diff --git a/init/init.go b/init/init.go
index 3d07baac..15336c0d 100644
--- a/init/init.go
+++ b/init/init.go
@@ -191,7 +191,7 @@ func setupSharedRoot(c *config.CloudConfig) (*config.CloudConfig, error) {
 
 	if isInitrd() {
 		for _, i := range []string{"/mnt", "/media", "/var/lib/system-docker"} {
-			if err := os.Mkdir(i, 0755); err != nil {
+			if err := os.MkdirAll(i, 0755); err != nil {
 				return c, err
 			}
 			if err := mount.Mount("tmpfs", i, "tmpfs", "rw"); err != nil {
diff --git a/tests/nonexistent_state_test.go b/tests/nonexistent_state_test.go
new file mode 100644
index 00000000..4a306b4f
--- /dev/null
+++ b/tests/nonexistent_state_test.go
@@ -0,0 +1,10 @@
+package integration
+
+import . "gopkg.in/check.v1"
+
+func (s *QemuSuite) TestNonexistentState(c *C) {
+	err := s.RunQemu("--no-format", "--append", "rancher.state.dev=LABEL=NONEXISTENT")
+	c.Assert(err, IsNil)
+
+	s.CheckCall(c, "sudo ros config get rancher.state.dev | grep LABEL=NONEXISTENT")
+}