S&P: Mitsubishi on watch

Standard & Poor’s said it placed the BB+ long-term corporate credit rating on Mitsubishi Motors Corp. on CreditWatch with negative implications following news that the company deliberately falsified fuel-consumption test data for four of its mini-vehicle models.

This testing fraud is highly likely to depress unit sales, S&P said, and damage business performance and the company’s financial profile for the next several years.

On April 20, Mitsubishi Motors announced confirmation of the deliberate falsification of data for fuel-consumption testing on four models of its mini-vehicles that sold 625,000 units in total, the agency said.

Because the focus of the company’s automotive lineup is mini-vehicles and sports utility vehicles, the success or failure of any one model has a significant impact on earnings, S&P said.

It remains difficult to immediately estimate the impact of the fraudulent testing on vehicle unit sales in Japan and abroad, the agency added.

But given that the company’s original equipment manufacturing (OEM) partner Nissan Motor revealed the falsification and that Mitsubishi Motors has admitted to two recall coverups in the past, S&P said it thinks the fraud is likely to lead to a decline in unit sales.

This incident may hurt the company’s business results significantly over the mid- to long-term if it reduces Mitsubishi’s manufacturing supplies to other automakers or weakens its brand recognition in Southeast Asian markets, which contributes to sales and profits, the agency said.

Meanwhile, the company has relatively ample cash and deposits at hand, which will absorb the financial impact of the incident to some extent if the fraud affects only mini-vehicles in Japan, S&P said.

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