Regulators raid Toyota offices over safety scandal, sending stock down

Toyota and other carmakers embroiled in a fresh certification scandal in Japan halted shipments of a handful of models and saw their offices raided by government officials, but the impact on their customers and operations appears to be limited.

Honda shares fell 2.4 per cent while Toyota dipped 1.1 per cent in morning trading in Tokyo Tuesday, after disclosing that they falsified safety certification tests. Toyota submitted faulty data during pedestrian-safety tests for three current models – the Corolla Fielder, Corolla Axio and Yaris Cross – the transport ministry said on Monday.

The findings follow an earlier order by the government for almost 90 manufacturers to reexamine their testing procedures after decades of fraud were uncovered at a pair of Toyota affiliates last year. While the disclosures are the latest blow for Toyota and Japan’s automakers, their shares remain up this year. The latest round didn’t include any cars being recalled or warnings over operational safety.

“Customers can rest assured their cars are safe to drive, but there are rules we must follow,” Toyota chairman Akio Toyoda told reporters on Monday. “We should not have sidestepped these important processes.”

Toyota’s three models account for less than 2 per cent of the 11 million vehicles Toyota produced last year. The shipment halts will affect two assembly lines responsible for the production of 130,000 units a year, according to the carmaker.

Still, Toyoda and his board will need to assuage any concerns about Toyota’s leadership or shared governance at its annual shareholder meeting on June 18. Two leading proxy firms urged shareholders to vote against the reappointment of Toyoda in the upcoming meeting, citing concerns over the recent scandals, as well as governance issues.

The emerging scandal is “extremely regrettable,” Ken Saito, the minister of economy, trade and industry, said during a news conference in Tokyo, adding the agency is investigating the impact on suppliers and will respond appropriately.

Authorities entered Toyota’s headquarters in Nagoya on Tuesday morning at 9:30 local time, according to the transport ministry. Officials said they would also conduct on-site inspections of Mazda, Yamaha and Suzuki.

Mazda said it fabricated test results and tampered with the units used for collision testing in five models, including the Mazda2 and Roadster RF, according to a company statement. Irregularities were identified in over 150,000 units the automaker has produced since 2014 for the Japan market.

“We will bear costs incurred to suppliers due to the shipment halts,” Mazda chief executive Masahiro Moro said, adding the company would make efforts to prevent the lapses from recurring. The halt is likely to affect 3,500 orders and the carmaker is not considering recalls at this point.

Moro attributed the data issues to employee misinterpretations of unclear procedure manuals, not an “organisational cover-up” or “malicious falsification.”

Separately, Honda was found to have fabricated data related to noise and gasoline engine output, affecting more than 3 million units. Still, customers can continue to use their vehicles, which include the Accord and Odyssey, since they meet legal standards. The automaker didn’t find any falsification for cars currently being sold, or for upcoming models.

“Our testing process was aimed at making the tests more efficient, so that we don’t have to repeat them,” Honda CEO Toshihiro Mibe said. “Government regulations keep changing which might get risky, so (to avoid that) we are aiming to introduce a system that does not require human intervention from next year.”

In December, an internal probe of Daihatsu showed most of its vehicles had not been properly tested for collision safety. Toyota also suspended all engine shipments in January after an investigation revealed it had falsified power-output figures.

The latest probes follow on from a series of scandals involving the likes of Nissan, Mazda and Suzuki stretching back more than a decade, including falsifying emissions and fuel economy data. Air bag maker Takata filed for bankruptcy in 2017 after one of the world’s most famous recall crises.

Vehicle development is more complex now and carmakers are trying to avoid increasing staffing, which could be forcing them to deviate from traditional processes and causing irregularities, according to Bloomberg Intelligence senior auto analyst Tatsuo Yoshida.

Still, he added, these issues are different from the scandal with Daihatsu and its impact on the economy will be limited. – Bloomberg