Ailing Mitsubishi Motors Corp., which announced a major reorganisation on Tuesday, on Monday took a beating when a ratings agency said the firm’s existence was in question and Japanese insurance firms said they may demand compensation for damages they had paid on the company’s cars.
Reuters said credit rating agency Standard & Poor’s cut its rating on MMC ‘s bonds deeper into junk territory, down to CCC + from B-, with a negative outlook, after Japan’s fourth-largest car maker revealed more safety defects.
“Recent disclosures of additional safety defects – which have led to further damage to MMC’s already weak brand image and plummeting domestic sales – call into question MMC’s viability,” S&P credit analyst Chizuko Satsukawa said in a report cited by the news agency.
“It is increasingly unclear whether pending operational and financial restructuring measures will be sufficient to ensure MMC’s survival,” she reportedly said.
Measures announced on Tuesday include the axing of 99 MMC departments and new measures to boost quality and ensure defects are properly tracked and reported.
Reuters noted that the scandal-plagued car maker only last week announced additional cost cuts for its month-old revival plan after evidence of past defect cover-ups surfaced at MMC and its truck affiliate, further damaging already-weak domestic sales.
It was already facing a shaky future despite a $4 billion rescue package announced on May 21 – which did not include aid from 37%-owner DaimlerChrysler AG, the report added, noting that the German giant had already given up on Mitsubishi’s rehabilitation.
Exacerbating financial woes for Japan’s only loss-making carmaker, insurance firms reportedly said on Monday they were reviewing their records and may seek compensation if accidents involving Mitsubishi’s vehicles were found to have been caused by defective parts.
“We have embarked on a review with the aim of exercising our right to compensation,” Takaki Yamaguchi, spokesman for Mitsui Sumitomo Insurance Co., told Reuters.
Sompo Japan Insurance also reportedly said it was conducting a review. The insurance firms said, however, that this was normal procedure following revelations of possible defects.
“One significant fear is a rash of court cases that just drags out this PR nightmare and doesn’t let this company get on with rebuilding its image,” auto analyst Kurt Sanger of ING told Reuters.