Mitsubishi expects $1.4 billion loss after mileage cheating

Mitsubishi Motors Corp forecast a net loss of 145 billion yen ($1.4 billion) for this business year as it faces hefty compensation costs and falling sales in the wake of a mileage-cheating scandal.

Government tests had showed that fuel economy for the minivehicles was on average 11 percent lower than their advertised readings but the transport ministry said that this would not lead to change in their vehicle classification.

Mitsubishi Motors said last week that it will give 100,000 yen ($960) to each Japanese owner of a auto with a false mileage claim to compensate for the extra gas costs and for inflating the mileage figure.

As part of its effort to win back the public’s trust, Mitsubishi has said that it will pay each Japanese owner of a vehicle involved in the fuel efficiency scandal ¥100,000 ($960) as compensation for the extra fuel expense and falsifying the mileage data.

Mitsubishi Motors expects an 8 percent year-on-year drop in vehicle sales in fiscal 2016 to 962,000 units, as sales in Japan are projected to take a hit from the fuel economy manipulation scandal.

Tokyo-based Mitsubishi Motors acknowledged recently it had systematically inflated mileage for eK minicar models, as well as some other models.

Mitsubishi is under orders to submit fixed data to the government.

The automaker will book JPY150bn in one-time charges related to faulty fuel tests, which will include JPY100bn yen in payments to Nissan, suppliers and the costs of halting production at its Mizushima plant. The automaker has repeatedly promised to fix its ethical standards.

In May, Mitsubishi agreed to sell a 34 per cent stake to Nissan, Japan’s second-largest carmaker, for ¥237 billion ($2.2 billion) to help it weather the scandal that has dented domestic vehicle sales.

Shares in Mitsubishi closed up 2.5 per cent on Wednesday but have fallen almost 38 per cent since news of the scandal emerged on April 20.