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Faulty Safety Inspections At Nissan Could Spark Massive Recall - Nikkei Asian Review

By Takeshi Shiraishi
Nikkei Staff Writer
TOKYO (Oct 02) -- Flawed safety inspections discovered at Nissan Motor's domestic factories could trigger a recall of up to one million vehicles and severely damage the company's brand image -- not to mention corporate earnings.

On-site investigations by officials from the Ministry of Land, Infrastructure, Transport and Tourism starting on Sept. 18 found that final inspections were being carried out by unqualified employees before vehicles were shipped to market.

Nissan Motor shares continued their slide into a fourth straight day on Monday. At one point they were down 60 yen, or 5.4%, from Friday at 1,054.50 yen, hitting their lowest point since April 28. They finished down 2.7%.

The flaw was confirmed at all six of Nissan's assembly plants in Japan -- including the company's facility at Oppama, just south of Tokyo, which has been positioned as the company's "global mother plant."

On Sept. 30, the day after the company had held a news conference, confusion was rife at the roughly 2,100 Nissan dealerships in the country.

A company in the Tokyo metropolitan area said it had yet to be informed of any details beyond what had been reported and that it was waiting for Nissan to provide the serial numbers of vehicles that may need to undergo second inspections along with instructions on how to implement the process.

Inquiries have flooded in from customers concerned about when their cars will be handed over, but, as of Sept. 30, the company was not in a position to respond.

Nissan said that it was still "investigating" how and why the flawed inspections were overlooked and when the problems started. Some have pointed the finger at poor management.

A director in charge of inspections has confirmed employees without the requisite certification were allowed to be involved in the final inspection process -- despite being aware of the regulations.

With Nissan having corrected its inspection setup and production carrying on as normal at plants across Japan, the dealer said it has continued to accept orders for vehicles such as the new Leaf electric car.

Under Japan's safety examination system for mass-produced cars, manufacturers must carry out a final inspection of each vehicle on behalf of the national government immediately before it is shipped.

There are similarities between Nissan's erroneous inspection process and the scandal involving falsified fuel economy data submitted to the ministry by Mitsubishi Motors. Both cases involved a breach of the government's trust.

Keiichi Ishii, the transportation minister, issued a statement lambasting Nissan for what he described as "an act that rocks the foundations of the system."

The ministry has ordered other automakers to check for similar flaws at their plants.

Nissan plans to file for a recall of cars that have been delivered to clients with the ministry if the company concludes there are vehicles that need to undergo a second inspection.

The number of vehicles targeted could be up to 1 million. While the exact costs of a recall on such a scale are unclear, it would be certain to hurt earnings.

Nissan noted that there is "no problem at all" at overseas plants due to a different safety inspection system.

The latest problem may undermine the company's global expansion ambitions sought under the alliance with Renault and Mitsubishi Motors.

Nissan forecasts combined global sales across the alliance to rise 40% from 2016 to 14 million cars by 2022.

The importance of its home country is growing for Nissan as the profitable U.S. market shows sign of decline. Nissan's domestic sales posted a year-on-year increase for 10 consecutive months through August, thanks in part to the popularity of the Note compact car, which was revamped in November 2016.

If the company is to minimize the impact on earnings, it will have to clarify the causes of the faulty inspections and disclose the necessary information as a matter of urgency.
- By Takeshi Shiraishi, Nikkei Staff Writer
- Nikkei Asian Review
- Send Feedback to feedback@NikkeiNewsRise.com
- Copyright (c) 2017 Nikkei NewsRise Asia Pte Ltd.

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