Toyota’s Daihatsu to compensate lower-tier suppliers for suspended production

TOKYO (Reuters) – Toyota Motor (NYSE:)’s small-car unit Daihatsu Motor said on Thursday it would compensate lower-tier contractors in its supply chain to cushion the blow from an indefinite production stoppage after revelations last week of a wider safety scandal.

Daihatsu, which had already announced plans to compensate 423 direct suppliers, has said it would keep production halted in Japan at least until the end of January while authorities investigate it for safety-inspection irregularities.

Production was stopped at all of its factories in Japan this week.

Daihatsu says it has more than 4,000 companies in its supply chain that are linked to its production and more than 1,000 other firms are associated in other ways.

A Daihatsu executive on Thursday declined to provide an estimate on how much the more than one-month production stoppage and supplier compensation would cost the company.

“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 reporters.

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

Daihatsu has held two meetings, each attended by more than 300 direct contractors, over the scandal’s fallout so far.

Toyota’s chief communications officer Jun Nagata said the company would fully support its wholly owned unit, including with loans already prepared for dealer and supplier compensation if Daihatsu requested such help.

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

Daihatsu wants to keep open various options for dealing with the cost of the stoppage and the wider fallout of the scandal, including possible bank loans, said Ide from the company’s corporate management group.

Daihatsu is already consulting with financial institutions, he said.