Mitsubishi Motors foresees $1.4-B annual loss after fuel scandal

Mitsubishi Motors foresees $1.4-B annual loss after fuel scandal image

Text: Marcus De Guzman / Photos: Mitsubishi | posted June 23, 2016 18:31

First annual loss to be declared by automaker in 8 years

Mitsubishi Motors Corporation (MMC) has finally released their full-fiscal year 2016 forecast, following the submission of their final report to the Ministry of Land, Infrastructure, Transport and Tourism of Japan. Mitsubishi Motors is forecasting a net loss of ¥145 billion ($1.4 billion) with losses expected in the current fiscal year to amount to ¥217.6 billion. This is the first annual loss the company is declaring in 8 years. The company made ¥72.6 billion in the recently ended fiscal year.

The company was embroiled in a fuel economy manipulation scandal which led to a sales halt on four kei car models, resignation of company president Tetsuro Aikawa and executive vice president Ryugo Nakao, and Nissan's recent purchase of a 34% controlling stake in the the company.

The Japanese government has since allowed resumption of sales of the halted models after testing for emissions and safety. Based on the regulator's testing the cars were about 11 to 16 percent less efficient than initially claimed. Mitsubishi Motors will be remunerating affected customers ¥100,000 each for "extra fuel expense".

The net sales and operating income figures

Net sales is expected to drop by 16% from ¥ 2.267 trillion to ¥ 1.910 trillion, year-on-year. Total global sales volume is expected at 962,000 units, a decline by 8% or 86,000 units.

Sales Volume forecast for 2016 fiscal year

Domestic sales are expected to take the largest hit with a decline by as much as 41%, European sales have also been forecast to decline by 9%. On a positive note, North American and Asian sales are expecting a slight uptick due to new products and favorable market conditions.

Even with the setbacks, MMC's capital and R&D expenditure will increase for 2016 in order to boost investments and growth. One of the key factors of MMC's future expansion is Mitsubishi Motors Philippines Corporation's (MMPC) leverage in the Comprehensive Automotive Resurgence Strategy (CARS) Program. Starting in 2017, MMPC will begin local production of the Mirage and Mirage G4. Other than that, MMC will also be laying groundwork for a new facility in Indonesia beginning in April 2017.

Boost and growth plans by MMC

Over to R&D, Mitsubishi cited their increase in research & development as they are working on a small new SUV, as well as the next-generation Outlander. Other than that, the company is also working on new technologies that will be used on new and current automobiles.