Mitsubishi, Denso probed in Germany over diesel emission allegations

Mitsubishi Motors Corp. and Denso Corp. had their German operations probed by investigators over allegations that they may be involved in equipping diesel engines with devices to cheat on emissions tests.

Police and prosecutors began investigating 10 sites across Germany, Nadja Niesen, a spokeswoman for Frankfurt prosecutors, wrote in an emailed statement. A spokeswoman for Denso, an auto parts supplier, confirmed that it was also raided in Germany and that it is cooperating with authorities. Separately, three of the locations raided belong to supplier Continental AG, which is a witness in the probe and is cooperating fully, according to an emailed statement from the company.

Shares in Mitsubishi Motors fell as much as 7.1%, while Denso declined as much as 3.1% as of midday in Tokyo following the news.

The auto industry has been rattled by allegations that software is being used in diesel engines to cheat on emissions tests. The scandal started almost five years ago when U.S. regulators disclosed they were probing Volkswagen AG over the issue. Since then, investigations have mushroomed across the globe.

“There’s suspicion that the engines were equipped with a defeat device set up to meet emissions limits during testing but not in real driving conditions," Niesen said. “The use of such a device is prohibited under EU law."

Tatsuo Yoshida, a Bloomberg Intelligence analyst, said that a possible recall could involve as many as 400,000 vehicles and cost as much as 30 billion to 40 billion yen ($273 million to $364 million), including legal costs. “This could become a serious issue," he said.

Tetsuji Inoue, a spokesman for Tokyo-based Mitsubishi, said the company is still gathering information while cooperating with authorities.

Authorities are looking at Mitsubishi’s 1.6-liter and 2.2-liter 4-cylinder Euro 5 and Euro 6 diesel engines, asking drivers who acquired cars with the motors since 2014 to contact police. Drivers may have been defrauded because vehicles with defeat devices are bearing the risk of losing the necessary license to use them on the streets, according to prosecutors.

Mitsubishi Motors is part of a global automaking alliance with Nissan Motor Co. and Renault SA, which was thrown into turmoil in November 2018 with the arrest of its then-chairman, Carlos Ghosn, in Japan on allegations of financial wrongdoing. Ghosn, who has denied the charges, was freed on bail after spending a total of almost 130 days in jail before recently fleeing to Lebanon from Japan.

Mitsubishi has a relatively small presence in the European market. New car registrations rose 3.4% to 138,003 vehicles in the region last year, according to European industry association ACEA. This translates into a market share of 0.9%, compared with 5% for Japanese peer Toyota Motor Corp.