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Mitsubishi to recall minicars, cost seen at Y10 bln

TOKYO, Sept 26 Reuters reported that Mitsubishi Motors Corp, said on Thursday it is recalling 164,584 minicars due to possible transmission defects and at an estimated cost of 10 billion yen ($82 million).

The recall and its comparatively high cost is another thorn in the side for the automaker, still working to overcome a major customer complaints scandal two years ago resulting in the recall of almost two million vehicles worldwide.

Since then, Mitsubishi has become extremely scrupulous about quality control, a necessary move to win back customer confidence but one that has also made it the most prolific recaller among Japanese automakers.

"This only highlights what is wrong with Mitsubishi. They need to restore confidence in the brand and each subsequent recall only prolongs the agony," said Kurt Sanger, auto analyst at ING.

While giving Mitsubishi credit for its restructuring efforts, analysts have blamed the recall problems for distracting management and hurting morale at the automaker.

A lack of new models has also exacerbated Mitsubishi's woes, with domestic sales falling sharply.

"They've done a lot of good things with cost-cutting but investors have not yet seen the clean break from past problems affecting its passenger car business in the domestic market," Sanger said.

Mitsubishi, 37 percent owned by German-U.S. auto giant DaimlerChrysler (XETRA:DCXGn.DE - News), said it had no plans to change its earnings estimate of 38 billion yen in net profit for the business year ending in March due to the cost of the recall.

Correcting transmission problems is relatively expensive. By comparison, another Mitsubishi recall last month of some 670,000 minivehicles was estimated to cost around six billion yen.

The current recall affects Mitsubishi's Pajero Mini, Minicab and Town Box models manufactured between October 1998 and July 2002. Another 70 of the vehicles affected were sold overseas, mainly in Singapore.

It said there were two possible defects, one that may only allow the vehicle to operate in fourth gear and one that may prevent the speedometer from working.

Mitsubishi added that to date, 35 incidents of the first defect and 84 of the second had been reported but no accidents had occurred.