Mitsubishi's Existence at risk as fraud case widens

Mitsubishi Motors Corp

TOKYO -- For the second time in about a decade, Mitsubishi Motors Corp. faces a scandal that could affect the company's existence.

The Japanese automaker has improperly tested the fuel economy of its cars for the past quarter century, widening the scope of misconduct that executives initially said dated back to 2002.

The Mitsubishi board has formed a panel of three ex-prosecutors to investigate for about three months. Until then, customers, investors and minicar partner Nissan Motor Co. may be left waiting for information about the number of affected models and details of compensation.

"I'm taking this as a case that could affect our company's existence," President Tetsuro Aikawa told reporters during a press conference Tuesday. "My mission is to solve the issue."

On Tuesday, Mitsubishi shares plunged for a fifth day, slashing the company's market value by half during that span to about 427 billion yen ($3.8 billion).

The deepening crisis is the worst since the automaker covered up defective axles that led wheels to detach in fatal accidents, prompting multiple bailouts from Mitsubishi Group companies.

"Right now, understanding which cars and how many of them are at stake is the most important thing," Koji Endo, a Tokyo-based analyst with Advanced Research Japan, said. After two press conferences in the span of a week, investors are "still waiting for a proper report."

Mitsubishi hasn't decided how it will compensate customers, Aikawa said. The company is in discussions about reimbursing Nissan, which was supplied about three-quarters of the 625,000 minicars that were improperly tested and relied on manipulated data. Nissan has since voluntarily stopped sales of the Japan-only models, called Dayz and Dayz Roox.

Depending on how many more vehicles were improperly tested, the company "will get into a situation where its survival is difficult," Endo said.

Widening probes

Wrongdoing by the Japanese automaker and Volkswagen Group has prompted a reckoning of the ways carmakers test for and label the fuel economy and exhaust emissions of their vehicles. Government investigators last week raided French manufacturer PSA Group as part of broader checks into vehicle emissions, while Daimler initiated an internal probe into its certification process at the behest of the U.S. Department of Justice.

The EPA and the California Air Resources Board also announced an investigation of whether models sold in the U.S. meet fuel economy regulations.

The EPA has instructed Mitsubishi to provide additional information on vehicles sold in the U.S. and will direct the company to conduct additional testing, EPA spokeswoman Julia Valentine said in an emailed statement Tuesday in Washington.

Japan's transport ministry asked Mitsubishi to re-submit findings from its investigation of improper testing methods by May 11. An initial report that the company provided the regulator ahead of a Wednesday deadline was insufficient, a ministry official said Tuesday.

In addition to potential payouts to customers and Nissan, Mitsubishi may have to pay back government tax rebates that its minicars shouldn't have been eligible for, Ryugo Nakao, an executive vice president, has said.

Nissan decision

Nissan first uncovered fuel economy discrepancies when working on development for the next generation of the minicars. CEO Carlos Ghosn said Monday that Nissan will decide on the future of the partnership after further verification.

Mitsubishi had set stretch fuel economy goals for its engineers to achieve. Aikawa, 62, and other executives attended meetings where the company raised targets for the Nissan Dayz, Dayz Roox and Mitsubishi eK Wagon and eK Space minicars, Nakao said Tuesday.

"We aren't able to deal with customers," Aikawa told reporters Tuesday, adding that he wasn't aware of the improper testing. "We're just telling them that we'll offer something."

Senior FCC Specialist, Anti-Bribery and Corruption, ASEAN and South Asia (ASA)

Main purpose of this role is to establish and maintain frameworks to identify, assess, manage, monitor, mitigate and report ABC risks and compliance.

Strategy and Leadership
• Asissts the Head of ABC, ASA, in maintaining the regional framework for ABC through close liaison with the Group Head ABC, establishing an ABC programme comprising of global standards, training, compliance monitoring and reporting.
• Leads on ABC-related external and internal risk identification and anticipation of future trends in the region.  Works with the business to drive the development of appropriate mitigation strategies.
• Identifies and communicates, across the region, relevant ABC changes – ensures policies and procedures are amended as required.
• Evaluating and advising on reputational and regulatory risk arising from customers and transactions within the region.

ABC Definition and Application
• Provides guidance on proper application and interpretation of ABC related laws, regulations and policies within the region.
• Works with Group Shared Investigations Services to support investigations with bribery or corruption implications in the region.
• Proactively engages with regional stakeholders to steer business practices towards exemplary regulatory governance.

ABC Compliance Reporting
• Ensures key ABC risks and issues in the region are being analyzed, reported, escalated and tracked appropriately.
• Prepares regular and accurate ABC reports that are escalated to the relevant regional governance bodies.

ABC Training
• Assists Head of ABC, ASA, to define who requires training, and assists in developing ABC training for the region.
• Assists in the development of an effective internal compliance culture by promoting the benefits of ethical business conduct and the benefits of compliance.

Government and Regulatory Relationship Management
• Support the interface between the Bank and regulators, government agencies and law enforcement on ABC matters for the region. 

Exclusions
• Responsibilities exclude prevention, detection or investigation of fraud, investigations under the Group’s Investigation Policy, data security, whistleblowing arrangements, BCP/ Crisis Management, Operational Risk management, first line assurance (except for processes owned by L&C) and second  line rules based assurance activity of any process not directly related to legal or regulatory risk.
 

Requirements:

• Substantial experience in the banking industry and/or law, including demonstrated success in a similar role.
• Sharp business acumen (including ability to assess risk and appropriate levels of return), strong leadership qualities, excellent interpersonal skills and multi-cultural awareness and sensitivity.
• Ability to manage geographically dispersed and varied customer and product base.
• Ability to collaborate and work dynamically across country, region, business and group stakeholders.
• Understanding of best practice risk management techniques and frameworks relating to ABC.
• Knowledge of laws, regulations, regulatory expectations relevant to financial crime.
• Sound judgement on business practices, regulatory relationship management and reputational risk.
• Exemplary integrity, ethics, independence and resilience.
• Personal authority with proven ability to establish relationships and provide strong direction at the most senior levels of the Group and with regulators and other external stakeholders.