TOKYO - An anonymous phone call has led to a public-relations disaster that will cost Mitsubishi Motors Corp. almost $50 million and potentially a lot more.
Acting on the call, Japan's Transportation Ministry investigated Mitsubishi, looking for evidence the carmaker had suppressed customer complaints. The complaints should have been reported to the government, so as to avoid costly and embarrassing vehicle recalls.
The ministry officials found the evidence in an employee locker room, instead of in proper ordered files. Mitsubishi has subsequently recalled 514,000 cars and trucks built in Japan between 1992 and April 2000, at a cost of about $48 million.
The affected cars include the Lancer, Galant, RVR, Pajero (known as the Montero and the Shogun in some markets), Pajero IO, Delica Sports Gear and several models of heavy- and medium-duty trucks. The company is still determining whether any vehicles that were exported should be recalled as well.
The government will await the results of an internal Mitsubishi investigation before deciding whether any punishment is warranted. Mitsubishi spokesman Fumio Nishizaki said the internal investigation is expected to take six weeks.
Until then, several other important questions will go unanswered, according to Christopher Richter, auto analyst for HSBC Securities Japan Ltd. in Tokyo.
First, he said, the possibility documents were deliberately hidden from the government 'raises concerns in Germany as to how this company is managed,' Richter said. DaimlerChrysler AG is buying a controlling 34 percent stake in Mitsubishi and planned to finalize the deal this month.
DaimlerChrysler Chairman Jurgen Schrempp has indicated he will give Mitsubishi's existing management considerable leeway in the managing of the Japanese carmaker.
Now, though, Schrempp 'will be criticized' along the lines of: 'Are you going to let these guys run the company?' Richter predicted.
The critical question, he said, was 'whether this undermines consumer confidence in Mitsubishi.'
That could be devastating to a company 'that hasn't had good sales in Japan aside from heavy trucks in recent months,' Richter said. 'People have a lot of other options' when choosing which model to buy, he added.
Richter dismissed as 'relatively inconsequential' the nearly $50 million price tag for the recalls, though the amount represents one-quarter of Mitsubishi's forecast pretax profit in the current fiscal year, which began April 1. 'The costs won't blow an enormous hole in their accounts,' agreed Howard Smith, auto analyst for ING Baring Securities (Japan) Ltd., in Tokyo.
Both analysts said the recall price was insignificant in part because Mitsubishi plans to take a $1.3 billion charge against earnings in the current fiscal year to cover the company's underfunded pension plans. The result was a projected group net loss after taxes of $666 million, which was forecast before the cost of the recalls was known.
Still, analysts and Mitsubishi executives alike will be waiting nervously until public reaction to the recall scandal can be determined.