People’s trust in Japanese cars has been questioned following revelations that two domestic automakers that enjoyed strong reputations — Nissan Motor Co. and Subaru Corp. — allowed unauthorized employees to conduct final quality checks on finished vehicles.
The scandal has caused Nissan to cut its operating profit forecast for the business year, which ends next March, by ¥40 billion to ¥645 billion due to costs related to the flawed inspections, including the recall of around 1.2 million vehicles in Japan, the company said earlier this month. Meanwhile, Subaru has recalled 395,000 vehicles and costs for corrective measures may top ¥20 billion.
Despite the misconduct, both carmakers claim vehicle safety and quality were never compromised, and that the core of the issue has more to do with compliance than quality.
The following are some questions and answers about vehicle inspections to explore these issues in more detail.
What domestic inspections are required?
The transport ministry requires that all vehicles undergo state inspections to confirm their safety, quality and road worthiness.
Carmakers can carry out the inspections at their assembly plants with the transport ministry’s approval, eliminating the lengthy process of having all completed vehicles undergo state-run tests at a designated center.
Before manufacturing a new model, carmakers need to register with the government a sample car and a manufacturing blueprint that includes the method for inspecting a finished car at an assembly plant. If the carmakers clear the screening process, they can skip state inspections by submitting a document declaring that inspections will be performed under the procedure approved by the government.
The regulation also applies to imported cars, which means foreign automakers also need to have their vehicles clear government screening before being sold in Japan. Likewise, domestic carmakers need to follow local regulations when selling cars in foreign markets.
What do carmakers do in the final checks?
At the end of the assembly process, automakers check if the finished cars fulfill the quality standards endorsed by the government.
The tests are extensive, and include braking functions and wheel alignment, headlights and the accuracy of the speedometer.
According to the ministry, quality checks are supposed to be conducted by designated, highly skilled and knowledgeable employees.
But the certification criteria vary by companies as the ministry does not set unified requirements for in-house inspectors. This is because the assembly process varies depending on the carmaker and model produced, a ministry official said.
What were the problems at Nissan and Subaru?
Both Nissan and Subaru did not comply with the inspection regulations they had arranged with the transport ministry.
Nissan said in September the nation’s No. 2 carmaker had let uncertified staff carry out the final inspections. The company later announced that the improper practice continued even after the transport ministry’s on-site probe revealed the misconduct, suggesting the practice was rooted deeply in its manufacturing culture.
On Friday, the Yokohama-based automaker revealed improper inspections at the company’s assembly plants have continued as routine for more than 30 years, citing lack of communication between workers and managers, shortages of certified inspectors and poor awareness of compliance as root causes for the misconduct.
In Subaru’s case, its in-house regulations had stated trainees who are not yet certified inspectors need to be involved in the final quality checks for a certain period to gain experience, a rule that contradicts state regulations.
The Tokyo-based carmaker said the practice had possibly continued for more than three decades until the transport ministry ordered the company to conduct an in-house investigation, after the Nissan scandal revealed potential problems.
Both companies admitted having unauthorized staff use personal seals bearing certified inspectors’ names, a finding that suggests the misconduct was intentionally concealed by making records appear as if quality checks were performed by authorized personnel.
Are there safety concerns?
At a news conference last month, Nissan President Hiroto Saikawa emphasized that from his perspective the problem is about lax governance, not the safety or quality of its vehicles, because inspections were performed.
“We are highly motivated to make good cars and I’m confident we have a system to produce good cars. But we were not careful enough about properly following regulations,” Saikawa said.
Subaru President Yasuyuki Yoshinaga also insisted vehicle quality had not been compromised as a result of the misconduct, claiming only trainees who were deemed to possess the skills and knowledge “100 percent” were involved in the final checks although the company had not certified them as authorized inspectors.
“Maybe we have set the hurdle (to become an authorized inspector) too high,” Yoshinaga said at a news conference last month. “We had never thought our rules were flawed” until the Nissan scandal broke, he said.
No accidents linked to the misconduct have been reported, although both companies decided to recall cars that may have gone through the flawed quality checks.
What is the impact of the misconduct?
The misconduct may not have caused critical financial damage to Nissan and Subaru. Their sales mostly come from foreign markets, and both companies say cars for export were not subject to the flawed quality checks because the issue is about violations of regulations specific to Japan.
Of 2.73 million vehicles sold worldwide from April to September, only 283,000 units were sold in Japan, Nissan said. The unit sales on the domestic market surged 34.1 percent from the same period last year, thanks to solid sales of new Serena minivans and Note e-Power electric vehicles, the carmaker said.
Subaru’s unit sales in the domestic market during April to September also increased, by 21.0 percent from the previous year to 82,000 units. The company sold 449,000 units outside of Japan during the same period, of which 364,000 units were sold in North America, Subaru said.
But it is still unclear how the scandal will affect their sales toward the end of the year, as Subaru President Yoshinaga said he was “extremely concerned” about damage to the company’s brand image.