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Mitsubishi Heavy Industries Ltd., the largest shareholder of Mitsubishi Motors Corp., is in dire straits due to a scandal over the automaker falsifying minicar fuel efficiency data.
The scandal comes on the back of existing miscalculations already troubling the heavy industry giant in the fields of building cruise ships and passenger jets, and in nuclear power generation overseas, all of which are considered MHI’s breadwinners.
MHI now has four major problems to deal with simultaneously, which will likely affect moves Mitsubishi Group companies are expected to make to help MMC reconstruct its business.
MHI President Shunichi Miyanaga said Monday, “What’s important is whether we can offer convincing explanations to [MHI’s] shareholders.” The remark was made at a press conference held in Tokyo to announce MHI’s earnings for the business year that ended March 31. However he also said, “The Mitsubishi brand is highly important,” revealing the dilemma MHI now faces.
MHI has a 20 percent stake in MMC, including indirect holdings. Also because many MHI executives have become MMC presidents in the past, MHI is the key to any effort to help MMC. However, recently, MHI’s own business performance has been sluggish, making providing help to MMC a difficult choice.
First of all, huge losses incurred in the business of building large cruise ships are putting enormous pressure on MHI’s management.
In 2011, MHI received an order from a major U.S. cruise services company for two large cruise ships. But the standard of quality for the ships’ facilities asked for by the U.S. company was much higher than MHI initially had in mind. As a result, the delivery date for the first ship had to be delayed significantly, while the second ship is still being built. The total of special losses from the deal amounted to ¥237.5 billion.
The Mitsubishi Regional Jet passenger plane, which is manufactured by MHI subsidiary Mitsubishi Aircraft Corp. and is Japan’s first passenger jet model, is also having problems. Delivery dates have been repeatedly postponed. Mass production of MRJ planes will not become full-fledged until 2019. The aircraft manufacturing business cannot be expected to contribute to MHI’s earnings any time soon.
Furthermore, MHI is being sued by a U.S. company operating a nuclear power plant. It was decided that the San Onofre Nuclear Generating Station in California would be decommissioned due to certain troubles. In connection with these troubles, the operating company is demanding that MHI pay $7.57 billion (about ¥810 billion) in compensation. Miyanaga said Monday, “Arbitration on the matter is making good progress.” But it is still unclear whether a settlement is at hand.
(THE YOMIURI SHIMBUN)
