Japan government finds Mitsubishi overstated mileage for eight more models

[August 30, 2016]  By Naomi Tajitsu

TOKYO (Reuters) - Japan's transport ministry on Tuesday ordered Mitsubishi Motors Corp to stop domestic sales of eight vehicle models after an investigation found the automaker overstated their fuel economy, the second such order in a matter of months.

The ministry said its investigation found the fuel economy on models including the Pajero, Outlander and RVR SUV models were lower than stated in marketing catalogue's. The finding adds to four mini vehicle models whose mileages were found to be falsified earlier this year.

"Our investigation confirmed that the fuel economy on eight models ... were as much as 8.8 percent and on average 4.2 percent lower than advertised," the ministry said in a statement.

It ordered the automaker to stop selling those eight models while it submits correct readings, a process the ministry expected would take a few weeks.

The announcement could prompt another fall in the automaker's domestic sales after it stopped selling the four affected mini vehicle models in April-June. Possible compensation costs linked to the latest affected models may also hurt Mitsubishi's bottom line.

Japan's sixth-largest automaker has been struggling to recover from the mileage scandal which began in April, and whose initial findings included two mini vehicle models produced for Nissan Motor Co Ltd <7201.T>.

An internal investigation by the automaker uncovered poor communication, slack governance and pressure on resource-starved engineers at the root of the automaker's problems.

Mitsubishi's market value has tumbled since the scandal broke. The ordeal prompted the company to seek financial assistance from Nissan, which agreed to buy a controlling one-third stake for $2.2 billion.

Mitsubishi has admitted to using unapproved methods to calculate mileage for 25 years, while it also used estimates, rather than data from actual tests, to calculate the fuel economy for its mini vehicles.

Mitsubishi Motors Corp's Chairman and CEO Osamu Masuko attends a news conference in Tokyo, Japan, August 30, 2016. REUTERS/Kim Kyung-Hoon

The company has said the scandal will likely push it into the red for the first time in eight years due lost sales, compensation costs to customers and payments to Nissan, along with dealers and suppliers.

The automaker expects to post a net loss of $1.4 billion this year, and book an extraordinary loss of 150 billion yen ($1.47 billion). Domestic sales are seen tumbling by nearly half in the financial year through March, which will result in a 55 billion yen hit to full-year operating income.

On Tuesday, the firm said that it would post an additional extraordinary loss of 7 bln yen in current fiscal year due to costs involved with the additional eight models.

Japan is Mitsubishi's fifth-largest market, following markets including Asia ex-Japan, Europe and other regions. Its home country comprised roughly 10 percent of its vehicle sales during 2015/16.

($1 = 102.3400 yen)

(Reporting by Naomi Tajitsu; Additional reporting by Maki Shiraki; Editing by Christopher Cushing)

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