Toyota shares slump on Daihatsu scandal and vehicle recall

Tokyo — Toyota Motor shares slumped on Thursday as Japan’s transport ministry inspected a subsidiary over safety concerns dating back decades and as the world’s top-selling vehicle maker separately announced a recall of 1.1-million vehicles.

Shares in Japan’s biggest vehicle maker closed down 4%, underperforming the benchmark Nikkei average, which fell 1.6%.

A day earlier, Toyota’s small-car unit, Daihatsu Motor, said it would halt shipments of all of its vehicles indefinitely after discovering more safety-inspection irregularities.

An independent committee said it had found issues involving 64 models, including almost two dozen sold under Toyota’s brand. The panel had been investigating the unlisted vehicle maker after it said in April that it had rigged side-collision safety tests carried out for 88,000 small cars.

Daihatsu said on Wednesday it did not know when it would resume shipments, but the impact on its earnings would be substantial.

Analysts said the impact on Toyota’s earnings would likely be limited given the parent company’s size. A one-month suspension of production, for example, would equal 120,000 vehicles and translate to a revenue reduction of ¥240bn ($1.68bn) for Toyota, Nomura automotive analyst Masataka Kunugimoto wrote in a report.

A bigger impact could be on Daihatsu’s suppliers. The company’s supply chain in Japan comprises 8,316 companies that made ¥2.21-trillion in annual sales from Daihatsu, Teikoku Databank said in a report.

Shares in parts manufacturer Metalart, which has strong ties with Daihatsu, plunged 10%.

Daihatsu’s infraction drew criticism from the government, with the transport ministry saying it will consider administrative penalties, including revoking Daihatsu’s production certification, depending on the outcome of its investigation.

“This is an extremely regrettable case that undermines the trust of automobile users and is a misconduct that affects the very foundation of the automobile certification system,” chief cabinet Secretary Yoshimasa Hayashi told reporters.

Daihatsu has said it will consider financial support and damages for its suppliers.

Separately, Toyota said it is recalling 1.12-million vehicles worldwide, mainly in the US, to fix a faulty sensor that could cause air bags to fail to deploy as designed.

Shares in Toyota affiliate and parts supplier Aisin, which manufactured those sensors and is a major supplier for Daihatsu, lost 3.9%. Shares of Suzuki Motor, Daihatsu’s main rival in Japan’s mini-vehicle market, rose 2.1%.

Reuters