Mitsubishi Motors

Some Sales Halted Over False Fuel Data

TOKYO -- Mitsubishi Motors Corp. on Tuesday suspended sales of eight car models in Japan after the country's Transport Ministry said the company overstated their fuel-economy figures.

The Transport Ministry has ordered Mitsubishi to correct the numbers, which were off by as much as 8.8% on vehicles including its Pajero sport-utility vehicle and Mirage small car. The Tokyo-based company said it would suspend sales of the eight models for two weeks.

In April, Mitsubishi said that it had falsified fuel-economy data for four minicar models sold in Japan, two of which it had manufactured for Nissan Motor Co.

The latest announcement brings the total number of vehicle models withdrawn from the market over misstated fuel-economy figures to 12.

Chief Executive Osamu Masuko blamed lax management oversight for the falsified data. Most car makers have stiffened their regulatory-compliance standards in recent years, but Mitsubishi hadn't, Mr. Masuko said.

Japanese law requires car makers to conduct road tests to gather fuel-economy data, however, in some cases Mitsubishi said it used desktop calculations to arrive at fuel-economy figures in an effort to keep costs down.

Mr. Masuko echoed findings by a third-party panel hired by Mitsubishi to root out the cause of the scandal. The report, released earlier this month, found that lax management oversight created a corporate culture where employees fudged data to hit unrealistic business targets. The report found that while employees raised concerns about potential data falsification in 2011, they were ignored by management.

Mitsubishi said Tuesday it would set aside Yen7 billion ($68.4 million) in addition to the Yen150 billion it already earmarked to compensate owners of the affected models and its partner, Nissan.

Mitsubishi forecast in June its first annual loss in eight years, predicting it would lose $1.38 billion for the financial year ending in March.

Japan's sixth-biggest car maker by sales has gone through some soul-searching after the latest in a string of scandals involving issues related to vehicle quality and recalls. In 2000, the company admitted to hiding information about vehicle defects for decades.

Mitsubishi said that it has been using improper fuel-economy test methods since 1991. In June, the company said it had manipulated fuel-economy data on 20 vehicle models sold in Japan in the past 10 years. That number included the eight models announced on Tuesday.

The company has reached out to Nissan for assistance. In May, Nissan said it would take a controlling 34% stake in Mitsubishi. The deal is contingent on regulatory approval for the merger, and Nissan's own due diligence.

Nissan also sent one of its executives, Mitsuhiko Yamashita, to head Mitsubishi's vehicle-development department.

Nissan declined to comment on Tuesday's announcement, citing its continuing due diligence.

--Chieko Tsuneoka and Sean McLain

Fred's

Loss Widens Amid Pharmacy Weakness

Fred's Inc. deepened its loss in the latest quarter as sales slipped amid weakness in its pharmacy business.

"We are disappointed with the company's performance, as comparable-store sales were down in front store, retail pharmacy and specialty pharmacy," said Chief Executive Michael Bloom, who took that title Monday. In all, sales at stores not newly opened or closed fell 2% for the quarter.

Mr. Bloom blamed the July quarter's loss on the deleveraging impact of lower sales and a tighter gross margin rate for the pharmacy division. He said headwinds in pharmacy and competitive pressures in the front store were deeper than anticipated, and the company will launch "new initiatives" in the back half of the year to combat those headwinds.

"We are at an inflection point as a company," added Mr. Bloom. "Our key areas of focus will be to optimize our store fleet and supply chain, focus on markets where we can win, make additional investments in marketing and technology, all to enable growth with discipline," he said. "We can be the best in the rural markets we serve; we know who our customers are and what they need."

Fred's on Monday promoted Mr. Bloom, who was chief operating officer, to CEO, the latest executive appointment in the company's transition plan. Mr. Bloom succeeded CEO Jerry A. Shore, who became chief executive in October 2014 and intends to retire in February, although he will remain on the company's board.

Memphis, Tenn.-based Fred's operates primarily in the southeastern U.S. and sells merchandise from small appliances to groceries and medicine. For the Memphis, Tenn., company, pharmacy operations represent a significant chunk of overall sales, and the company has looked to capitalize on the strength of those operations.

In all for the second quarter, Fred's reported a loss of $6.9 million, or 18 cents a share, compared with a year-earlier loss of $4.9 million, or 13 cents a share. Revenue slipped 3% to $529.5 million.

Analysts were looking for a per-share loss of 21 cents on $536 million in revenue, according to Thomson Reuters.

--Anne Steele

(END) Dow Jones Newswires

August 31, 2016 02:49 ET (06:49 GMT)

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