January 29, 2024

Results of the Investigation Regarding Domestic Certification for Engines
Toyota Industries Corporation, on March 17, 2023, made public announcement of violation of domestic laws andregulations in domestic certification relating to emissions performance of current model forklift and construction
machinery engines, and stopped shipping the subject engines and carried out a recall and took other measuresconcerning forklifts within Japan. At the Company’s request, a Special Investigation Committee made up of outside
experts conducted an independent investigation, and on this day, the Company made report to Japan’s Ministry ofLand, Infrastructure, Transport and Tourism and other competent ministries, of the content of such investigation andof the initiatives the Company is promoting to prevent recurrence.
Through the investigation, it became clear that there were violations of domestic laws and regulations with regards
to industrial engines, including old types of engines for forklift and construction machinery, and it was newly
discovered that there were violations of domestic laws and regulations with regards to certain engines for automobiles,
too. In light of the importance of the certification system—which, amidst the Company’s corporate business activities,
is a fundamental system that must be complied with—the Company’s management takes this extremely seriously andreflects deeply upon this.
The Company understands that this matter has caused a great deal of trouble for our customers, our sales agents,
vendors, competent ministries, and many other related persons, and the Company again apologizes for that. The
Company will reemphasize the fundamentals of compliance with laws and regulations and undertake company-wide
initiatives to prevent recurrence to ensure that this sort of conduct does not happen again.

I. Discovered Matters
1. Industrial Engines
1) Overview
Besides the three current models of engines for forklifts and the one current model of engines for construction
machinery shipping of which was suspended in Japan because violations of domestic laws and regulations wereconfirmed in March 2023, it was discovered in this investigation that there were domestic violations involving six
models of engines for forklifts (of which, five were old types) and one engine for construction machinery (old type).
In addition, regarding one current model of engine for construction machinery shipping of which was suspendedin Japan, it was learned that domestic emission regulation values had been exceeded.

VIOLATION OF ENGINES FOR INDUSTRIAL VEHICLES

Reported on March 17 Results of this Investigation
Use

Year
CertifiedEngine Model

Violations

Regulations
ValuesExceeded

Violations

1KD
DieselCurrent
type

●

2014
●

1ZS
4Y

2009

Confirmed noexcess

1FS

2014

―

Gasoline
Forklift

Former
1DZ
Diesel
Old type●

FY2022
Sales

Former4Y

2,000 units

Confirmed noexcess6,000 units

11,000units
61,000units
89,000units

Confirmed noexcess200 units

2,000 units

8,000 units

163,000
units

26,000units
20,000
units

2007

―

2010

●

To be confirmed―

4,000 units

67,000units

16,000
units

2007

1FZ

1,000 units

Construction
Machinery

Current Diesel
type

1KD

2020

Old
type

Former1KD

2016

DieselTotal Sales

Same asReported on
March 17

3Z
15Z

Gasoline●

Whether
Regulation
ValuesExceeded or
not (Note 1*)

No. of Domestic Sales

―

●

―

●

●

2,000 units

2,000 units 2,000 units

●

To be
confirmed―

1,000 units 1,000 units*Note 1: Type designations of the IKD and IZS Engines were revoked in April 2023.
*Note 2:In deterioration durability testing implemented again in-house, it was confirmed that the 4Y and 1FS
Engines for forklifts had emission values that were within the domestic regulation values, and the current model
1KD Engine for construction machinery had NOx (nitrous oxide) values that exceeded the domestic regulation
values.

