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May 18, 2016 01:00 AM

Mitsubishi president resigns amid fuel economy scandal

Hans Greimel
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    Reuters
    Aikawa (right) and Nakao will leave their positions effective June 24. The two appeared at a press conference together last month.

    TOKYO -- The president of Mitsubishi Motors, Tetsuro Aikawa, will step down less than two years in the job amid a widening fuel economy scandal that torpedoed the automaker's sales and led to it selling a controlling stake to rival Nissan Motor Co.

    Aikawa, 62, will resign June 24, the date of Mitsubishi’s annual shareholders meeting, the company announced today in a statement. 

    Also leaving the company then will be Ryugo Nakao, executive vice president in charge of quality and product strategy.

    Mitsubishi said it would name their replacements later.

    Mitsubishi said its management created an environment for fraud. The automaker used "desktop calculations" to determine the fuel economy of models including the Outlander plug-in hybrid and didn’t conduct test on the RVR SUV, according to the statement.

    CEO Osamu Masuko, 67, will stay and is expected to handle their duties until successors are announced. He is also expected to remain at the helm until Nissan Motor Co. completes its planned purchase of a 34 percent equity stake in Mitsubishi.

    Aikawa is an engineer noted for leading development of such Japan-market minicars as Mitsubishi's eK Wagon and the egg-shaped i. But with minicars at the heart of Mitsubishi’s fuel economy scandal, they ended up being his downfall.

    The scandal broadsided domestic sales at Mitsubishi and ratcheted costs. Faced with mounting troubles, Mitsubishi agreed last week to sell the controlling 34 percent stake to Nissan, which said it planned to help restore Mitsubishi’s reputation.

    Short tenure

    Aikawa’s departure caps a short tenure in the presidency that began in June 2014, when he was tapped to transition the carmaker away from nine years of the leadership under Masuko.

    It also comes at a time of uncertainty as struggling Mitsubishi tries to finalize its $2.2 billion equity sale to Nissan.

    Under their agreement, Nissan will be allowed to appoint a third of the board members at Mitsubishi as well as the chair. Having Aikawa onboard could have helped with the transition.

    Masuko handed the presidency to Aikawa in 2014 and took the then-empty role of CEO in addition to assuming the chairmanship.

    Aikawa joined Mitsubishi in 1978 and was promoted to its board of directors in 2005. He has also worked in domestic sales and manufacturing. Starting in 2011, he led Mitsubishi's global production division, overseeing the realignment of Mitsubishi's U.S. and Japanese plants. The overhaul included phasing out production of such U.S.-only models as the Eclipse, Endeavor and Galant at Mitsubishi’s only U.S. assembly plant in Normal, Illinois.

    Aikawa later oversaw the closing of that plant, announcing last year it would pull the plug. When it couldn’t find an automotive buyer, the company sold the site to an auction house.

    Mitsubishi said in April that it overstated the fuel economy ratings of four minicar models sold in Japan. Two of those models were rebadged and sold under the Nissan brand.

    The improper testing dates back to 1991.

    Nissan discovery

    The bogus fuel economy results were discovered when Nissan noticed discrepancies and called Mitsubishi out on it. The minicars were designed, manufactured and homologated by Mitsubishi and sold as the Mitsubishi eK Wagon and eK Space and as the Nissan Dayz and Dayz Roox.

    In a late 2013 interview with Automotive News, Masuko was circumspect about how long he would stay with the company, which he joined as president in 2005 to help bail out.

    “At that time, I went around all the plants at MMC. Before me, there was on average nine different presidents over nine years,” Masuko said. “The employees said try to stay as long as possible. It was a not a good thing for the employees to have nine presidents in nine years. But it was beyond my imagination that I'd end up serving as president for such a long time.”

    Aikawa’s departure may keep Masuko in the executive suite longer.

    Japan’s Nikkei newspaper reported today that Nissan intends to keep Masuko at the carmaker after the alliance is finalized. He is envisioned as helping revive the damaged Mitsubishi brand and coordinate the two companies’ integration projects.

    When Aikawa took over in 2014, he recounted how the company had its r&d ranks hollowed out after the company’s breakup with then-partner DaimlerChrysler. That, combined with the defects scandal, led more than 10 percent of the company's engineers to leave within the span of half a year, hobbling future product plans, he said. He called it the toughest period in his career.

    He added that he wanted to reconstruct the Mitsubishi brand through technology and design.

    Sensitive to those needs, Nissan CEO Carlos Ghosn has already promised to offer Mitsubishi engineering help.

    -- Vince Bond Jr. and Bloomberg contributed to this report.

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