Toyota loses $15 billion in market value amid certification scandal, marking a significant blow to the world’s largest car manufacturer. The scandal, which erupted on June 3, has seen Toyota’s shares plummet over 5% since May 31, the last trading day before the scandal broke. This drop reflects the serious concerns over the company’s practices and the broader impact on the automotive industry in Japan.
Toyota and Other Japanese Automakers Hit by Scandal
The certification scandal involves not only Toyota but also other major Japanese automakers. Mazda, Honda, Suzuki, and Yamaha have all been implicated in the irregularities found in certification applications. Shares of Mazda saw a larger loss, falling 7.7% since May 31. The wide-ranging inspection by the Ministry of Land, Infrastructure, Transport and Tourism discovered that false data was used to certify certain models, leading to a significant drop in the stock prices of these companies.
Immediate Financial Consequences
The financial impact has been severe. Mazda lost 80.33 billion yen, or $511.8 million, in market capitalization last week. Honda’s stock fell 5.75%, Yamaha Motor lost 2.2%, and Suzuki Motor inched down 0.3%. Despite the initial shock, shares of all these companies were trading higher on the following Monday, showing a slight recovery.
False Test Data and Production Halts
All five companies had submitted false test data or, in the cases of Toyota and Mazda, falsified the vehicles used in crash tests. Toyota announced that it will temporarily halt shipments and sales of three models currently manufactured in Japan: the Corolla Fielder, Corolla Axio, and Yaris Cross. Mazda suspended the Roadster RF and Mazda 2 from May 30. Despite the suspensions, both companies assured customers that they could continue to drive their cars.
Government Response and Further Inspections
The transport ministry is conducting on-site inspections of the five companies where misconduct was reported. This follows an earlier scandal involving Toyota’s Daihatsu unit, which halted shipments of all vehicles after safety issues were found in 64 models. The ministry’s rigorous inspection and the companies’ internal investigations are ongoing, with Toyota still probing issues related to vehicle fuel efficiency and emissions. Toyota loses $15 billion in market value amid certification scandal, highlighting the need for stricter compliance measures.
Impact on Company Leadership and Reputation
The scandal has brought significant scrutiny to Toyota’s leadership. Influential proxy advisory firms Institutional Shareholder Services and Glass Lewis have recommended shareholders vote against re-electing Akio Toyoda as chairman at the upcoming annual general meeting. This is due to the “spate of certification irregularities” at the Toyota Group. Toyoda, the grandson of the automaker’s founder, apologised for the lapses and assured that corrective measures are being taken. Toyota loses $15 billion in market value amid certification scandal, reflecting the deepening trust issues with the company’s management.
Broader Industry Impact
The certification scandal is a sore point for the Japanese government, which has been praised for its corporate reforms. However, this incident highlights ongoing issues within the automotive industry. The government has labelled the misconduct as “regrettable” and is pushing for more stringent regulations to prevent future occurrences.
Future Outlook and Recovery Efforts
Despite the scandal, there is a glimmer of hope. Shares of Toyota, Honda, and Mazda were up slightly on the Monday following the announcement. Toyota has committed to completing its investigation by the end of June and implementing necessary changes. The company has also halted shipments and sales of affected models, demonstrating its commitment to resolving the issues. Toyota loses $15 billion in market value amid certification scandal, but the company’s proactive steps might help restore some investor confidence.
