News Archive

Mitsubishi says overstated mileage for more vehicle models

TOKYO Mitsubishi Motors Corp (7211.T) said on Tuesday more of its vehicle models were involved in a mileage cheating scandal than initially stated, and that it would temporarily stop domestic sales of affected vehicles and compensate owners.

Earlier in the day, Japan’s transport ministry said its investigation had shown the automaker had overstated the fuel economy for eight vehicles including the RVR, Pajero and Outlander SUV models, in addition to four minivehicles initially confirmed in April.

The latest announcement deals another reputational blow to Japan’s sixth-largest automaker, which has been struggling to recover from the mileage scandal, which affected two minivehicle models produced for Nissan Motor Co Ltd (7201.T).

The company’s market value has tumbled since the scandal broke, and the ordeal prompted the company to seek financial assistance from Nissan, which agreed to buy a controlling one-third stake for $2.2 billion.

Mitsubishi said it had submitted new mileage readings to the ministry earlier in the day, after the ministry’s probe had shown the fuel economy for some models was as much as 8.8 percent lower than stated in marketing catalogues.

“Both competition and compliance have tightened in the industry, but we had a lax approach to compliance and this was one of the factors which led to this issue,” Mitsubishi Motors President Masuko Osamu said at a briefing.

“We need to change this.”

Mitsubishi said it would pay compensation of up to 100,000 yen ($977) each to roughly 76,000 owners in Japan. This would amount to an extraordinary loss of 7 billion yen, although the company said the amount would be covered in the expected extraordinary loss of 205 billion yen for this year.

The automaker expects to post a net loss of $1.4 billion this year as the scandal will likely push it into the red for the first time in eight years due to lost sales, compensation costs to customers and payments to Nissan, along with dealers and suppliers.

An internal investigation by the automaker uncovered poor communication, slack governance and pressure on resource-starved engineers at the root of the automaker’s problems.

Mitsubishi said it would comply with the ministry’s demand for the automaker to stop selling the eight affected models while it corrects marketing materials, a process the ministry expected would take a few weeks.

Masuko said the latest issue would affect some overseas models and the company was considering possible compensation for affected owners, although vehicle numbers would be limited.

Mitsubishi has admitted to using unapproved methods to calculate mileage for 25 years, while it also used estimates, rather than data from actual tests, to calculate the fuel economy for its minivehicles.

Japan is Mitsubishi fifth-largest market, following markets including Asia ex-Japan, Europe and other regions. Its home country comprised roughly 10 percent of its vehicle sales during 2015/16.

($1 = 102.3700 yen)

(Reporting by Naomi Tajitsu; Additional reporting by Maki Shiraki; Editing by Christopher Cushing and Mark Potter)

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Increase in U.S. home prices slightly less than forecast

NEW YORK U.S. single-family home prices rose slightly less than expected on an annual basis in June, and were down from the prior month, a survey showed on Tuesday.

The SP CoreLogic Case-Shiller composite index of 20 metropolitan areas rose 5.1 percent in June on a year-over-year basis, retreating from the 5.3 percent climb in the prior month and short of the estimate calling for a 5.2 percent increase from a Reuters poll of economists.

“Overall, residential real estate and housing is in good shape,” said David M. Blitzer, managing director and chairman of the index committee at SP Dow Jones Indices.

“While the real estate sector and consumer spending are contributing to economic growth, business capital spending continues to show weakness.”

Prices in the 20 cities fell 0.1 percent in June from May on a seasonally adjusted basis, the survey showed, matching expectations for a decline of 0.1 percent.

On a non-seasonally adjusted basis, prices increased 0.8 percent from May.

Home prices in three U.S. cities – Denver, Seattle and Portland, Oregon – showed the highest year-over-year gains, the survey showed.

