Daihatsu Motor Co. announced on Thursday its decision to cease operations at all its vehicle assembly plants across Japan in the wake of a scandal involving falsified vehicle safety tests. The automaker has not indicated when it will resume operations and has warned that the suspension of production could be prolonged, potentially affecting subcontractors. The company is also considering compensating its suppliers and other business contacts for financial losses.
The carmaker stated that vehicles parts for which it has already placed orders will continue to be produced, but production will gradually be wound down. Daihatsu’s plants in Oyamazaki, Kyoto Prefecture; Ryuo, Shiga Prefecture; and Nakatsu, Oita Prefecture will suspend operations on Monday, followed by its main plant in Ikeda, Osaka Prefecture, on Tuesday. The engine manufacturing plant in Kurume, Fukuoka Prefecture shut down on Friday.
Out of the 60,000 vehicles for which Daihatsu currently has orders, the company plans to cancel deliveries of the 12,000 yet to be completed. However, the 48,000 vehicles already completed will be delivered to customers upon request. The impact of the production halt is already being felt by parts suppliers.
One such company is an auto body parts supplier in Okayama Prefecture, which was informed by Daihatsu that it will no longer be ordering parts for the rest of the month. This supplier has seen its business with Daihatsu grow over the years, to the point where sales to the automaker account for about 20% of its annual sales of ¥10 billion. The company is now looking to increase orders from other automakers to offset the loss, but is concerned about future orders from Daihatsu.
Daihatsu purchases auto parts directly from 423 domestic companies, with additional ties in distribution and equipment repair. According to a survey, there are an estimated 921 first-tier subcontractors that deal directly with Daihatsu, and the number rises to 8,136 when up to fifth tier is included, with total sales amounting to ¥2.21 trillion.
Aichi Prefecture has the largest number of subcontractors with 2,084 companies, followed by Osaka Prefecture with 1,043, Hyogo Prefecture with 334, and Oita Prefecture with 89. The impact of the production suspension is expected to have a significant effect on the local economy, particularly in terms of employment.
Daihatsu’s Vice President, Hiromasa Hoshika, has stated that the company is already in discussions with its direct contractors and is considering providing compensation to them. With approximately 9,000 people employed at its five plants in Japan, Daihatsu is considering offering non-regular jobs or extended leave to its workers after paying a specified amount of wages.
In light of these developments, the future of Daihatsu’s operations and the potential wider impact on the Japanese automotive industry remain uncertain. The company’s next steps and their repercussions are being closely watched within the industry and among business partners.
