Daihatsu Scandal: Rigged Safety Tests Threaten Toyota’s Reputation

Summary

    Daihatsu, a subsidiary of Toyota, has been put under investigation following allegations of rigging safety tests. The controversial findings suggest that the issue is much larger than initially thought, reflecting adversely on Toyota’s reputation for quality and safety. The review also showed that the irregularities affect not only the domestic market but also many overseas models. Toyota acknowledges the need for drastic reform in Daihatsu and a thorough review of certification operations. This issue resurfaced after Daihatsu announced in April that it had found inaccurately conducted tests as per a whistleblower’s report.

Daihatsu’s Quality and Safety Reputational Crisis

An independent panel probing into Daihatsu revealed a wider than expected scandal in its safety procedures. Allegedly, the Toyota subsidiary had falsified side-collision safety results in about 88,000 small cars, many of them sold as Toyotas. Thus, the misconduct may jeopardize the parent company’s reputation for excellent safety and quality.

Daihatsu primarily manufactures Toyota’s small-car units, including the popular “kei” small cars and trucks native to Japan. Unfortunately, the misconduct extends to Mazda and Subaru’s models sold domestically as well as Toyota and Daihatsu models for the international market, the investigation disclosed.

Calls for Fundamental Reform in Daihatsu

Toyota affirmed a need for a “fundamental reform” within Daihatsu along with an extensive review of certification operations. The auto giant stated that such revamping is significant and cannot be accomplished rapidly. Instead, it would require an exhaustive review of management, business operations, organization, and structure.

Wednesday saw Toyota shares remain static despite a wider market increase of 1.6%. Furthermore, Daihatsu was exposed as having manipulated safety tests for nearly all its currently produced models and some prior productions, as per an Asahi newspaper report.

Daihatsu Cheats Safety Tests

The scandal emerged following an April report by a whistleblower, according to which Daihatsu confessed to incorrectly performed tests. As a result, the company immediately informed regulatory agencies and stopped shipping the affected models.

The controversy led to Daihatsu temporarily halting the sales of Toyota Raize hybrid electric vehicle and the Rocky model. By October, Daihatsu had generated nearly 40% of its 1.1 million vehicles on foreign sites. With around 660,000 vehicles sold worldwide over that time, Daihatsu accounted for 7% of Toyota’s sales.

The affected models included those designated for southeast Asian markets, such as Thailand, Indonesia, Malaysia, Cambodia, Vietnam, and the Central and South American countries of Mexico, Ecuador, Peru, Chile, Bolivia, and Uruguay. This is the most recent safety issue to affect Toyota amidst several others in the past.

A data fabrication scandal concerning Hino Motors, a Toyota truck-and-bus-making subsidiary in 2022, led to manifold consequences, including manager pay cuts and resignations. Akio Toyoda, then CEO and Today’s Chairman, testified before the U.S. Congress during a 2010 safety crisis revolving around faulty accelerators.

This financial news could potentially impact trading, especially if you’re considering assets linked to Toyota or its affiliates. The potential reputational damage and review process could lead to volatility in Toyota’s stock.

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