FleetWatch - Ed's Comments

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		July 2004

No news here - big news there

Although very much a part of the global village, South Africa's distance from international markets serves to shelter us from many of the storms that break over there. Certainly we get word of them but the waves have usually petered down to a trickle by the time they reach our shores. It is no wonder then that Johan Cloete, divisional manager for Freightliner FUSO, DaimlerChrysler SA, did not - based on his response to a question at the launch of the new Mitsubishi Canter models (see page 30) - seem to fully grasp the serious implications of the scandal that recently broke in Japan around the failure of Mitsubishi Motors Corp management to recall vehicles for known faults.

Cloete rightfully stated that the death of a driver of a MMC truck in October 2002 had been highlighted in Japan as being caused by a defective clutch box. In January 2002, a woman was killed and her sons injured in Yokohama when a wheel came off an MMC vehicle allegedly due to a defective wheel hub. It is said that management knew of the defects but concealed them. "What management failed to do was to report the defects in the proper way," is how Cloete put forward the case. We know Cloete as an honest man totally committed to the good of this industry. It is thus we know that his answer was not an attempt to skim over what, in effect, hit as a huge scandal in Japan. We read his response as part and parcel of us being so far from those markets.

Close-up, it was an entirely different scene which I saw being played out while visiting Japan on a recent business trip and it is because I was viewing the impacts of the scandal from close-up rather than from a distance, that I gained a better insight into the harsh impacts of the actions of senior MMC executives. The bottom line is that it is not, as Cloete stated, that MMC management failed to report the defects "in the proper way". Rather they have been accused of failing to report them at all. In other words, covering them up in spite of knowing about them. There's a huge difference.
On June 8th, the story hit the front page of The Daily Yomiuri under the headline: 'Ex-MMC executives to face criminal charges'. The report stated that police "will jointly pursue criminal charges against up to six former executives of Mitsubishi Motors Corp over the death of the driver of an MMC truck in October 2002 that was caused by a defective clutch box."

Those facing criminal charges were all in top executive posts at MMC when the automakers's failure to recall its vehicles with defective parts came to light. The report stated that "the police have apparently concluded that it is necessary to establish a criminal case as they believe MMC's top executives failed to take any safety measures despite being aware of the clutch box defects." It went on: "Even after the company's failure to recall the defective models came to light in 2000, the automaker intentionally took the defective parts off the list of those in need of emergency measures, thus avoiding having them become subject to an inspection by the then Transport Ministry."

And then, the next day - June 9th - another report hit the paper headlined: "Yet another MMC cover-up revealed". In this report it was stated that "Mitsubishi Motors Corp covered up an additional 93 defects in large vehicles. Of these, 21 led to accidents involving injuries and eight were considered highly likely to cause accidents. The automaker did not recall any of the affected vehicles. The Construction and Transport Ministry has begun an investigation of the latest findings on suspicion that the automaker, which spun off its truck and bus division in January 2003 to create
Mitsubishi Fuso Truck & Bus Corp, concealed serious defects besides the defective clutch cases that already have come to light." And then, on Friday June 11th, the real crunch came when a report in the same newspaper confirmed that police had arrested former MMC President Katsuhiko Kawasoe, 67, and five other former MMC executives on suspicion of professional negligence related to the accident. The report stated that according to sources, Kawasoe and the five former executives knew the defective aluminum clutch housings were not strong enough but did nothing to correct the defect. MMC did not issue a recall notice and failed to take any action to fix the problem. "In addition," it went on, "MMC continued to conceal the defect during an investigation by the then Transport Ministry. Police believe that the cover-up culture at the company led to the fatal accident in Yamaguchi Prefecture. Mitsubishi Fuso Truck & Bus Corp, the commercial vehicles arm of MMC, admitted in May it had been aware of the clutch defects since 1996."

So no, it was not just a case of management failing to report the defects "in a proper way." It was a cover up and the price is now being paid by management - although it has already been paid by those killed and injured in accidents as a result of those known defects. This saga has been inherited by the current management of Mitsubishi Fuso Truck & Bus Corp whose CEO and President, Wilfried Porth, has issued a statement assuring the market that the new management of MFTBC has accelerated the enforcement of strict quality standards already initiated in 2003 and implemented a radical clean-up of the past. After addressing various single issues over the previous months, the company announced the implementation of 43 recall and four improvement campaigns on June 14, addressing quality issues dating back more than 10 years. "We are fully committed to cleaning up the past. We are creating a socially responsible company respected by our customers for our high-quality products and by the society in general for a transparent corporate culture," said Porth.

According to the statement, it is currently not possible to finally assess the financial and business impact of all quality related measures and issues and against this background, MFTBC does not see itself in a position to provide a prudent business forecast and financial outlook for fiscal year 2004. FleetWatch can state that one of the impacts is the fact that the Japanese Government has ceased all orders of Mitsubishi vehicles and will not allow them into any tender process. That has got to take a huge chuck of sales out of the pie. The good news in among all this bad stuff is that MFTBC is being fully supported by its parent company DaimlerChrysler which, among other actions taken, has sent a team of top engineers and technical experts from Germany to support Mitsubishi Fuso to secure optimal quality and swift implementation of all necessary measures. In March 2004, MFTBC became a fully consolidated subsidiary of DaimlerChrysler when DaimlerChrysler raised its hare in MFTBC to 65%.

Although South African customers are assured that the defects were discovered in vehicles prior to those launched in South Africa, we highlight this issue so as to make the point that being part of the global community opens us up not only to the good news but also to the bad. Trucks are coming into this country from all over the world and while we have warmly welcomed the influx of new models, we need to be aware that there are flaws in the systems in the source countries. Due to our isolation during the sanctions days, South Africans lived under the false belief that anything to do with overseas had to smell of roses. This was due to us not only being cut off from overseas products but also from hands-on experience of those markets. We have since found out that the smell is sometimes that of a 'khakibos' rather than a rose!

What MMC management is alleged to have done is so wrong and we condemn it outright. There are so many recalls nowadays - thankfully mainly on cars rather than trucks - that to hear of seniour executives knowing of defects and covering them up, especially when such defects have led to accidents and deaths, is totally unacceptable. It tells you that their priorities are all wrong - giving good returns to shareholders at the cost of lives is hardly an admirable course to go. It makes a mockery of the whole concept of 'accenting the customer' as the most important asset of an organisation. By hiding defects, you place the customer last on your list of priorities. The selfish actions of MMC executives at the time have now had an adverse impact on the brand overseas and their successors are embroiled in damage control rather than driving positive growth.

This saga also highlights the fact that we are not the only ones in the world who are hit by stories of covers-ups, bribery and general scandals. In pointing this out, let it not serve to let us off the hook in terms of our own problems. Rather let it serve as a spur for top management in our industry to be transparent in all their actions around their products and to act openly and honorably in dealing with any problems that may arise. As sure as night follows day, there will be problems - as there have been in the past. When they arise, however, let this industry's management tackle them above board rather than under cover. By doing so, the heads of our industry will not only endear themselves to their customers but will also be displaying exemplary conduct and good corporate citizenship that can stand as an example to their overseas counterparts.

Patrick O'Leary
Managing Editor