Daihatsu to Halt All Assembly Operations Following Revelation of Improper Safety Testing

The Yomiuri Shimbun
Daihatsu Motor Co.’s plant in Oyamazaki, Kyoto Prefecture, on Thursday.

Daihatsu Motor Co. has said it plans to completely halt operations at all its vehicle assembly plants in the nation by Tuesday, in response to revelations of falsified vehicle safety tests.

It is unclear when the automaker will resume operations and the suspension of production could be prolonged. Subcontractors are already affected, and Daihatsu is considering compensating its suppliers and other business contacts for the loss of revenue.

The carmaker said it will continue to produce vehicles parts for which it has already placed orders for but will gradually stop production afterwards.

Three plants in Oyamazaki, Kyoto Prefecture; Ryuo, Shiga Prefecture; and Nakatsu, Oita Prefecture will suspend operations on Monday, and its main plant in Ikeda, Osaka Prefecture, on Tuesday.

The engine manufacturing plant in Kurume, Fukuoka Prefecture was to be shut down on Friday.

Of the 60,000 vehicles for which Daihatsu currently has orders, the automaker will cancel deliveries of the 12,000 yet to be completed. The 48,000 vehicles already completed will be delivered to customers upon request, it said.

Parts suppliers have already been impacted.

An auto body parts company in Okayama Prefecture was informed from Daihatsu on Wednesday that the automaker will stop ordering parts for this month. A decade or so ago, the company succeeded in starting business with Daihatsu to boost earnings, and it has expanded to the point where sales to Daihatsu currently account for about 20% of its annual sales of ¥10 billion.

“We would like to increase orders from other carmakers to make up for the shortfall. But we are worried because we don’t know about orders from next month,” the company’s official said.

Daihatsu purchases auto parts directly from 423 domestic companies. However, the number of companies with which Daihatsu has ties with increases even more if distribution, equipment repair and others are included.

According to a survey by Teikoku Databank Ltd. conducted on companies with Daihatsu-related sales of 1% or more, there are an estimated 921 first-tier subcontractors that deal directly with Daihatsu, and the number rises to 8,136 when up to fifth tier is included. Total sales amounted to ¥2.21 trillion.

By location, Aichi Prefecture has the largest number of subcontractors with 2,084 companies, followed by Osaka Prefecture with 1,043, Hyogo Prefecture with 334, and Oita Prefecture with 89.

“If the production suspension is prolonged, there are concerns about the impact on the local economy, including employment,” a Teikoku Data Bank official said.

“The impact will be fairly large. We will consult with each of our direct contractors and consider compensating them,” Daihatsu Vice President Hiromasa Hoshika said. The firm has already begun discussions with them.

A total of about 9,000 people work at Daihatsu’s five plants in the nation. The company is considering giving them nonregular jobs, such as cleaning plant facilities, or extended leave after paying a certain amount of wages.