Suzuki patriarch steps down from CEO post as mileage test storm grows

TOKYO (Reuters) - Suzuki Motor Corp 7269.T patriarch Osamu Suzuki is stepping down as chief executive and the Japanese automaker promised to cut executive pay and slash 2015 bonuses after the bruising admission of major flaws in its fuel tests.

Suzuki Motor Chairman and Chief Executive Officer Osamu Suzuki (C) bows as he leaves a news conference at the Land, Infrastructure, Transport and Tourism Ministry in Tokyo, Japan May 31, 2016. REUTERS/Issei Kato

Executive Vice President Osamu Honda, who also served as chief technical officer, will retire, taking responsibility for the research and development team at the heart of the testing scandal.

The company said that board members would choose the next CEO on June 29 after its annual shareholder’s meeting, and that the top executive would be selected from among the board members.

Japan's No. 4 automaker by sales said in May it had used the wrong methods to calculate mileage for models going back to 2010, widening a mileage testing storm that had already rocked smaller rival Mitsubishi Motors Corp 7211.T.

Those followed accounting scandals at Olympus Corp 7733.T and Toshiba Corp 6502.T, prompting criticism from some investors that the Japanese government's push to introduce new corporate governance rules has failed to shake up a cozy and often secretive corporate culture.

Suzuki, who has led the company for nearly four decades, acknowledged that during the past few years it had become difficult to oversee all of the company’s operations on his own.

“Upon reflection, I believe that this may have contributed to the latest incident,” he told reporters on Wednesday.

Suzuki, 86, will remain as chairman, but his narrower role is a recognition of responsibility for a testing error the company previously shrugged off.

The automaker used indoor tests for its cars’ individual parts, rather than testing vehicles on an outdoor course. It said this was done because its testing site is on a windy hill by the sea, making readings erratic.

On Wednesday, it also blamed a lack of transparency in its key research unit.

“This latest incident occurred because of problems within the company which had continued for a long time, including an R&D division which was not transparent enough,” said Toshihiro Suzuki, the chairman’s eldest son. He took over from his father as president last year.

“We are making these changes today to try to regain the trust of our customers, and to rebuild Team Suzuki.”

Suzuki, as chairman, will oversee efforts to strengthen compliance and improve training for engineers, while reworking its mileage testing procedures to ensure they comply with regulations.

Raided by Japanese investigators last week as part of a probe over the tests, Suzuki also said it would encourage whistle-blowing.

Suzuki’s changed role and Honda’s retirement are effective June 29, subject to approval by shareholders at its annual general meeting, the company said.

The testing scandals at Suzuki and Mitsubishi come after Volkswagen AG VOWG.DE was first discovered last year to have cheated diesel emissions tests in the United States.

Reporting by Naomi Tajitsu; Editing by Muralikumar Anantharaman/Ruth Pitchford