Mitsubishi fuel economy

scandal

Ayushi Jaiswal – 18BSP1549

Kaustubh Shrivastava- 18BSP1665
Priyanshi Agarwal – 18BSP1851
Prateek Thukral – 18BSP1829
Sahil Chhabra – 18BSP3614
Rajat Singh Rajawat – 18BSP1879
 About the company
• Mitsubishi was established in 1970 and was headquartered in Tokyo, Japan. It
operated in Asia, Africa, Europe, Latin America, the Middle East, North America,
and the Oceania.
• There were more than 20 models of cars, minivans, trucks, and Sport Utility
Vehicles (SUV) made in Asia, Europe, and the US. Some of the Mitsubishi car
brands were Lancer, Triton, Pajero, Mirage, and Outlander. It also made an electric
minicar named the i-MiEV (Mitsubishi innovative Electric Vehicle) model.
• Mitsubishi entered into large scale production in the 1960s.
• In 1971, the company made “Mitsubishi Corporation” its official English name.
• In 1977, it entered the European market and the US market in 1982
• In 1989, MC was listed on the London Stock Exchange.
 A SCANDEL UNRAVELS
• Tokyo-based automaker Mitsubishi Motors Corporation (Mitsubishi) said in
June 2016 that 20 of its models sold over the previous 10 years were
involved in the fuel economy scandal in which the company was embroiled.
• Earlier on April 20, 2016, Mitsubishi had acknowledged that it had
fabricated fuel economy data for 625,000 cars sold in Japan.
• The company admitted that its engineers had deliberately manipulated the
mileage data of the cars.
• It said that the inaccurate tests involved 468,000 Dayz, Dayz Roox vehicles
produced for Nissan Motor Co. (Nissan) and 157,000 of its own-brand eK
wagon and eK Space light passenger cars. These four models were made to
look 5 to 10 percent more fuel efficient than they would be in real world
driving conditions
 ALLIANCE WITH NISSAN
• Mini cars were small vehicles with 660cc petrol engines that were a hit
in the Japanese market, though they had found little success overseas.
• Since Nissan did not have minicars in its line-up, it opted for a
collaboration with Mitsubishi to produce them.
• Nissan and Mitsubishi announced on May 20, 2011, that they had
signed a contract for the formation of a joint venture related to their
minicar business in the Japanese market.
 THE GENESIS OF THE SCANDAL
• Japan reformed its fuel economy testing rules in 1991. It issued precise
rules for a ‘coasting test’ to define the air resistance of a vehicle.
• Mitsubishi, rather than using this technique, decided to generate a
substitute method to determine air resistance. This method, which it
referred to as a ‘high speed coasting test’, led to higher fuel economy
results than the government instructed method.
• Some analysts opined that it was the rule changes in Japan’s coasting
test that had led to Mitsubishi starting to cheat on fuel economy tests
in 1991
 HOW THE SCANDAL UNFOLDED?

• Carmakers came under extreme scrutiny about the claims they made
about their vehicles after Volkswagen acknowledged in 2015 that it
had manipulated emissions tests.
• In November 2015 when Nissan inspected the fuel consumption
figures of its cars, it observed some inconsistencies while updating the
Dayz model.
 IMPACT ON MITSUBISHI

• Mitsubishi was forecasting its first loss in eight years after setting
aside compensation costs related to the scandal.
• The company posted a loss of JPY19.1 billion (US$173 million) in
fiscal year 2015. As a result of this loss, Mitsubishi’s 2015 profit was
revised downward from JPY82 billion to JPY72.5 billion (US$656
million).
• Sales plummeted and the company was pushed into an intense
management crisis. It stopped the sale of the eK Wagon and the eK
Space models and Dayz, Dayz Roox vehicles produced for Nissan in
April 2016.
REIMBURSEMENT AGAINST FRAUDLENT
PRACTICES BY MITSUBISHI
TRADITIONAL ETHICAL THEORIES
 Individualism
• The definition of the ethical rule of Individualism is that decisions are made in order to maximize profits for
both the owners and the company, staying within the law.
• Individualism in this case is saying that Mitsubishi would have to take actions that would maximize their
profit as long as they keep it legal.
• What they were doing, altering the mileage, would help to maximize their profits but this action is illegal.
• Unfortunately, directly ignoring regulations was the choice former president Tetsuro Aikawa made for
Mitsubishi.
• They felt that their numbers were not up to par to compete with the competitive market and they saw an
opportunity to make more profits. Exactly what the stockholders want as investors, but they opted for the
wrong means of doing so.
• Trust is needed for any company to succeed, and all trust is lost from consumers when lying about figures,
especially fuel economy.
 Utilitarianism
• The definition of the ethical rule of Utilitarianism is maximizing the happiness of others
along with yourself.
• The stakeholders were affected by all business decisions. In the case of Mitsubishi, they
were taking actions that were trying to increase their sales by making their cars look
better than they actually are, mileage wise. This was an effort to make some people
happy, which are management and employees, but only for short term.
• The management and employees were selling a lot of cars prior to the news breaking so
everyone involved with the company was happy by making more money.
• They did not think of the long term perspective.
• Initially, they were making money when sales were better, but once the sales decreased
they started to loose money. Also, the customers are unhappy in this case because they
were purchasing cars that they are being lied to about.
• Not only did this make customers unhappy, but also made them feel that they are
supporting a company that is unethical.
• Once the Japanese Transport Administration raided the company, the idea of a utilitarian
organization was kicked down along with the front door.
 Kantianism
• The definition of the ethical rule of Kantianism is making decisions and taking actions that have consent from
all parties included, honoring and respecting the people that are informed in the company. This ethical rule
states that a person shouldn’t harm any other individual in any way.
• In Mitsubishi’s case, the company did not make decisions that was consented from all the parties. They were
only thinking about selling the most no. of cars possible, not matter what the consequences would be.
• Mitsubishi acted irrational in every aspect of the term when deciding to ignore new regulations back in 1991.
• They did not approve of the rules set in place, and considered themselves exempt from having to follow them.
• As a maxim they manipulated economy data in order to achieve a competitive market.
• They also lied to the government, in order to avoid being prosecuted. These actions were not rational, nor
rightly motivated.
• Kant describes a rational decision as one that is morally permissible or morally required.
• If Mitsubishi was acting with good will, they would have adapted to the laws back in 1991, and made a strive
to make a quality product within the boundaries placed before them. A positive maxim for them to follow
would have been: We will produce accurate figures, because it is the right thing to do as a automobile
manufacturer. Its simple to follow, and would have left them in a much better place.
 VIRTUE THEORY
• By definition, virtue theory is acting so that good character traits are portrayed and bad
character traits are avoided in any way. Aristotle said, “we all have rational capacities and
social capacities, so we all need is to exercise our rationality in whatever talents we have
and to relate to others in the world in a way that brings balance into our relationships”.
• This philosophy was not followed by Mitsubishi.
• If you look at former president Tetsuro, his function was to lead a multi-billion dollar
company forward in a successful manner. He was on the border of virtuous, but did not
make his choices around it.
• Aristotle sees the four main virtues as courage, honesty, temperance, and justice. These all
fall between two extremes, and therefor make them "just right" for how to act in a given
situation.
VIRTUE THEORY
COURAGE is having strength in the face of pain or grief for the right action. Mitsubishi did
not follow this because they are not taking the right actions

