Toyota's Daihatsu stops production and sales after another "explosion" in Japan

2023-12-25

Due to testing violations and other issues, on 26 December, Toyota's subsidiary Daihatsu Industries announced that its headquarters plant in Ikeda City, Osaka Prefecture, stopped operating. As a result, all four of the company's vehicle plants in Japan have ceased production. The shutdown is expected to last until at least the end of January 2024. In the meantime, Daihatsu has suspended shipments of all models and is currently under investigation by Japan's Ministry of Land, Infrastructure, Transport and Tourism.

Violations lasted 34 years

Daihatsu, which was founded in 1907 and is known for its popular micro-small cars in Japan and Southeast Asia, is understood to have been acquired by Toyota for 51.2 per cent of its shares in 1998 and became a wholly-owned subsidiary of Toyota in 2016. In April this year, Daihatsu received an internal report of crash test violations, and a preliminary investigation was conducted after which it was confirmed that the report was true, and that four of its models developed for overseas markets had violated the regulations in side impact tests. As a result, Daihatsu set up a new independent third-party committee to conduct further investigations based on the internal investigations, and in May, two more models were found to be in violation of the crash test. Later, as the investigation progressed, more violations were revealed.

On 20 December, Daihatsu announced on its website that it would suspend shipments of all models, including those already in production, after the third-party committee found 174 irregularities in the company's review and monitoring, including falsification of safety crash test data. The number of models confirmed to be involved in the irregularities has increased from 6 to 64, including those produced on behalf of Toyota, Mazda and Subaru in addition to Daihatsu brand vehicles. Later that day, Daihatsu President Soichiro Okudaira and Toyota Vice President Hiroki Nakajima jointly attended a press conference to apologise to the public.
The investigation found that certain Daihatsu models used airbag control units in crash tests that were different from those used in marketed models. The irregularities also involved false reporting of headrest impact tests and safety test speeds for certain models. The investigation found that the misconduct was particularly prevalent after 2014, with violations in one of the discontinued models even dating back to 1989. In other words, Daihatsu's irregularities have been going on for 34 years.

The main reasons for this, according to Daihatsu, include: overly tight and rigid development cycle schedules that put extreme pressure on employees; greater authority of frontline staff and lack of management involvement; and management focusing on short-term development and turning a blind eye to irregularities. To ensure that such issues do not recur, Daihatsu said it will review its certification application process and make fundamental changes to its corporate culture to prioritise compliance awareness.

In addition, given that Daihatsu produces cars and parts for a number of Japanese brands, including Toyota, Mazda, and Subaru, its irregularities have spilled over to other car companies. In particular, parent company Toyota, whose Hino Motors 2022 has already been found to have falsified emissions, and now Daihatsu's exposure to violations has sparked more questions about Toyota's lack of supervision.

On 21 December, Japan's Ministry of Land, Infrastructure, Transport and Tourism raided Daihatsu's headquarters in Osaka. Almost at the same time, Toyota North America announced that about 1 million vehicles sold by the company in Canada and the U.S. would need to be recalled due to airbags or potential quality problems in some vehicles. The two overlapped, and Toyota shares plummeted.

Reaching more than 4,000 suppliers

Daihatsu suspended shipments of all models in Japan after the problem was exposed. In terms of production, Daihatsu has 4 factories in Japan, 3 factories in Shiga, Kyoto and Oita Prefectures were closed down on 25th December, and the headquarter factory was closed down on 26th December. As a result, all Daihatsu's production operations in Japan have been halted until at least the end of January 2024, and the company is expected to resume exports or production by the end of this year. Daihatsu has not yet confirmed when it will resume exports or production.

Several foreign media commented that this incident may cause a serious crisis of confidence in Japan's auto manufacturing industry. Nikkei News pointed out that the scandal "has reached the rare point of completely stopping shipments from factories".

In fact, in recent years, Japan's auto industry counterfeiting, violation of the frequent occurrence of scandals, and most have lasted three or four decades. Whether it is the car field of Mitsubishi, Nissan, Subaru, Mazda, Suzuki, Lexus, Hino, or parts and components in the field of Takata, Toray, Aurora Brake, Hitachi Ansteem, etc., is a long list of backroom operations seem to have been commonplace. From a broader context, most of the above violations started in the late 1980s or 1990s. The bursting of the Japanese economic bubble brought a big blow to all industries, and coupled with fierce market competition, violations seem to have become a means for companies to survive, and an unspoken unspoken rule in the industry. Daihatsu violated

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