Suzuki is recalling 2 million cars after cheating on safety tests

Thomson Reuters

Suzuki plans to recall around 2 million vehicles after cheating on safety tests, filing false fuel-efficiency reports, and failing to conduct proper inspections.
Japan’s third-biggest car company expects to book a one-off loss of ¥80 billion ($700 million), a big chunk of its projected net income of ¥220 billion($2 billion) for the year ended March 31.
Suzuki investigated its factories and found evidence of faulty brake checks, data tampering, and inspections being conducted by uncertified staff — assistant inspectors still in training.
Suzuki’s recall follows similar incidents at Japanese rivals Nissan and Subaru.
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Suzuki plans to recall around 2 million vehicles in Japan after admitting it cheated on safety tests, filed false fuel-efficiency reports, and failed to conduct proper inspections.

Japan’s third-biggest car company — it sold 714,000 units last year — will take back domestic vehicles sold since April 2016 that haven’t received a government-mandated check-up. It expects to book a one-off loss of ¥80 billion ($700 million) as a result — a large chunk of its projected annual net income of ¥220 billion ($2 billion).

An internal investigation of Suzuki’s factories found evidence of faulty brake checks, tampering with fuel-efficiency data, and inspections being conducted by uncertified staff — assistant inspectors still in training.

President Toshihiro Suzuki said it was likely there was "inappropriate confirmation of conformity to the Japanese vehicle safety standards" — in other words, inspectors falsified test results. He pledged executives would take a pay cut as punishment, according to Nikkei.

"We believe that Japanese automakers like Subaru and Suzuki have been trying to squeeze out additional volumes from their factories in Japan, rather than expand production," said Janet Lewis, an analyst at Macquarie Securities, in a research note. "This effort to sweat the assets in Japan appears to have resulted in corners being cut in the inspection process."

There don’t appear to be any actual problems with the vehicles so far, she added, but the scandal "is raising questions about the trust in Japanese automotive manufacturing."

The recall could affect up to 25 car models, including some made for Mazda and other automakers, according to Nikkei. Suzuki will slow its production-line speeds by 2% to 5% to allow proper inspections, and rely on overtime and weekend work to maintain output. It’s also earmarked ¥170 billion ($1.5 billion) for quality and safety investments over the next five years, according to Nikkei.

Suzuki’s recall won’t shock followers of the Japanese motor industry. Nissan recalled 1.2 million cars in Japan last October, after it found uncertified technicians were conducting final vehicle inspections.

Nissan — owner of the Infiniti and Datsun brands — recalled a further 150,000 domestic vehicles in December, after it found inspections of brakes, steering wheels, speed measurement, and vehicle stability weren’t up to scratch. In July, it admitted testing of emissions and fuel economy at most of its Japanese factories didn’t meet government standards.

Similarly, Subaru announced its biggest-ever recall — 2.3 million vehicles worldwide, including 300,000 in Japan — in February, citing a problem with brake lights.

Rising sales of cars and motorcycles pushed Suzuki’s net sales up 4% to ¥2.8 trillion ($25 billion) in the nine months to December 31, driving net income up 10% to ¥181 billion ($1.6 billion), according to its third-quarter earnings presentation.

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Source: Business Insider – tmohamed@businessinsider.com (Theron Mohamed)