Explanation of Japanese automakers' failure to pass certification tests and improvement measures
✔️ Prologue
The Japanese automobile industry has won the trust of the world for its high quality and safety over many years. However, the recently discovered fraud problem in certification tests has cast a big shadow on that trust. In this article, we will analyze the details of the current fraud issue, the impact on stock prices, and issues to restore trust.
✔️ Problem Overview
The Ministry of Land, Infrastructure, Transport and Tourism announced that five companies, Toyota Motor Corporation, Honda, Mazda, Suzuki, and Yamaha Motor, had committed fraudulent acts in certification tests associated with national type designation applications.
In response to this, each manufacturer argues that “there is no problem with performance” and “it is possible to ride safely,” but it is viewed as a problem that it deviates from test methods and data required by the national system.
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✔️ Short-term effects and investor anxiety There is a high possibility that each manufacturer's stock price will plummet immediately after the fraud issue is discovered. Loss of trust due to fraud is a major risk for investors. Major manufacturers such as Toyota and Honda are particularly affected.
・Market reaction There is a movement in the securities market where stocks of automobile manufacturers are being sold. This is because the reliability of companies fluctuates, and there are concerns that future profits and market share will decline.
✔️ Medium-term impact
・Impact on business results
Investigating and responding to fraud is costly, and there is a possibility that this will adversely affect business results. Also, marketing costs to regain consumer trust and technology development costs to comply with laws and regulations will also increase.
・Decline in brand value
If fraud is made public, the brand image will deteriorate, and there is a possibility that sales in overseas markets will be particularly affected. This can be a factor that has a negative impact on long-term sales.
✔️ Long-Term Effects
・Difficulties in restoring trust
Long-term efforts are needed to restore confidence, and there is a possibility that stock price recovery during this period will be delayed. In particular, when fraud has been discovered in the past, it is even more difficult to regain the trust of investors.
・Decline in competitiveness
There is also a risk that fraud issues will reduce competitiveness against other global competitors. There is a possibility that this will lead to a decrease in market share and a decline in profit margins.
✔️ The path to restoring trust
・Ensuring transparency
Businesses need to actively disclose information to ensure transparency and restore trust. It is important to provide consumers and investors with a sense of security by clarifying specific measures and improvement plans.
・Organizational culture reform
As stated by Toyota President Koji Sato, organizational culture reform is required, it is necessary to create an environment where employees can say the right things, and build a culture that does not allow fraud throughout the company.
✔️ Compliance with international rules
It is required to ensure the accuracy of test methods and data in accordance with international standards. Thus, recurrence can be prevented and trust restored.
✔️ Conclusions
The current certification test fraud problem is a major test for Japanese automobile manufacturers. However, it is possible to restore trust through appropriate responses, ensuring transparency, and reforming organizational culture. It is important for investors and consumers to watch how these companies resolve issues and regain trust.
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