Mitsubishi 'hid' defects in cars

JAPANESE insurers are to launch a major investigation into car giant Mitsubishi after it emerged that the company deliberately concealed details of serious vehicle defects that could have caused dozens of car accidents.

Tokio Marine and Fire Insurance, a Tokyo-based insurer that handles most Mitsubishi vehicle insurance, said it is looking into accidents involving Mitsubishi vehicles and may make the manufacturer meet costs if a defect is found to be behind the accident.

The move is bad news for Mitsubishi, Japan‘s only unprofitable vehicle-maker, which is due to receive part of a $4.1bn (£2.2bn) injection of fresh capital from investors and shareholders on Thursday.

The company has announced a spate of recalls this year for defects it acknowledged it had hidden for years. The total number of accidents being investigated is uncertain. It is also not known how many accidents in the UK and elsewhere will come under the microscope.

Former and current Mitsubishi officials have been arrested on charges of professional negligence resulting in death and other offences in two fatal accidents, in which defects of vehicles' wheel and clutch systems are suspected.

Fuso Mitsubishi Fuso Truck and Bus Corporation recently admitted that it had chosen not to report 'dozens' of defects that could have resulted in serious accidents it had chosen not to report to authorities. It said the defects were known to have caused more than 100 accidents.

Insurance claims would add to the other costs of the scandal, including recall expenses and plunging sales.

There was more bad news for Mitsubishi after credit rating agency Standard & Poor's lowered its rating on Mitsubishi Motors' senior unsecured bonds to 'CCC+' from 'B-' and kept its outlook on the issue as negative.

Chizuko Satsukawa, credit analyst at S&P, said he was concerned about Mitsubishi. The recent disclosure of concealed defects and the arrests linked to the fatalities 'have led to further damage to MMC's already weak brand image and plummeting domestic sales', he said.

Mitsubishi Motors has suffered big losses and is trying to carry out a revival with a cash infusion from other Mitsubishi brand companies, including a machinery maker and a bank.

The financial restructuring and new investment will result in a dilution of DaimlerChrysler's 37% stake in Mitsubishi.

DaimlerChrysler has said it is no longer willing to put more money into the vehicle-maker.