(Reporting by Chuck Mikolajczak)

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China’s big banks set for hard slog as margins shrink

SHANGHAI/BEIJING Four of China’s so-called ‘Big Five’ state-owned banks have warned that profits will continue to be pressured in the second half of the year, as slowing growth in the world’s second-biggest economy hits borrowers and saps lenders’ margins.

Chinese banks, among the world’s biggest by market value, also face rising volumes of sour debt, forcing a quicker pace of write-offs – even as a series of rate cuts has chipped away at their interest income.

Industrial and Commercial Bank of China (ICBC) (1398.HK) (601398.SS), Bank of China (BoC) (3988.HK) (601988.SS), Agricultural Bank of China (AgBank) (1288.HK) (601288.SS) and Bank of Communications (BoCom) (601328.SS) (3328.HK) all warned of tough times ahead.

BoC’s chief risk officer Pan Yuehan said the bank faces “relatively big pressure” in the near future, while ICBC’s chairman Yi Huiman said bad loans will continue to rise.

ICBC, the biggest bank by assets, and BoC reported near flat half-year profits on Tuesday, and shrinking net interest margins (NIM) – the difference between interest earned on loans and that paid out to depositors.

The lacklustre first-half – a far cry from the banks’ strong double-digit profit growth just two years ago – raises the prospect that the government will have to inject more than $100 billion to shore them up, some analysts have said.

ICBC’s Yi said the four biggest banks – ICBC, BoC, AgBank and China Construction Bank (CCB) (601939.SS) (0939.HK) – and four leading asset management companies would be included in a government debt-to-equity pilot scheme, which aims to let industrial firms convert their debt into equity stakes.


ICBC’s margins narrowed to 2.21 percent at end-June from 2.28 percent a quarter earlier, while those at BoC slipped to 1.9 percent from 1.97 percent.

“Successive interest rate cuts and repricing of deposits and loans narrowed the interest spread,” ICBC said in a statement on its earnings.

ICBC’s Yi said he expects the bank’s NIM to contract by 6-7 basis points in the second half, noting that each basis point drop costs more than 2 billion yuan in lost profit.

Last week, AgBank, BoCom and CCB also reported lower margins.

“One surprise is the NIM pressure. We hadn’t anticipated the banks would report net interest income declining in the second quarter, but a number of them did,” said Min Zhou, a banking analyst at AB Bernstein.

China’s central bank cut interest rates last October for the sixth time in less than a year in a bid to jump-start growth in the stuttering economy.

The squeeze on margins has also put pressure on banks’ capital strength, analysts said, with all the big five banks seeing their core capital slip, again raising the likelihood of a government bail-out.

While core capital – an indicator of a bank’s ability to take financial stress and remain solvent – at the five banks hovers between around 10-13 percent, above a 10.5 percent minimum lenders need to achieve by 2018, it has dipped from the previous quarter.


Last week, AgBank’s chairman Zhou Mubing said good companies are not borrowing from banks, but issuing bonds or equity instead, while the bank’s vice-president said profit growth in the second half would come under big pressure.

BoCom President Peng Chun warned that soured debt had still not bottomed out and the downward cycle would likely persist.

Non-performing loan (NPL) ratios remained steady at the five big banks as they were quick to dispose of these.

ICBC wrote off 44.8 billion yuan ($6.71 billion) of soured debt in the first half alone, compared to 60.2 billion yuan in the whole of last year. BoC disposed of 29.2 billion yuan in January-June, compared to 45.2 billion yuan in all of 2015.

AgBank’s first-half bad debt write-offs of 38.3 billion yuan were only around 3 billion yuan less than in all of last year, and the bank’s president Zhao Huan said it plans to increase disposals in the second-half.

“The credit quality pressure is going to continue in the second half and for next year, as the economy slows further and the central government has the intention to push supply-side reforms,” said Zhou, the AB Bernstein analyst, adding that a clamp down on industries with large over-capacity – such as the coal and steel sectors – would be “bad news” for banks.

