Mitsubishi Motors's debt rating cut by S&P Global

Mitsubishi Motors Corp’s long-term corporate credit rating has been cut by two notches to ‘BB-‘ to by S&P Global Ratings, which cited the Japanese automakers’ falsification of fuel-consumption data.

Mitsubishi has admitted falsifying data on some models’ fuel efficiency. About 157,000 of its cars were involved in the inaccurate tests, plus 468,000 vehicles made for Nissan. The latest scandal follows previous cover-ups of vehicle recalls, and Volkswagen's separate manipulation of emissions data in diesel models.

S&P Global said its long-term rating for the automaker remained on CreditWatch with negative implications, adding the downgrade reflected its view that Mitsubishi had serious deficiencies in its company-wide risk management regime and internal governance.

It believed Mitsubishi had not successfully institutionalised comprehensive policies that effectively identified, monitored, selected and mitigated key risks.

“Therefore, we have lowered our overall assessment of Mitsubishi Motors' management and governance to weak from our previous assessment of fair,” the credit-ratings outfit said.

S&P Global also noted the damage to Mitsubishi’s brand and social credibility as a result of its most recent misconduct, warning it might also hurt the Japan-based company's business competitiveness and capacity to generate earnings.

That “might lead us to lower our assessments of the company's business and financial risk profiles,” S&P Global said in a statement.

“Not only might unit sales plunge, but because the focus of the company's automotive line-up is just two vehicle types, mini-vehicles and sports utility vehicles (SUVs), it will have a significant impact on the company's sales amount.

“If the fraudulent testing also leads to a heavy financial burden to meet various expenses for compensation, reduced profitability and increased working capital may lower operating cash flow and free cash flow.

“In turn, this might weigh heavily on Mitsubishi Motors' financial standing, which underpins our current rating on the company.”