updated 3/10/2005 10:40:37 AM ET 2005-03-10T15:40:37

Japan’s Mitsubishi Motors Corp. said Thursday that it had settled with DaimlerChrysler AG on compensation for the costly defect cover-up and recall scandal at Mitsubishi Motors’ truck unit.

The deal includes a cash payment — the amount of which was not disclosed — and the transfer of Mitsubishi Motors’ 20 percent stake in the truck company to DaimlerChrysler, the German-American automaker.

DaimlerChrysler was a key partner of the Tokyo-based automaker before deciding last year to end cash infusions to bail out the troubled company.

DaimlerChrysler has been upset that disclosures about a systematic cover-up of auto defects emerged after it took a stake in both Mitsubishi Motors and its truck unit. The wrongdoing was first disclosed in 2000.

Mitsubishi said the settlement was already accounted for in its forecast, for the fiscal year ending March 31, of a loss of 472 billion yen ($4.5 billion). Mitsubishi Motors sales have plunged after the recurring recall scandals.

Separately, Mitsubishi Motors said it raised 274 billion yen ($2.6 billion) by issuing new shares to three Mitsubishi group companies as part of a previously announced restructuring plan.

After the announcement, Standard & Poor’s Ratings Services said it lowered its long-term issuer rating on Mitsubishi Motors to “SD,” or Selective Default from “CC,” because the plan included a debt-for-equity swap worth 54 billion yen ($519 million).

The ratings agency says debt-for-equity swaps are tantamount to default.

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