Toyota tightens oversight over scandal-hit small car unit Daihatsu

Japan's Daihatsu Motor said on Monday it will streamline the way it reports on development and certification to  Toyota Motor, as the parent company increases oversight of its compact car division and seeks to overcome a safety test certification scandal.

The move comes more than a month after a new president from Toyota took up the reigns at Daihatsu, facing the daunting task of putting the small-car unit back on a growth track.

Daihatsu will still be commissioned by Toyota to handle actual vehicle development, the company said in a statement that redefined itself as a "mobility company centered on mini vehicles."

The business structure changes include dissolving the Emerging-market Compact Car Company (ECC), which has served as a bridge between Toyota and Daihatsu until now.

Daihatsu will move its reporting line for development and certification to another Toyota segment that focuses on compact cars.

The change will be made based on model changeover schedules.

Toyota would also become responsible for resource management and its optimization related to Daihatsu's business and product planning, Daihatsu President Masahiro Inoue said.

Daihatsu wants to take up the challenge of rolling out a battery-powered "kei car," which are smaller and less powerful than regular cars, he added, without giving a timeframe.

Toyota's domestic sales slid by a third in February due to production stoppages at Daihatsu, which makes some Toyota brand cars, and due to the reputational fallout from the safety certification lapses at its unit.

The world's biggest automaker by volume has also faced separate governance issues at truck maker Hino Motors and affiliate Toyota Industries.

The scandals at the three companies led Toyota Chairman Akio Toyoda to issue a rare apology in January.

In volume terms, Daihatsu accounted for 4% of Toyota's total group sales of 1.6 million vehicles over the first two months of the year, including those of the luxury Lexus brand and Hino Motors, down from 7% over the whole of 2023.

Daihatsu President Inoue was previously Toyota's CEO for the Latin America and Caribbean region before taking up his current post on March 1.