Daihatsu will compensate lower-tier suppliers amidst safety scandal

Following discoveries of a huge safety crisis last week, Toyota Motor’s small-car subsidiary Daihatsu Motor stated on Thursday that it would compensate for lost revenue from an indefinite production suspension by paying lower-tier contractors in its supply chain.

In addition to announcing intentions to reimburse 423 direct suppliers, Daihatsu has stated that it would suspend manufacturing in Japan until the end of January at the latest while authorities look into possible anomalies in safety inspections.

This week, all of its factories in Japan ceased production.

Daihatsu claims that over 4,000 businesses are connected to its manufacturing through its supply chain, and over 1,000 other companies are connected in various ways.

On Thursday, a Daihatsu representative refused to estimate the costs of the company’s more than one-month-long production standstill and supplier compensation.

“We fully understand that suspending the company’s business and providing compensation will cost a considerable amount of money,” Keita Ide, an executive manager at the company, told Reuters.

“However, it is difficult to accurately calculate the impact at this point as it is unclear how long this period will last.”

Thus far, Daihatsu has convened two meetings with over 300 direct contractors in attendance to discuss the aftermath of the issue.

Toyota’s chief communications officer, Jun Nagata, stated that if Daihatsu asked for it, the corporation would provide complete support for its wholly owned subsidiary, including pre-arranged dealer and supplier reimbursement loans.

“We’ll fully back them up in the event of a lack of funds,” Nagata said.

According to Ide from the corporate management section of the firm, Daihatsu wishes to keep a variety of alternatives open for handling the expense of the stoppage and the broader impact of the incident, including potential bank loans.

According to him, Daihatsu is already asking for financial institutions advice.

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