(Bloomberg) -- Nissan Motor Co. will recall about 1.2 million vehicles sold in Japan after regulators discovered unauthorized inspectors approved vehicle quality, potentially costing the company 25 billion yen ($222 million).
The vehicles, from as many as 24 models made and sold between October 2014 and September 2017, will be called back for inspection, Chief Executive Officer Hiroto Saikawa said. The cars have no quality issues and won't need to have any parts replaced, the company said. Nissan vehicles exported from Japan aren't involved in the recall.
Nissan shares rose as much as 1.7 percent Tuesday as the company said the models involved, produced in six Japanese factories, are safe to drive and will be called back purely for re-inspection by authorized personnel. The stock had tumbled Monday after the automaker disclosed it had temporarily suspended vehicle registration in Japan due to the non-compliance.
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While the issue is bad for the carmaker's corporate image and leads to concern that sales could be affected, it doesn't mean Nissan cars are lacking in quality, Takeyuki Atake, a credit analyst at SMBC Nikko Securities Inc., wrote in a report Tuesday. The recall costs are also small compared with Nissan's net income forecast of 535 billion yen for the current fiscal year, Atake wrote.
Saikawa said he will personally investigate the issue and find out the cause before deciding who should bear responsibility for the “shocking” lapse. There will also be an external probe, he said at the company's headquarters in Yokohama Monday.
In addition to the more than 1 million vehicles being recalled, about 34,000 units that have yet to be registered will also be re-inspected.
Nissan said final inspections were carried out by technicians not properly authorized to carry out those duties under the company's processes approved by the Japanese Ministry of Land, Infrastructure and Transport. The inspection process has been fixed and registrations for new vehicles have resumed, Nissan said.
“It's very regrettable” the lapse occurred, Hiroshige Seko, Japan's trade minister, told reporters Tuesday. "I'd like Nissan to do everything possible to prevent user concern and confusion from spreading.”
Automakers worldwide are under increased scrutiny over quality and compliance with regulations as vehicles become more complex and the industry moves toward autonomous driving, electrification and connectivity.
The automaker may face penalties for utilizing un-certified personnel during inspections, said Kenichi Hayashi, an official in the transport ministry. The lapse was discovered by the ministry during a review at the company's Shatai plant, Saikawa said.
--With assistance from Anne Riley Moffat
To contact the reporters on this story: Ma Jie in Tokyo at jma124@bloomberg.net, Nao Sano in Tokyo at nsano3@bloomberg.net.
To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Yuji Okada at yokada6@bloomberg.net, Lena Lee
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