How mighty Mitsubishi lost its
luster By Richard Hanson
TOKYO - Soon after Tokyo's defeat in World War
II, United States occupation trustbusters shocked
Japan's most powerful business groups - known as
zaibatsu - with sudden orders to break them up on
grounds that they had conspired to bring about the war.
The head of the family-owned Mitsubishi group, Koyato
Iwasaki, a crusty direct descendent of the founder,
though suffering on his deathbed, was outraged. Two
close relatives - the prime minister and the minister of
finance, had brought the bad news to him personally.
Koyato, as the last true Iwasaki scion, would
not be happy with the group today. While the strongest
members of the Mitsubishi group recovered in the postwar
era, the long-festering problems of Mitsubishi Motors
provide an example of how the prominent family name has
lost its luster.
Last Thursday the Kanagawa
prefectural police searched the offices of Mitsubishi
Fuso Truck & Bus Corp, a subsidiary of Mitsubishi
Motors owned mostly by DaimlerChrysler, the giant German
motor company. Police were looking for evidence that
officials of the truck and bus company had deliberately
made false reports to the authorities about defective
wheel hubs in Mitsubishi vehicles. In at least one case,
such defects caused a fatal accident, killing a young
mother and injuring her two children in Yokohama in
January 2002.
They also had an arrest warrant
for former Mitsubishi Fuso chairman Takashi Usami and
six other former senior officials of Mitsubishi Fuso and
its parent, Mitsubishi Motors Corp (MMC). They were
being charged with violating the Road Vehicles Act,
which bans false reporting and professional negligence
resulting in death and injury.
According to
reports, the police suspect that Usami, 63, former
Mitsubishi Motors managing director Akio Hanawa, also
63, and five others failed to take safety precautions,
such as vehicle recalls, despite being aware of defects
in the trucks' wheel hubs - the part of a wheel that is
fastened to the axle. They were all arrested later
Thursday afternoon.
Police had made two earlier
raids related to the accident, in October and January,
on suspicion of professional negligence. In January
2002, MMC refused to acknowledge the hubs had structural
defects, saying that it would conduct a voluntary
inspection and replace affected vehicles.
Mitsubishi refused to order recall, blamed
drivers A recall was rejected despite government
pressure to replace the hubs free to encourage truck
owners to have their vehicles checked. MMC still blamed
individual driving habits, such as carrying heavy loads,
according to reports at the time.
Last week,
Japan's Transport Ministry filed a separate criminal
complaint with the police against Mitsubishi Motors and
five former and current executives involved in the
incident, for allegedly falsifying reports.
"It
is truly regrettable that Mitsubishi Motors has
committed the same crime despite having been prosecuted
and punished in 2000 for filing false reports," Land and
Transport Minister Nobuteru Ishihara said in a
statement. "They falsified the reports to escape
recalling the vehicles, and that is an extremely evil
act," he added.
Adding insult to injury, in
March, Mitsubishi Fuso Truck & Bus Corp, owned 65
percent by DaimlerChrysler AG and 20 percent by
Mitsubishi Motors, finally admitted that a design defect
had been responsible for more than 50 truck accidents
since 1992. The company recalled 112,000 trucks in
Japan.
Mitsubishi Fuso was spun off from
Mitsubishi Motors in early 2003. The company had begun
repairing itself. First, Yoihichiro Okazaki, Mitsubishi
Motor's newly appointed chairman and president, said he
would set up an in-house organization under his direct
control to prevent a recurrence of scandals that have
shaken the company, such as a cover-up of a wheel hub
defect. He described this as a "reconstruction program"
expected to be worked out in mid-May, and also said
Mitsubishi Motors would launch the in-house center to
promote "corporate social responsibility".
Several of those picked up by the police denied
the allegations. Altogether, 33 accidents involving
wheels coming off Mitsubishi vehicles were reported
between 1992 and the Yokohama accident in January 2002.
The police believe the Mitsubishi officials could have
foreseen that serious accidents would sooner or later
take place.
To make matters worse, Mitsubishi
Motors is facing a financial crisis as DaimlerChrysler
has refused to participate in a planned rescue. The
truck arrests will do little to help Mitsubishi's brand
image. In 2000, MMC went through a costly recall scandal
when a whistleblower revealed that for more than two
decades the company had illegally failed to disclose
customer complaints.
Mitsubishi Motors was
forced to recall more than 2 million cars and other
vehicles, and paid a token fine of 4 million yen (about
$35,600).
German owner trying to change
Mitsubishi culture In the latest arrests, there
were no DaimlerChrysler employees. Mitsubishi Fuso's
boss is Wilfried Porth, a former DaimlerChrysler
executive who has the tough job of looking after the
$1.26 billion the company has in two portions to hold 65
percent of the company. This arrangement was part of
spinning off the truck and bus unit in 2003.
