Mitsubishi hit by massive car recall

Mitsubishi hit by massive car recall

TOKYO, FEB 15: Japanese automaker Mitsubishi Motors Corp, its image tarnished by a defect cover-up scandal, announced its second massive recall in less than a year on Thursday, affecting an estimated 1.35 million cars. Japan's Transport Ministry said the automaker submitted plans to recall 401,106 vehicles, including 110,000 cars that had been subject to a previous recall last year after the company admitted to hiding defects and customer complaints for more than 20 years.

Mitsubishi Motors has been struggling in the wake of that scandal to restore its image and its financial health with the help of DaimlerChrysler AG, which took a 34 per cent stake in the company last year. "We hope to develop a system of checks with DaimlerChrysler," Sonobe said.

Mitsubishi Motors' shares slid 8.3 per cent on Thursday to close at 364 yen, a low for the month. The benchmark Nikkei average ended the day up 0.33 per cent at 13,327.39. The shares had been trading just under 500 yen last summer before news broke that Mitsubishi had systematically covered up customer complaints for decades rather than reporting them to the authorities for possible recalls, as the law required.

Mitsubishi's share price tumbled more than one-third in the wake of the scandal before finally stabilising late last year. The recalls and checks triggered by the scandal also forced the company to post an 11.5 billion yen special loss for the business year to March. Analysts expected the additional recalls would rub salt into the automaker's wounds.

"At this point, I can't suggest buying their stock. They need to complete a drastic overhaul of their operations under the close watch of Daimler," said Yoshinobu Muraoka, fund manager at DLIBJ Asset Management. "If you look at their domestic sales numbers, it's clear they are in a tough bind. This will weigh heavily on their stock price.

At the same time, it's hard to say they can be sold much lower than the current level." The company's sales volume in Japan has been sliding in recent months, dropping at double-digit rates from year-earlier levels in four of the last five months. A Transport Ministry official said the company reported defects in 11 car and truck models sold in Japan, mostly faulty ball joints in its Galant sedan and defective airbags in mini versions of its Pajero sport-utility vehicle. The recalls in the United States involved four models, including the Galant, a company spokesman said.