Unveiling the Safety Scandal
Background
Daihatsu, a Japanese car manufacturer under Toyota's umbrella, has recently halted production in its domestic market across four manufacturing facilities. This drastic move follows the admission of fraudulent practices in safety tests spanning the last 30 years with the initial malpractices dating back to 1989.
Safety Tests Manipulation
The revelation was made public after investigations revealed improper safety testing techniques. Toyota, the parent company of Daihatsu stated that the scandal has "shaken the company's very foundation." The deception entailed falsifying crash safety testing on 88,000 automobiles the majority of which were sold under the Toyota brand in ASEAN nations such as Malaysia and Thailand.
Unraveling the Scandal
Initial Findings
In April 2023, Daihatsu admitted to modifying the front seat door inside lining to deceive specific safety checks. These manipulations allowed the vehicles to pass certain safety tests particularly those involving side collisions where Daihatsu failed to comply with established regulations.
Further Discoveries
In May 2023, additional fraudulent practices were uncovered, revealing incorrect data submitted by Daihatsu regarding collision tests involving two hybrid electric vehicles. This led to an immediate halt in the sales and exports of the affected hybrid electric vehicles.
Escalation of the Scandal
Recent revelations by an independent third-party committee indicate evidence of tampering with safety tests in up to 64 vehicles. Some of these vehicles were badge-engineered and marketed under the Toyota brand.
Impact on Daihatsu's Operations
Halting Domestic Production
As a response to the extensive safety scandal, Daihatsu has temporarily stopped domestic production across all four manufacturing facilities. This hiatus, which began in January 2024, might extend into February 2024. Approximately 9,000 workers across these facilities, including the headquarters in Osaka, are affected by this pause.
Toyota's Response
Toyota, committed to rectifying the situation, promises a "fundamental reform" to revitalize Daihatsu and the automotive giant recognizes the need for a comprehensive review of Daihatsu’s management, operations, and overall structure.
Financial Ramifications
The impact of this scandal extends to financial repercussions for Toyota, as evidenced by a 4% drop in Toyota's shares in Tokyo last Thursday and the financial losses incurred underscore the severity of the situation and its implications for both Daihatsu and Toyota.
Conclusion
Toyota's financial situation has been negatively impacted by the safety crisis involving Daihatsu which has not only caused a temporary stop to domestic manufacturing but also more extensive ripple effects. To rebuild integrity and confidence in the automotive sector a comprehensive reorganization of Daihatsu's activities is imperative. About the challenges presented by this dire circumstance, Toyota's commitment to a fundamental transformation indicates a proactive attitude.