To digest some of the rising tide of bad debt, both ICBC and BoC plan to issue NPL asset-backed-securities. ICBC said these could be issued as early as next month, and a first batch would not exceed 5 billion yuan.

CCB’s chief risk officer Zeng Jianhua, however, saw some light down the tunnel. “I expect asset quality hit bottom last year. The worst was last year,” he said.

($1 = 6.6741 Chinese yuan renminbi)

(Reporting by Engen Tham in SHANGHAI and Shu Zhang in BEIJING, with additional reporting by Matthew Miller in BEIJING; Editing by Muralikumar Anantharaman and Ian Geoghegan)

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Fed’s Fischer says U.S. job market ‘very close’ to full strength

WASHINGTON The U.S. job market is nearly at full strength and the pace of interest rate increases by the Federal Reserve will depend on how well the economy is doing, Fed Vice Chairman Stanley Fischer said on Tuesday.

In an interview with Bloomberg TV, Fischer did not comment on the timing of the next Fed rate hike but said “we choose the pace on basis of data,” and that U.S. “employment is very close to full employment.”

Fed Chair Janet Yellen said on Friday she thought the case had grown stronger in recent months for an interest rate increase, remarks that Fischer later that day said were consistent with a view that the U.S. central bank might raise rates at its next policy meeting in September.

Asked about the dollar on Tuesday, Fischer said the currency’s strength affected U.S. inflation and company profits but improvements in the labor market showed the economy had withstood this headwind.

The Fed has signaled since March it would lift rates twice this year, but investors have been skeptical.

Prices for Fed funds futures on Tuesday suggested they expect about a 20 percent chance of a hike next month and just over even odds for such a move in December 0#FF: FFZ6. The Fed also has a policy meeting scheduled for early November.

The U.S. Labor Department’s monthly employment report on Friday is expected to show the economy added 180,000 jobs in August, according to the median forecast in a Reuters poll.

(Reporting by Jason Lange; Editing by Bernadette Baum)

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Asia stocks bounce, dollar dips on Fed hike doubts

SYDNEY Asian shares bounced on Tuesday as doubts the Federal Reserve really would hike rates as soon as September undermined the dollar, while investors continued to count on more policy stimulus elsewhere in the world.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.4 percent, recouping around half of Monday’s loss. Stocks in South Korea .KS11 and Australia both rose around 0.6 percent.

Japan’s Nikkei .N225 dipped 0.1 percent as the yen turned around and starting nudging higher once more.

A raft of Japanese data, from unemployment to retail sales, mostly beat analysts forecasts but did nothing to change expectations the Bank of Japan would eventually have to ease further.

Fed Chair Janet Yellen on Friday said the case for a rate increase was strengthening, but provided little detail on when the Fed would next move. Vice Chair Stanley Fischer suggested a hike as soon as next month was possible.

Yet while the initial market reaction was to push up the probability of a September hike to 44 percent, investors quickly had second thoughts and early Tuesday the implied chance was back at 36 percent 0#FF:.

On Wall Street, the Dow .DJI ended Monday up 0.58 percent, while the SP 500 .SPX added 0.52 percent and the Nasdaq .IXIC 0.26 percent.

Financials .SPSY was the best performer on the SP 500, with Wells Fargo (WFC.N) up 2.2 percent.

The sector typically rises with talk of higher rates, on the expectation that banks’ income could rise as they charge more for loans. However, the correlation is not direct as it requires the yield curve to steepen and, so far, it is not obliging.

Indeed, longer-term yields fell further than the short end on Monday, in part because much of the market suspects any Fed tightening would lead to even lower inflation over the long run.

Figures out Monday showed the Fed preferred measure of core inflation stuck at 1.6 percent for a fifth straight month.

The San Francisco Fed underlined the subdued outlook for inflation and rates in a research note.

The “natural” rate of interest – the real rate consistent with full use of economic resources and steady inflation near the Fed’s target level – was near zero and would rise to only 1 percent over the next decade.