2) Details of Violations of Domestic Laws and Regulations
It was discovered as part of the Special Investigation Committee’s work, regarding forklift engines and engines
for construction machinery, that in the deterioration durability testing for domestic certification, there was suchconduct as data different from measured values being used and parts being replaced during testing, and in the Mass
Production Sampling Inspections carried out at the plant, there was such conduct as implementing tests using asampling frequency different from the sampling frequency specified in internal rules and using control unit softwaredifferent from the mass production engine control unit software.
[Domestic] Violations Involving Industrial Vehicle Engines

When obtaining certification
Use

Year
CertifiedEngine Model

Used values
different frommeasured values

1KD
Diesel2014
1ZS*

Current
type

Used control unit
software different
from mass
production engine
software

●

●

●

●

●

●

4Y

2009

●

●

●

●

●

1FS

2014

●

●

●

●

●

Former
1DZ

2007

●

●

●

●

●

●

●

●

●

●

●

●

Gasoline
Forklift

Diesel●3Z*

Old typeGasoline

Replacedparts during
testing

During Mass Production
Sampling Inspections
Selected values Used frequency different
from amongfrom rules and control
multipleunit software different
measuredfrom mass production
valuesengine software

15Z*

2010

Former
4Y

2007

●
●
●

1FZ
Construction
Machinery

Current
type

Diesel

1KD

2020

Old type

DieselFormer
1KD

2016

●

●

*Note 3: 1KD deterioration durability testing data was used for 1ZS.
*Note 4: The former 1DZ deterioration durability testing data was used for 3Z and 15Z.

2. Engines for Automobiles
For three models of engines for automobiles of which the development was partially entrusted by Toyota
Motors to the Company (table below), Toyota Motors and Hino Motors have proceeded with application
procedures for vehicle type designation. During the application procedures, the Company was in charge of theoutput tests and submitted necessary data; however, it was discovered that upon conducting the tests, there wassuch conduct as adjusting the fuel injection amount to make the data better-looking with respect to output values
and torque curve. Meanwhile, it was confirmed in sampling inspections that the output shipping standard values
for output performance were satisfied.

Use

Year
CertifiedEngine Model20172021

Hiace, Granace, Land Cruiser Prado,
Dyna/Dutro

2GD

2020

Hilux

F33A

2021

Land Cruiser

1GD
Automobile

Current
type

DieselVehicles in which Relevant Engines
are Installed

Results of this Investigation

No. ofDomestic
Sales

Irregularities

OutputPerformance

FY22 Sales●

Satisfaction ofshipping
standard
valuesconfirmed

84,000 units

3. Causes of Violations
The company understands, based on the Special Investigation Committee’s findings, the following to be theprimary causes that led to the discovered violations.

1) Engines for industrial vehicles(1) Lack of risk management awareness on the part of management relating to compliance withlaws and regulations
In relation to the industrial vehicles business that the Company has been operating after its functional
integration with Toyota Motors in 2001, management and the organization failed to be properly aware ofthe change in circumstances represented by the tightening of domestic emissions regulations for engines forindustrial vehicles, and the allocation of managerial resources and communication befitting the challenges
faced by the respective work sites were insufficient, leading to an environment where the obtaining ofcertification and management of mass production were not properly carried out, and it was not possible tocorrect this situation.

(2) Lack of sufficient independent mindset
The Company did not learn the type of behavior that would enable it to respond under its own responsibility
and power to the tightening of social circumstances such as regulations and thus was not able to respond to
the new challenges arising from the introduction of strict emissions regulations.
(3) Trivializing engines for industrial vehicles
The difficulty of development of engines for industrial vehicles, which had a smaller scale of businesscompared to engines for automobiles, was under-evaluated, and the Company did not implement thenecessary review of the development system and schedule, or the education and training necessary foraddressing the tightening of emissions regulations.
(4) Lack of management’s efforts to address the adverse effects of the business divisions system
No constructive discussions took place between the industrial vehicles business divisions and the Engine
Division regarding how to develop better engines, and with regards to risks and business problems that abusiness division on its own would be unable to fully address, there was insufficient participation andinitiatives on the part of the management for considering these matters in a cross-sectorial manner andseeking the attainment of total optimization.
2) Engines for automobiles(1) Lack of sufficient communication with Toyota Motors, the entrustor of the output tests
In a situation where the role of diesel engine development was expanding, work of output tests was being
carried out without sufficient communication and sufficient alignment of testing process and required
procedures.
3) Common to both engines for industrial vehicles and engines for automobiles(1) Lack of compliance awarenessIn a situation where the role and business of diesel engine development was expanding, the top priorities
and values, namely, “compliance,” and “(i) safety, (ii) quality, (iii) amount, and (iv) cost,” failed to be kept,
and the basic awareness of respecting data accuracy was weak.

