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After Daihatsu Scandal Toyota Will Strictly Oversee The Company

Japanese compact car maker Daihatsu on Monday announced its plans to revamp its reporting processes regarding development and certification activities to its parent company, Toyota. This decision comes in the aftermath of a safety test certification scandal, as Daihatsu aims to regain trust and stability in its operations.

The restructuring of reporting mechanisms follows the appointment of a new president from Toyota to lead Daihatsu, signaling a concerted effort to navigate the company back onto a trajectory of growth and reliability.

While Daihatsu will continue to manage actual vehicle development under Toyota’s commission, the company emphasized its commitment to evolving into a “mobility company centered on mini vehicles.”

As part of the business restructuring, Daihatsu will dissolve the Emerging-market Compact Car Company (ECC), previously instrumental in facilitating communication between Toyota and Daihatsu. The reporting line for development and certification will shift to another Toyota segment specializing in compact cars, aligning with model changeover schedules.

Furthermore, Toyota will assume responsibility for resource management and optimization of Daihatsu’s business and product planning, as stated by Daihatsu President Masahiro Inoue. He expressed Daihatsu’s aspiration to venture into producing battery-powered “kei cars,” smaller and less powerful vehicles, although no specific timeline was provided.

The repercussions of the safety certification lapses at Daihatsu have impacted Toyota’s domestic sales, experiencing a significant decline in February due to production disruptions at Daihatsu, which manufactures some Toyota-branded cars. Additionally, reputational damage has resulted from the safety certification issues.

The governance concerns extend beyond Daihatsu, with separate issues emerging at Toyota’s truck maker, Hino Motors, and affiliate Toyota Industries. These challenges prompted Toyota Chairman Akio Toyoda to issue a rare apology in January.

In volume terms, Daihatsu’s contribution to Toyota’s overall group sales has dwindled to 4% in the first two months of the year, down from 7% in the previous year. Masahiro Inoue, previously Toyota’s CEO for the Latin America and Caribbean region, assumed his role as Daihatsu President on March 1, indicating a strategic realignment within the company’s leadership to navigate through these turbulent times.

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