Former Mitsubishi President is Arrested

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Recalls > Recall News

By YURI KAGEYAMA
AP BUSINESS WRITER

TOKYO -- Katsuhiko Kawasoe, the former president of scandal-plagued Mitsubishi Motors Corp., was arrested Thursday on charges related to a cover-up of auto defects suspected in a fatal accident.

Five other Mitsubishi officials, including a former president and vice president of the automaker's truck unit, were also arrested, and police said all six were in custody.

Prosecutors will decide whether to file official charges. In Japan, professional negligence resulting in injury is punishable by a prison term of up to five years or a fine of up to 500,000 yen ($4,500).

Mitsubishi Motors has been plagued by a series of recalls since it admitted four years ago it had systematically hidden auto defects and announced a massive recall.

Kawasoe took over the automaker after a 1997 scandal involving payoffs to racketeers and promised to fix his company, including monitoring product quality. He resigned in 2000 to take responsibility for the recall scandal but denied any knowledge of the cover-up that had been going on for decades at his company.

But police said Thursday that Kawasoe and the others failed to follow orders from authorities to report all auto defects. Police also said the company officials chose only to deal with reported problems dating back to March 1998, and ignored a suspected clutch defect reported in 1996.

That defect is believed to have led to the October 2002 death of the driver of a Mitsubishi truck who crashed when his vehicle's brakes failed.

The company has acknowledged two other accidents involving injuries linked to the defect, which causes clutch covers to crack. A cracked cover could cause the propellor shaft, which transmits power from the engine to the wheels, to fall off and sever a brake hose.

After years of denial, Mitsubishi Motors only recently acknowledged the clutch defect and another one involving a wheel which is believed to have also caused a fatal accident. Both accidents involved the company's truck division, Mitsubishi Fuso Truck & Bus Corp.

The former chairman of the Mitsubishi truck unit and four other officials were earlier arrested and charged in the January 2002 accident, in which a pedestrian died after being crushed by a wheel that rolled off a Mitsubishi truck.

Mitsubishi Fuso president Wilfried Porth acknowledged a "corporate culture of concealment" in the ranks, and publicly apologized.

Mitsubishi Motors has announced 10 separate recalls this year affecting thousands of vehicles for defects the company had hidden for years.

Adding to its woes, Mitsubishi is also struggling with huge debts.

And in April, DaimlerChrysler, which owns 37 percent of Mitsubishi Motors, dealt the Japanese company a serious blow by refusing to provide fresh financing. Mitsubishi Motors announced a revival plan last month with injections of money from the Mitsubishi group and other companies.

Mitsubishi reported a loss of 215 billion yen ($2 billion) for the fiscal year ended March 31 and expects a loss this fiscal year. Although it is hoping to return to profitability by March 2007, sales in Japan have been plunging and are not expected to recover for months.

Mitsubishi Motors's shares rose 0.5 percent to close at 200 yen ($1.81) on Thursday on the Tokyo Stock Exchange.

Mitsubishi Motors President Yoichiro Okazaki, who took office in April, apologized in a statement for Thursday's arrests.

He has repeatedly said Mitsubishi Motors now has its last chance to survive and must fully disclose all buried defects.

"We take this matter very seriously and intend to fully cooperate in investigations," he said. "We pray for the soul of the victim and offer our sincerest apologies to the family."