More frauds found, what's wrong with today's Daihatsu? Audit team cites failure to follow Toyota's genba philosophy as cause
Hans · Dec 20, 2023 06:00 PM
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Toyota, renowned for its quality-first approach, announced that it has discovered more irregularities in procedural compliance (a nicer way of saying fraud) by its compact car subsidiary, Daihatsu.
A thorough audit by a third-party committee revealed issues in 64 models, including 22 Daihatsu-developed models sold under the Toyota brand. As a result, the Toyota Motor group will temporarily suspend deliveries of the following Malaysia-relevant Daihatsu-developed models:
Toyota Vios
Toyota Rush
Toyota Veloz
Perodua Axia
Perodua Bezza
Perodua Myvi
Perodua Ativa
Perodua Alza
Perodua Aruz
There are also many more Japanese market models on the list here.
Toyota's partnership with Daihatsu dates back to 1967, with Toyota taking full ownership in 2016. This partnership was crucial for developing compact cars for emerging markets.
The third-party audit committee was commissioned by Daihatsu, at the request of Toyota following a whistleblower report in April this year regarding Daihatsu’s side-impact certification for the Toyota Vios and Perodua Axia. One month later, pole side-impact certification issues for hybrid variants of Toyota Raize and Daihatsu Rocky were also found.
Many Toyota mini/compact cars are developed by Daihatsu, and have been flagged for compliance issues
With 64 models affected, it’s obviously too long for Toyota to list the details of the problems but among the examples given were:
Different airbag control unit (ECU) used for testing, versus cars delivered to customers - affecting Daihatsu Move / Subaru Stella, Daihatsu Cast / Toyota Pixis Joy, Daihatsu Gran Max / Toyota Town Ace / Mazda Bongo
Different specification for tyre pressure used for speedometer certification
‘Rehearsal’ crash test data submitted as actual test data
Doors remained locked after side-impact collision – Daihatsu Cast / Toyota Pixis Joy
In today's swiftly arranged joint press conference in Toyota City, Daihatsu president Soichiro Okudaira acknowledged the lapses in management and emphasized the need for a cultural shift towards better compliance and communication.
“The independent third-party committee pointed that the root cause was a problem with the top management, that pursued short-term development without taking measures to counter irregularities. Behind the irregularities was management’s failure to fully grasp and comprehend the burden of genba workers. Neglecting the workplace environment of workers that did not allow workers to raise their voices when they have problems, while pursuing an increasing number of development projects on a short-term schedule. As a result, corporate culture that prioritizes project promotion and fails to comply with laws, regulations, and rules have been formed, for which management is fully responsible,” said Okudaira.
Genba is the Japanese word 'the real place' where work is done. The concept is central to Toyota's philosophy, underscoring the importance of firsthand observation in problem-solving and decision-making. There is no one English word that can fully translate the concept of genba. It's a uniquely Japanese mindset.
“The independent third-party committee has made a number of recommendations to prevent a recurrence, including senior management sending a clear message of remorse and determination to employees, and revamping the widget and inflexible short-term development and certification process. First of all, the top management itself must change its mindset and visit the genba work site, understand the situation on site, and work with employees to create an organization that ensures psychological safety and sound communication. In addition, we will create an appropriate process and a system that will extend development lead-time on the basic premise of legal compliance and appropriate certification process, a mechanism to hold the process if necessary. In addition to revisiting organizational structures and developing rules and work standards, we will relentlessly work on preventing recurrence. We will report separately on specific measures and executive structure in light of the findings and instructions from the relevant authorities.”
When asked by the Japanese media if he will be resigning, President Okudaira said “At this moment, I cannot talk about when or how I shall exit.” Okudaira is a former Toyota executive, serving as chief engineer for the 10th and 11th generation Toyota Corolla. He became President of Daihatsu in 2017. The compliance issues pre-dates his appointment, stretching back to 1989! Moreover, Toyota only took full ownership of Daihatsu in 2016.
Okudaira also explained that shortage of engineering staff, insufficient cars to do crash testing, and short development time to meet aggressive launch schedules had pressured development teams to skip certain procedures.
Outside of Japan, Daihatsu has been tasked by Toyota to lead in the development of cars tailored for emerging markets like Southeast Asia and Latin America.
The total number of projects that Daihatsu is responsible for has gone up, but vehicle development capacity remains unchanged.
Toyota joined hands with Daihatsu in 1967
Toyota’s Executive Vice-President Hiroki Nakajima said some typically polite Japanese words but read between the lines, and you can pick the unusually strong meaning (by Japanese press conference standard) behind it.