The second virtue is HONESTY, which is selling vehicles that the consumer is informed
correctly about. This again was not followed by Mitsubishi. They should tell their
customers the truth in order to follow by this virtue, rather than lie to the customers on
what they are buying.

The third virtue is TEMPERANCE, which is expectations and desires that are both
reasonable, which was not followed by Mitsubishi. Mitsubishi was just making an action
based on making money and not doing it ethically.

The last virtue is JUSTICE, which is making products with good quality and doing it
through fair practices. Mitsubishi yet again, did not follow this virtue because they were
selling tainted products, through unfair practices. This can be fixed by being honest with
themselves and the consumers and selling products that are described correctly
BASIC POLICY
Code of conduct
• All officers and employees of Mitsubishi Corporation (the "Company") must comply with all applicable laws, rules and regulations where they
operate, international standards and rules, and all internal corporate rules and policies. In addition, all officers and employees of the Company
must act in a socially responsible manner by complying with the highest ethical standards in the conduct of their business.
BASIC PRINCIPLES
• Respect human rights, and do not discriminate on any basis or engage in any form of harassment.
• Maintain a high regard for environmental considerations in conducting our business operations, and ensure that our business is conducted in an
environmentally sustainable manner, and comply with treaties, laws and regulations concerning the environment.
• Promote fair business practices and comply with trade rules, regulations, and internal corporate rules and policies.
• Comply with the rules and regulations of international trade.
• Protect and properly use confidential and proprietary information, protect the rights of the Company and respect the rights of others.
• Do not engage in insider trading.
• Avoid conflicts of interest with the Company; maintain a distinction between corporate and private business.
• Record and report accounting and financial information timely and accurately.
• Maintain proper legal and ethical standards with respect to gifts and entertainment.
• Resolutely oppose any organization, group or individual engaged in unlawful activities and do not provide money or other types of economic
benefits to them.
• Promptly report to or consult the superiors, the Group Compliance Officers, the relevant departments, the Secretariat for the Compliance
Committee, or the outside counsel in charge of Compliance upon discovering or committing any violations of this "Code of Conduct".
 Creating Value Through CSR
• Global sustainability issues have significantly evolved over the years
and continue to change today.
• MC recognizes the importance of staying attuned to changes within
the global environment and society, and it aim to generate societal
and environmental value by addressing key sustainability issues
through our business activities which span numerous industrial
sectors.
CONSUMER PROTECTION AT MITSUBISHI
• Mitsubishi Motors in the UK subscribes to the Office of Fair Trading
Approved Motor Industry Code of Practice for New Cars. This
consumer code sets out standards with which they comply regarding:

Car
Advertising New Car sales Manufacturer’s
Warranties

Availability of
Complaints
replacement
Handling
parts
• The Code is a fully independent, consumer-focused scheme backed by
industry, government and consumer groups.
• Launched in August 2008, the Code safeguards consumer interests by
helping to identify responsible garages and encouraging the sector to
set and maintain a high standard of customer service. Developed to
respond to consumer concerns over pricing, quality of work and
customer service, it offers motorists:
A free consumer advice line
An online search facility allowing consumers to locate their nearest
subscribing garage
Free conciliation and low-cost, legally binding arbitration
A CTSI certified Alternative Dispute Resolution (ADR) service if a consumer
remains dissatisfied with the outcome of a dispute. The Motor Ombudsman’s
Dispute Resolution Service website address is: themotorombudsman.org or
call their consumer advice line: 0345 241 3008