It’s tempting to think that the Toyota Motor president’s apology on Monday, accompanied by the usual bow, was over the top. Ultimately, Akio Toyoda was trying to rectify past problems with testing and certification procedures, which in some cases were stricter than required by the Japanese government. But the investigations are not over yet, and the revelations add to a slew of scandals and complaints about governance across the group. Two weeks before the company’s annual meeting, valued at 52 trillion yen (310 billion euros), Toyoda seems especially exposed.
Toyota officials said the problems occurred during six different tests conducted in 2014, 2015 and 2020. A spokesperson added that the company continues to investigate issues related to fuel efficiency and vehicle emissions, and that it aims to complete the investigation at the end of June.
Seven models, including one from the popular Yaris series, were tested using methods that differed from government standards. In one example, staff measured collision damage on only one side of a model’s hood instead of both sides. In five cases, staff made checks more stringent than official criteria. Tokyo ordered the world’s largest automaker to halt shipments of some models, and yesterday shareholders had shaved 3% off the company’s value since Friday’s close.
The disappointment is understandable. The investigation was initiated as a result of irregularities committed in three subsidiaries of the company, Daihatsu Motor, Toyota Industries and Hino Motors. This had already shaken faith in the group, causing Toyoda – the founder’s grandson and former CEO – to fear that management had lost touch with frontline workers. In the case of Daihatsu, an investigation counted 174 irregularities in the tests, including false statements and manipulation of original data.
Meanwhile, discontent grows around the council. Voting advisor Institutional Shareholder Services maintains that three directors are not truly independent due to as many ties to Toyota. Glass Lewis highlights similar concerns. Both have recommended shareholders vote against Toyoda’s re-election as chairman. This comes as the Tokyo Stock Exchange strives to improve both the profitability and governance of Japanese listed companies, for example by encouraging them to publish plans to increase shareholder value; Toyota has so far refused to join the official effort.
It is true that other automakers are also being investigated, such as Mazda, Honda, Yamaha and Suzuki (Mazda has also suspended shipments of some models). But the investigation has begun with the Toyota group, whose reputation has been built on its projection of reliability thanks to meticulous manufacturing and quality control protocols.
The investigation will continue for the rest of the month, so it is possible that more problems will be discovered. Toyota has been driving a dangerously fine line. The vote on Toyoda’s future will put an indicator on how much trust the company has lost.
The authors are columnists for Reuters Breakingviews. The opinions are yours. The translation, of Carlos Gómez Belowit is the responsibility of Five days
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