“If these projections are accurate, then a monetary policy designed to track the rise in r-star (natural rate) would imply a very gradual normalization of the federal funds rate,” the note said.

The retreat in Treasury yields undid some of the dollar’s gains and its index edged back to 95.575 from a two-week top of 95.834 .DXY.

The dollar likewise ebbed to 101.82 yen JPY= from a peak of 102.39, while the euro steadied at $1.1184 EUR=.

In commodity markets, oil steadied after falling by around 1 percent on Monday. Oversupply remained a major concern with U.S. crude stockpiles forecast to have risen by 1.3 million barrels last week, a Reuters poll showed. [O/R]

Brent crude futures LCOc1 were up 6 cents at $49.32 a barrel, while U.S. crude CLc1 added 9 cents to $47.0.

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Oil prices rise as dollar retreats from two-week high

SINGAPORE Oil futures edged up on Tuesday as the U.S. dollar erased earlier gains, but doubts that producers would be able to agree to an output freeze continued to drag on prices.

International Brent crude oil futures LCOc1 were trading at $49.34 per barrel at 0125 GMT, up 8 cents from their previous close.

U.S. West Texas Intermediate (WTI) crude futures were up 15 cents at $47.13 a barrel.

The U.S. dollar retreated from Monday’s two-week high as investors looked ahead to jobs data this week that Federal Reserve Vice Chair Stanley Fischer has said will be important to whether the U.S. central bank raises interest rates soon.

A weaker greenback makes oil purchases for countries with other currencies cheaper, potentially spurring demand for the fuel.

Yet concerns of a successful outcome to September talks among members of Organization of the Petroleum Exporting Countries (OPEC) about a production freeze continued to weigh on markets.

“There’s a feeling that the OPEC production freeze talks might result in something positive, but it’s just talk,” said Robert Nunan, risk management director at Mitsubishi Corporation.

Saudi Arabian Energy Minister Khalid Al-Falih tempered expectations that the world’s major oil producers would look to freeze production next month, telling Reuters on Thursday that the “market is moving in the right direction” already.

“Either way, despite some increases in Saudi Arabia and Iraq, OPEC production seems to be flattening with the outages in Libya, Nigeria and Venezuela, knocking out about some 3 million barrels of daily production and no one is holding their breath they’ll return soon,” said Nunan.

Nigerian rebels pledged to end hostilities against its oil and gas industry, which they repeatedly attacked earlier this year knocking reducing the OPEC member’s output by 700,000 barrels a day to 1.56 million bpd.

“We promise to fight more for the Niger Delta, if this opportunity fails,” the Niger Delta Avengers said in a statement received by Reuters on Sunday.

(Reporting by Roslan Khasawneh; Editing by Joseph Radford)

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Volkswagen decides not to sue South Korea over sales ban

SEOUL Volkswagen (VOWG_p.DE) decided against suing South Korea which last month suspended sales of most of its models and slapped a fine of 17.8 billion won ($15.93 million) on the German carmaker.

Instead, Volkswagen will try to achieve certification for the affected models and resume sales quickly rather than taking on a lengthy legal process, a spokesman for Volkswagen’s South Korean unit said.

Last month, the government revoked certification for 80 model variants of VW, Audi and Bentley vehicles on grounds that the German automaker fabricated certificates of vehicle emissions and noise-levels.

At that time, Volkswagen described the ruling as “most severe” and said it would consider a legal challenge.

Volkswagen’s sales slumped 40 percent to 12,888 vehicles from January to July in South Korea, after jumping 17 percent last year, in the wake of its emissions-test cheating scandal.

Nissan Motor’s (7201.T) South Korean unit has filed a lawsuit over claims by the environment ministry that it had cheated on emissions with its Qashqai diesel sport utility vehicle.

