Toyota's Stock Plunges Amidst Crises: Safety Concern and Subsidiary Issues

Dec 21, 2023 09:30 PM EST

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In the wake of a staggering safety testing controversy at one of its subsidiary companies and the issuance of a massive recall affecting around one million vehicles across the United States, Toyota's stock witnessed a dramatic plunge.

Toyota's Stocks Take a Dive

The repercussions were deeply felt, as shares of Toyota experienced a 4% decline on Japan's Nikkei 225 index, while concurrently, on the New York Stock Exchange, they registered a notable 0.067% decrease as of 9 a.m. EST Thursday, compounding the prior 1.07% dip observed in pre-market trading. UPI News reported details about Toyota's stocks plummeting.

Investor confidence has been rattled as a consequence of two significant developments, leading to a decline in Toyota's stock. Toyota's international plummeted at 4%. According to reports, Toyota shares have gone up 32% since January before Thursday's session. General Motors and Ford Motor both did worse than this.

These companies had higher labor cost and the strike went on longer, which made Toyota's stock look better.

Two Reasons Behind

The first root cause of this turmoil can be traced back to the discovery that the Osaka-based headquarters of Toyota's subsidiary, Daihatsu, had engaged in the manipulation of collision-safety test results, a misconduct that dates as far back as 1989 and escalated in 2014. These unsettling revelations led the government to search Daihatsu- Toyota, Mazda, and Subaru supplier.

Further exacerbating the situation, Toyota took the drastic step of announcing the suspension of shipments for all Daihatsu-developed models, both domestically and internationally.

After an independent inquiry in April, Daihatsu was found to have rigged side-collision safety tests on a large number of small cars, many of which were Toyotas.

An alarming number of new abnormalities were found in 174 products across 25 test categories.

These issues extended beyond the previous door lining irregularity uncovered in April and the side collision test irregularity in May, affecting a total of 64 models and three engines, including 22 models and 1 engine currently available through Toyota's offerings. Toyota apologized for the disruption and suffering these revelations caused all parties, especially customers.

The second reason for Toyota's stock dive is because approximately one million cars and SUVs within the United States are undergoing a recall. As reported in CNN Business News, possible flaw may prevent passenger airbag deployment in a collision, prompting recall. This included various 15 models from 2020 and 2021 Toyota and Lexus cars. Camry, Rav4, Sienna, RX350, and ES350 were included in the recall.

The Toyota 1 Million recall involves a sensor failure in the Occupant Classification System (OCS), which determines weight to separate adults and children in the front passenger seat.

If a child is detected, the airbag deployment might be inhibited during a collision to prevent harm due to the airbag's force.

The core issue is a potential short circuit in the OCS sensor, jeopardizing proper airbag deployment, as highlighted by Toyota. While Toyota acknowledges the problem, they have not disclosed any injuries resulting from it.

To address this safety concern, Toyota plans to notify affected vehicle owners by mid-February 2024. Owners will be prompted to visit authorized Toyota or Lexus dealerships, where the sensor will be thoroughly inspected and replaced, with no cost to the vehicle owner.