In
Asia, Mitsubishi Fuso, which has been profitable, is
still part of DaimlerChrysler's strategy for the region
(which is seen as separate from its cooling down of
relations with Mitsubishi Motors).
On Monday,
Nihon Keizai Shimbun reported from Frankfurt that
DaimlerChrysler AG might reduce its 37 percent stake in
Mitsubishi Motors after a decision to reject all future
financial aid. But the report said there was some
opposition to such a move on the board of directors.
Daimler is looking for a fresh start for
Mitsubishi Fuso, which is why president Wilfried Porth
was sent from the German headquarters in an apparent
move to demonstrate DaimlerChrysler's principled stance
and to eradicate the truck manufacturer's tendency to
cover up problems, the newspaper said. The German
company does not want to risk is own quality name brand
by association with Mitsubishi's lapses.
The
absence of a ruthless sort of clean-house mentality is
at the heart of Mitsubishi's dilemma. For that, blame
the company's uncomfortable fit in the Mitsubishi
corporate grouping itself, according to some observers.
How can memberships in the gold-plated
Mitsubishi family hurt? For one thing, nobody knows how
to get rid of a rotten egg. The other is that those who
have bought into the Mitsubishi name (at least as far as
cars) have overpaid and underestimated how badly the
company has been run. The obvious other point is that
the rest of the Mitsubishi family does not want to
tarnish the name.
Inefficient aristocrats at
the helm That is because Mitsubishi Motors Corp
is top heavy with "aristocrats", such as some of the top
people now helping the police in their inquiries from
inside a detention center. Takashi Usami, former
chairman of the auto maker, is one of them. His pedigree
includes the right school and close family relations in
the Mitsubishi group (including one who became president
of Mitsubishi Bank and later governor of the Bank of
Japan, the central bank). Usami contributed to expanding
the truck and bus business of Mitsubishi Motors after
becoming a board member in 1995.
In some ways,
the arrests last week of several former and current
Mitsubishi Motor Corp executives on charges of covering
up one of the worst postwar scandals to hit the
Mitsubishi "group" history served as a symbol of how
group relations have weakened in Japan.
Other
group companies have suffered in the past from being
"second-tier" in their fields. Mitsubishi Steel
Manufacturing ekes out a living supplying its stronger
Mitsubishi Heavy Industries, and Mitsubishi Electric
stays afloat by concentrating on such things as
big-ticket contracts won as part of the group.
But since the 1970s and early 1980s, Mitsubishi
Motors has found it hard to find just the right niche in
the cutthroat global automobile market, and in the
big-truck and bus business. The problem, most agree, is
not in the level of know-how and technology. What has
been overrated perhaps is the value of being part of the
Mitsubishi group, a luster that both domestic and
foreign companies overestimated.
The core group
firms are fine. Nippon Yusen is tops in shipping.
Mitsubishi Corp leads the way among the big trading
houses, and Mitsubishi Estate is rebuilding part of
downtown Tokyo, much of which it owns. But even the
group's banking businesses tend to shy away from the
motor business.
As one banker described
Mitsubishi Motor's dilemma, "The banks can't provide the
financing. It is too large and risky. So Mitsubishi
began to sell itself to foreigners. The problem is
foreign investors were unable to take control because of
the resistance of the management. At Nissan Motor, they
succeeded because they got rid of the old management."
That appears to be at least partly at the root
of the troubles that landed MMC Japan executives in
jail. The charges against the executives of Mitsubishi
Motors, and its truck- and bus-making affiliate, are
serious. The company is accused of lying about the cause
of a number of accidents - some resulting in deaths -
involving Mitsubishi-made brakes.
The pattern of
deceit seems almost ingrained, judging from reports in
the Japanese press. The chairman of Mitsubishi Fuso
Truck & Bus Corp was questioned by investigators on
Saturday in connection with a cover-up scandal involving
defective hubs, police sources told the Yomiuri Shimbun.
Michio Hori, 61, who assumed the presidency of
the auto maker in April, reportedly suggested setting up
an investigative committee whose members, including
former chairman Takashi Usami, are believed to have
decided to submit to the Construction and Transport
Ministry false reports on faulty hubs used in large
vehicles their firm produced, according to the Yomiuri
Shimbun.
This sort of affront to the Mitsubishi
name no doubt would offend the founders of the group.
After the end of World War II, the US occupation
embarked on sweeping purges of the Japanese government
and the big businesses, such as the great trading and
industrial house of Mitsubishi.
Koyato Iwasaki
died, of a severe case of shingles, before he could be
purged.
A new generation pieced the group back
together. They obviously included some pieces that did
not fit. Perhaps the current purge at Mitsubishi Motors
was just overdue.
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