Toyota, the world’s largest automaker, recently suffered a significant blow to its market value, losing $15.6 billion following revelations of safety test data falsification. Japan’s Transport Ministry uncovered that Toyota had mishandled and falsified safety certification tests, leading to a more than 5.4% drop in the company’s shares last week. Despite a slight recovery with Nasdaq-listed shares up by about 1% on Monday, the scandal’s impact on Toyota’s reputation remains profound CNBC reported.
The controversy arose from an internal investigation initiated by regulatory mandates, which revealed that Toyota had failed to perform necessary safety tests as required for certification in five instances. These involved popular models such as the Crown, Corolla, and Yaris Cross. Notably, in one instance involving the Lexus RX, Toyota submitted falsified data to meet safety standards for certification.
Despite assurances that the affected vehicles are safe to drive, Toyota’s chairman, Akio Toyoda, issued a public apology at a press conference last week. “As the person responsible for the Toyota Group, I would like to extend my sincere apologies to our customers, car enthusiasts, and all stakeholders for this issue,” Toyoda stated.
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In response to the findings, Toyota announced the suspension of production for three models: the Corolla Fielder, Corolla Axio, and Yaris Cross. This decision follows the sale of over 11 million vehicles worldwide by the company last year. The suspensions are expected to impact production schedules and supply chains, affecting not only Toyota but also its extensive network of suppliers and dealers.
The scandal isn’t confined to Toyota alone. Rivals Honda, Mazda, and Suzuki have also admitted to falsifying data related to safety certification tests. Mazda, Japan’s second-largest automaker, halted production of the Roadster RF and Mazda 2, with shares dropping more than 7% last week, equating to a $500 million loss in market capitalization. This collective setback among Japanese automakers threatens to tarnish the stellar reputations they have cultivated, especially in key markets like North America.
Earlier this year, Japan’s Transport Ministry mandated that 90 car manufacturers reassess their vehicle testing procedures after a Toyota affiliate was found to have falsified safety data for decades. This directive led to the recent revelations and has intensified scrutiny on the industry. The Ministry’s wide-ranging inspection found irregularities in certification applications from several major automakers, including Honda, Suzuki, and Yamaha Motor.
Since the scandal broke on June 3, Toyota’s shares have plunged more than 5%, recovering slightly by Monday. Mazda’s shares saw a larger decline, falling 7.7% since May 31. Honda, Yamaha Motor, and Suzuki also experienced dips in their stock prices but showed marginal gains as the market opened this week.
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Toyota has announced it will temporarily halt shipments and sales of the affected models in Japan, with Mazda taking similar actions for the Roadster RF and Mazda 2. Despite these halts, both companies have reassured customers that their vehicles remain safe to drive. The Transport Ministry plans to conduct on-site inspections of the implicated companies to ensure compliance with safety standards moving forward.
This scandal follows a series of safety-related issues for Toyota. In December, Toyota’s Daihatsu unit halted shipments globally after an investigation uncovered safety test rigging in 64 models, including those under the Toyota brand. This pattern of misconduct underscores systemic issues within the company’s safety testing processes and has prompted calls for more stringent oversight and reform.
The implications of these revelations extend beyond financial losses. The integrity of safety testing processes is crucial for maintaining consumer trust and industry credibility. As Japanese automakers navigate this crisis, their commitment to transparency and regulatory compliance will be pivotal in restoring confidence among customers and stakeholders.