Toyota is driving a dangerously fine line
04/06/2024 12:00
(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own. Updates to add graphic.)
By Katrina Hamlin
HONG KONG, June 4 (Reuters Breakingviews) - It's
tempting to think the Toyota Motor 7203.T chair's apology on
Monday, accompanied by the customary bowing, was overdone. After
all, Akio Toyoda was trying to make amends for problems with
past testing and certification procedures that in some instances
were more stringent than the Japanese government required. But
investigations aren't yet over, and the revelations add to a
heap of scandals and governance gripes across the group. With
the $290 billion company's annual meeting just two weeks away,
Toyoda looks particularly exposed.
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 a
single side of a model's bonnet rather than on both sides. In
five cases, staff carried out more exacting checks than the
official criteria. Tokyo ordered the world's largest carmaker to
halt shipments of a few models, and by Tuesday morning
shareholders had sliced some $8 billion off the company's value
since Friday's close.
The disappointment is understandable. The investigation was
prompted by earlier wrongdoing at three company subsidiaries,
Daihatsu Motor, Toyota Industries 6201.T and Hino Motors
7205.T . That had already shaken faith in the group, causing
Toyoda - a grandson of the founder, and a former CEO - to fret
management had lost touch with front line workers. In the case
of Daihatsu, an investigation counted 174 testing
irregularities, including false statements and manipulation of
original data.
Meanwhile, there's growing discontent about the board. Proxy
adviser Institutional Shareholder Services argues three
directors are not truly independent due to various others ties
to Toyota. Glass Lewis highlighted similar concerns. Both have
recommended that shareholders vote against re-electing Toyoda as
chair. This comes at a time when the Tokyo Stock Exchange is
working hard to improve both returns and governance at Japanese
listed companies, for example by encouraging them to publish
plans to enhance shareholder value - Toyota has so far declined
to sign up to the official effort.
Granted, other carmakers are being investigated, too,
including Mazda Motor 7261.T and Honda Motor 7267.T . But the
inquiry started with the Toyota group, whose reputation has been
built on its projection of reliability thanks to meticulous
manufacturing protocols and quality control.
The probe will continue for the rest of the month, too, so
more problematic findings may yet come to light. Toyota has been
driving a dangerously fine line. The vote on Toyoda's future
will put a marker on how much trust the company has lost.
Follow @KatrinaHamlin on X
CONTEXT NEWS
Japan's transport ministry is to conduct an on-site inspection
at Toyota Motor's headquarters on June 4 after the carmaker and
rivals Mazda Motor, Yamaha Motor, Honda Motor and Suzuki Motor
revealed they had found irregularities in applications to
certify certain models. Toyota and Mazda are both halting
shipments of some models.
The ministry had ordered the companies to carry out the
probes after similar issues surfaced last year at Daihatsu
Motor.
Toyota executives said in a press conference on June 3 that
problems occurred during six different tests conducted in 2014,
2015, and 2020.
A Toyota spokesperson added that the company is still
investigating issues related to vehicle fuel efficiency and
emissions, and aimed to complete the inquiry by the end of June.
Toyota Motor's shares fell 1.76% to 3341 yen on June 3.
Shares fell as further 1.2% in early morning trading on June 4.
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Graphic: Toyota group's shares are falling https://reut.rs/455lKkl
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(Editing by Antony Currie and Aditya Sriwatsav)
((For previous columns by the author, Reuters customers can
click on HAMLIN/ katrina.hamlin@thomsonreuters.com; Reuters
Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))