Toyota’s Suspension of Shipments: Serious Misconduct Calls into Question Group’s Governance

Editorial

15:36 JST, January 31, 2024

Performance test irregularities have been uncovered one after another at companies affiliated with Toyota Motor Corp. Toyota Motor itself has been forced to suspend shipments of some of its models. This is a serious situation that calls into question the governance of the Toyota group’s businesses.

Toyota Industries Corp., a member of the group, has announced that it conducted fraudulent performance tests for diesel engines it manufactures for Toyota Motor.

Toyota Motor has halted shipments of 10 models sold in Japan and overseas, including the Land Cruiser sport utility vehicle and the Hiace commercial vehicle, which are equipped with the fraudulently tested engines.

Six of these models are intended for the domestic market, and they include many popular models that have waiting lists for delivery. Even though it is a group company’s irregularities, it is inevitable that public trust in Toyota Motor will decline.

The Land, Infrastructure, Transport and Tourism Ministry has conducted an on-site inspection of a Toyota Industries plant in Aichi Prefecture. It is hoped that the ministry will investigate the details of the testing fraud and be strict in exacting punishment, such as through administrative penalties.

Toyota Industries is one of the core companies of the Toyota group, and is also the group’s origin. The company manufactures industrial vehicles and automobile engines, among other products.

In March last year, the company announced that it had conducted fraudulent certification tests for forklift engines, and a special investigative committee comprising lawyers and other experts held an investigation.

When the company tested engines to be used by Toyota Motor, it changed the amount of fuel injected to different values from the real ones in order to make the output figures look better.

The majority of the automobile engines produced by Toyota Industries are intended for Toyota Motor. As for the cause of the testing fraud, the investigative committee pointed to Toyota Industries’ tendency — as a supplier — to simply receive orders from Toyota Motor, which makes it impossible for Toyota Industries to deal with risks on its own.

There also was pressure to keep to schedules in developing engines for forklifts. Even if employees told their superiors that schedules were too demanding, the atmosphere was deaf to such complaints, according to the investigative committee. This corporate culture must be reformed.

The Toyota group has been involved in a spate of performance testing irregularities, and Daihatsu Motor Co. and Hino Motors, Ltd. have had some of their type certificates revoked. The certificates are issued by the central government and are necessary for the mass production of automobiles. It is impossible to overlook the fact that the causes of the fraud perpetrated by the two automakers were similar to what occurred at Toyota Industries.

Toyota Motor is known for its efficient management and strictness on costs and delivery deadlines. Did this “Toyota style” in some ways lead to the fraud at the group companies?

Toyota Motor Chairman Akio Toyoda apologized at a briefing on the group’s vision on Tuesday, saying that the group companies had lost sight of their founding principle of contributing to society through manufacturing.

Toyota Motor must take the initiative in implementing reforms to corporate governance throughout the group as a whole, including by strengthening communication between management and the manufacturing front lines.

(From The Yomiuri Shimbun, Jan. 31, 2024)