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Electrical machines diagnosis needs a modelling approach reliable and as close to the reality as possible. It is shown that by proper modelling of the induction machine it is possible to detect the effect of the different faults on the machine current and vibrations. This paper proposes a model based on permeance network method (PNM) for the simulation of faulty induction machines. The PNM allows the authors to take into account the local magnetic saturation and remains moderately time consuming compared to the finite element method. The developed permeance network of the machine is coupled to the stator phase electrical equations on one side and, on the other side, to the mechanical motion equation in order to simulate variable speed operations. The air-gap eccentricity is then taken into account in the modelling of the air-gap permeance. The effect of the eccentricity on the current and vibration signatures is discussed. Theoretical analysis for the effect of the machine eccentricity is presented.