($1 = 1,117.7000 won)

(Reporting by Hyunjoo Jin; Editing by Stephen Coates)

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Mitsubishi Motors overstated fuel economy on eight more models: Nikkei

TOKYO Mitsubishi Motors Corp (7211.T) overstated the fuel economy on eight of its vehicle models, in addition to four others the embattled Japanese automaker admitted to earlier this year, the Nikkei newspaper reported on Tuesday.

Japan’s transport ministry, which had been investigating the fuel economy on Mitsubishi models including the Pajero SUV, would report its findings as early as Tuesday, the Nikkei said, citing an unnamed source.

The Nikkei said the company would likely withdraw the affected vehicles from the market to revise its catalogs, a process which could take about two to three weeks. Compensation to customers was a possibility, it added.

Both Mitsubishi and the transport ministry declined to comment on the report. Shares in the automaker slipped 0.8 percent in early trade.

Japan’s sixth-largest automaker has been struggling to recover after admitting in April that it had falsified the fuel economy on two of its minivehicle models, along with two similar models produced for Nissan Motor Co (7201.T).

The scandal led to a suspension of sales for nearly three months, and prompted a slump in Mitsubishi’s market value. The company sought financial assistance from Nissan, which agreed to buy a controlling one-third stake for $2.2 billion.

An internal investigation has uncovered poor communication, slack governance and pressure on resource-starved engineers at the root of Mitsubishi’s problems.

Mitsubishi said last month that the resulting slump in domestic sales led to a 75 percent plunge in first-quarter operating profit, while the company said it booked an extraordinary loss of 125.9 billion yen ($1.24 billion) in the first quarter as a result of the cheating.

($1 = 101.8600 yen)

(Reporting by Naomi Tajitsu; Editing by Stephen Coates)

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United Airlines hires No. 2 at American to be its president

United Continental Holdings Inc (UAL.N) has hired the No. 2 executive at rival American Airlines Group Inc (AAL.O), Scott Kirby, to be its president, the companies said on Monday.

The move, effective immediately, is the latest attempt by United’s reshuffled board and new Chief Executive Officer Oscar Munoz to shape a new strategy and boost the airline’s stock price. United has lagged other U.S. carriers in on-time arrivals and profit margins, though its results have recently improved.

United’s shares rose more than 1 percent in after-market trading. American’s fell nearly 2 percent.

In a letter to employees, Munoz called Kirby’s hiring the “culmination” of his forming a new leadership team.

“This move will allow me to sharpen my own focus as CEO on the core mission of driving United’s overall strategy, business innovation and financial performance,” he said.

Industry experts welcomed United’s move.

“United has lacked intellectual rigor,” said consultant Robert Mann. “Scott going over there will absolutely shake up the place.”

Travel industry analyst Henry Harteveldt said United “got themselves a star player.”

Earlier this month, United appointed a new chief financial officer and new chief commercial officer, each with airline industry expertise. The company came under pressure from activist investors in the spring to name airline veterans to its board who could guide Munoz, a former railroad executive who took the helm of United in September 2015.

At American, Chief Operating Officer Robert Isom will replace Kirby as president, the airline said in a news release.

The management change stemmed from succession planning and the conclusion that “it would not be able to retain its existing executive team in their current roles,” after “conversations regarding career expectations,” the airline said.

A filing by American showed the airline agreed to pay Kirby a cash severance of $3.85 million and to accelerate the vesting of his stock.

The timeline that led to Kirby’s move was not immediately clear.

A United spokeswoman said the appointment followed several conversations between Kirby and Munoz, 57.

Industry watchers said a chance to become CEO of United may have attracted Kirby, 49, to the role. At American, board director John Cahill said in a statement on Monday he looked forward to the “leadership for many years to come” of CEO Doug Parker, 54.

Reporting to Kirby at United will be Chief Commercial Officer Julia Haywood and Chief Operations Officer Greg Hart.

(Reporting by Jeffrey Dastin in New York and Supantha Mukherjee in Bengaluru; Editing by Shounak Dasgupta, Tom Brown and Bill Rigby)

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