Subaru investigates possible mileage cheating, shares drop

[December 20, 2017]  By Naomi Tajitsu

TOKYO (Reuters) - Japan's Subaru Corp <7270.T>, already smarting from a vehicle inspection scandal at home, said it was now investigating whether mileage readings may have also been falsified during final checks, driving its shares down as much as 8 percent.

Mileage readings, an indicator of fuel efficiency, do not fall under safety requirements. However, any proof of what would be a second instance of misconduct in as many months would taint the image of not only Subaru but also Japan's manufacturing industry that has been rocked by a slew of scandals recently.

Just last year, Mitsubishi Motors Corp <7211.T> saw around 40 percent of its market value, or $3.2 billion, wiped out in three days after it admitted it had overstated the fuel economy of its minivehicles.

Subaru on Wednesday said it was checking to see if any possible fabrication could have impacted its official mileage readings and if any exported models may have been affected.

"At the moment we are trying to confirm whether data was indeed fabricated, and if so, how this happened and which models are affected," Subaru spokeswoman Miyuki Yasuda said.

She added that any evidence of falsified mileage figures, which show the number of kilometers a vehicle can travel on a liter of petrol, was unlikely to result in a recall as it would not constitute a violation of safety requirements.

The mileage probe follows Subaru's revelation in October that uncertified staff had been for decades carrying out final checks on new cars sold in the domestic market. The company this week vowed to improve oversight, but it did not mention any probe into mileage readings at the time.

Subaru said reports of falsified mileage readings emerged as external investigators looked into the inspection scandal.

Some inspectors told investigators that mileage data had been altered on some sample vehicle models tested during final checks. Subaru said it had not confirmed that any such fabrications had taken place.

Subaru's logo is pictured at its factory in Ota, north of Tokyo, Japan May 24, 2017. REUTERS/Kim Kyung-Hoon/File Photo

"Coming on the heels of the certified inspection issue, this could be a sign of a bigger problem of how Subaru manages its manufacturing operations," said Janet Lewis, head of Asia transportation research at Macquarie Securities.

Subaru shares fell as much as 8.5 percent to their lowest since July 2016, before ending down 7 percent. The stock has given up almost 10 percent over the past two months amid the inspection scandal.

A series of compliance failings by Japanese companies have surfaced in recent months, hitting the country's reputation for quality control and prompting calls for better governance.

Nissan Motor <7201.T> has admitted to incorrect final inspection procedures. In just the latter half of the year, Kobe Steel <5406.T>, Mitsubishi Materials Corp <5711.T> and Torbay Industries <3402.T> - all key suppliers of products to global manufacturers - have admitted to product data fabrication.

Fretting about the impact of the string of scandals, nearly half of Japanese firms have either taken steps to strengthen internal controls or are planning to do so, a Reuters poll showed earlier this month.

(Reporting by Naomi Tajitsu Ran Kim and Ayai Tomisawa; Additional reporting by Ritsuko Ando; Editing by Himani Sarkar)

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