“Reinventing a company requires reform of not only management and operations perspective but overall organization and structure, human resource development and mindset change of each and every employee – not an overnight task. It’s a significant challenge for Toyota as a partner of Daihatsu. We will support Daihatsu and its endeavour to overhaul itself into a compact mobility company that it was originally meant to be when Toyota and Daihatsu began working together. We will continue to work on specific measures and initiatives going forward and we will publish them at the appropriate timing, when we receive guidance from the authorities.”
The word “originally meant to be” implied that Daihatsu has strayed off-course. While Toyota is repeatedly emphasizing genba, Daihatsu has forgotten the most important foundation of Japan's famed monozukuri - the art of manufacturing, Japan's promise of quality and peace of mind ownership experience.
Genba is a very, very important principle stressed by Akio Toyoda, when he took over as President in 2009 and thrown into the fire pit following a heavily publicized recall in the US.
Few know that within the site of Toyota Kuragaike Commemorative Hall in Toyota City, Aichi, next to the historic home of company founder and Akio's grandfather Kiichiro, lay a cherry blossom tree planted by Akio in 2011.
The tree was planted after the recall issues were dealt, to symbolize the rebirth of Toyota. In the eyes Akio, Toyota had already died once. It had grown too big, tries its best to justify itself into not doing anything, and is no longer following the tenets of genba laid down by his grandfather, who died thinking he failed.
The cherry blossom tree planted by Akio represented the rebirth of Toyota, and to remind future generation of Toyota dealers how far the company once went off-course.
Akio said despite his position, it took him more than 10 years to change Toyota, to bring back genba. Such is the inertia within the giant organization that Toyota is. Akio often stressed the importance of genba, for managers to get off their chairs, go out and see for themselves how cars are manufactured, transported, sold, serviced, and more importantly, what their rivals are doing.
Clearly, while Daihatsu's management understood Akio's message of genba intellectually, it appears they did not fully embrace it in practice. Akio has since stepped down as President of Toyota to assume the position of Chairman. As such, he no longer makes executive decisions. His successor is Koji Sato, the former chief engineer for the Lexus LC.
When asked why President Sato was not present in the press conference, Executive Vice-President Nakajima explained that he has been the one on the ground confirming the findings of the audit committee, thus explains why he is answering the questions from the media.
Chairman Akio is currently in Thailand, preparing for an endurance race this weekend in Buriram, where his privately-owned Rookie Racing team is fielding a hydrogen-powered Toyota GR Corolla, and two synthetic fuel cars; a Toyota Prius and a Toyota GR86.
Regarding Daihatsu’s failure to internalize Toyota’s tenents of genba, Executive Vice-President Nakajima said “Since the foundation of the company, Toyota always operates on the genchi genbutsu basis. We confirm the situation and we take the necessary actions. This is what we have been doing since the founding the company. We were not able to deploy that philosophy to Daihatsu, and we regret that this has happened."
Genchi Genbutsuis a Japanese word for ‘go see for yourself.’ It means genba in action, and is the foundation of Toyota’s philosophy not just in management, but the way it pursues the making of ever-better cars.
Nakajima is also Toyota's chief technology officer. He was previously the chief engineer for the Toyota iQ and the current generation Toyota Hilux.
On how long the delivery suspension will last, Daihatsu President Okudaira said it will depend on instructions on Japan’s Ministry of Land, Infrastructure, Transport and Tourism, the ministry that supervises vehicle safety and recalls. As for other countries, including Malaysia, it will depend on the local authorities, as the suspension is a voluntary action by Daihatsu.
What about Perodua?
Perodua's issued a statement shortly after Daihatsu, saying "We are doing a detailed assessment on the matter and are currently in discussion with Malaysian authorities as to the impact of this development to our vehicles."
The company stressed that the independent audit report also said “...these verifications and tests confirmed that all 174 irregularities pointed out by the third-party committee satisfied the standards set by laws and regulations”.
In such circumstances, there is nothing much that Perodua can do given its role as a regional R&D hub for Southeast Asia.
If there's a positive side to this, we can confidently report that Perodua's CEO Dato' Sri Zainal Abidin Ahmad is the most genba-oriented car industry captain in Malaysia, even more so than his comfortable Toyota counterparts here. As he leads a company that sells over 300,000 cars annually, problems are bound to happen. When issues arise, even at just 1%, they affect a large number of vehicles.
Over 15 years of experience in automotive, from product planning, to market research, to print and digital media. Garages a 6-cylinder manual RWD but buses to work.
