Daihatsu has acknowledged manipulating data on certain models for the past 30 years, potentially costing the company up to $700 million in factory closures and compensating suppliers.
As a result, the Japanese car manufacturer has temporarily halted all production activities in its home country without announcing a specific timeframe for resumption. In addition to the loss in sales, Daihatsu is also facing negotiations with suppliers to compensate for lost revenue due to the production stoppage, as well as support costs for Daihatsu dealers who have been abandoned by customers following the scandal. In Japan, Daihatsu has over 423 tier-one suppliers and 30,000 car dealers nationwide.
The expected compensation amount is significant and will include the expenses for additional safety investigations and inspections.
According to Seiji Sugiura, an expert from the Tokai Tokyo Research Institute, “Depending on the scale of compensation, Daihatsu’s damages could reach 100 billion yen (equivalent to $700 million) or more.”
In the fiscal year 2022, Daihatsu reported an operating profit of 141.8 billion yen and a net profit of 102.2 billion yen. However, the scandal could drive Daihatsu into the red for the first time in 30 years.
Japan accounts for approximately 60% of the 1.42 million cars produced by Daihatsu in its last fiscal year. Daihatsu also manufactures cars in Indonesia and Malaysia, with production reaching around 300,000 cars. Additionally, Daihatsu serves as an original equipment manufacturer, supplying cars to the Toyota, Subaru, and Mazda brands. Moreover, Daihatsu plays an integral role in Toyota’s strategy to develop mini electric cars in Japan and small cars in emerging and developing markets.
Since becoming fully owned by Toyota in 2016, Daihatsu is said to account for only approximately 3% of the parent company’s operating profit. However, it is projected to increase by 65% to 4.5 trillion yen in fiscal year 2023. Nevertheless, if Daihatsu incurs losses exceeding 100 billion yen, Toyota’s profitability may be affected.
The Japan Ministry of Transport is conducting a separate investigation and has instructed Daihatsu to halt the delivery of cars until the safety of its products can be verified. Moreover, the company may face additional penalties, including the revocation of necessary certifications for commercial production.
TT (Tuoitrethudo)
Reference: Asia Nikkei
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