(2)Inadequacies regarding organizations and systems necessary to advance development andproduction in compliance with laws and regulations
There was no department dedicated to regulation certification and there were insufficient efforts tounderstand the domestic laws and regulations and ensure that the rules set forth in domestic laws andregulations were included in the provisions of internal rules. There also was no check function on
development that operated from the perspective of compliance with laws and regulations and the quality
assurance functions and system were insufficient, and for this reason, there was also no check function on
development schedule or targets operating from the perspective of quality assurance.
II. Responses in Light of the Investigation Results
1. Company’s attitude
The Company management reflects with deep seriousness on its responsibility for the fact that the violations
continued over many years without a proper understanding of the certification system being thoroughly ensured,and that the Company was unable to detect and correct the said violations.
The Company takes the discovered facts very seriously; and the Company will return to the fundamentals
and its starting point as a manufacturer, and, as the top priority of the management, make efforts to thoroughlyraise awareness of compliance with laws and regulations and to rebuild a system and an organization.

2. Addressing the subject engines
In addition to the engines that have been under a suspension of domestic shipping since March 2023,
domestic shipping has been stopped as of today for forklift engines and engines for automobiles which in thisinvestigation were newly found to involve violations of domestic laws and regulations, as well as for forklifts
in which said engines were installed. The Company will have discussions with the recipient customers andcompetent ministries and take necessary measures with respect to the 1KD Engine for construction machinery
which was discovered to exceed the regulation values.
3. Towards prevention of recurrence
The Company is aware of the need for a fundamental rebuilding of the engine business for industrial vehicles
and will carry out a comprehensive inspection of the certification and mass production processes and proceedwith company-wide measures to prevent recurrence. In addition, as regards engines for automobiles, theCompany will revisit its division of duties with Toyota Motors and rebuild its communications with Toyota
Motors as it moves forward with initiatives to prevent recurrence.
Since the announcement of its violations of domestic laws and regulations in March 2023, the Company,
working in parallel with the Special Investigation Committee investigation, has moved forward with initiatives
to prevent recurrence in the three fields of “mechanisms”, “organization and systems”, and “corporate culture”,
such as independence of the certification function, the creation of a dedicated regulation certification department
and the strengthening of compliance awareness, having received from the Special Investigation Committee
recommendations concerning recurrence prevention focusing on “fostering a compliance culture”, “establishingmechanisms contributing to prevention and early detection of improper conduct”, and “reforming awareness andbehavior of the management”, the Company will incorporate these recommendations into its initiatives so thatits measures to prevent recurrence are that much more secure and robust.
The Principal Initiatives Being Advanced
1) Devise mechanisms that enable manufacturing (monozukuri) to be carried out properly toprevent improper conduct(1) Standardized and clearly defined development, certification, quality control processes
・Standardization of test procedures for certification by incorporating laws and regulations, and tighteningof systems for recording and storing of test data
・Review the processes for compliance with laws and regulations, certification application andacquisition, and post-market introduction, as well as the standard certification schedule.
・Revamp internal rules, provide rules and standards for important processes, and revamp the related
managerial tools.
(2) Strengthen the check and monitor functions in the development and certification processes
・Make clear the examination items and determination criteria for each stage of the Design Review(development and design review).
・Implementation of transition to deterioration durability testing and certification application, as well as
control unit software management, will no longer be carried out by the engineering departments, butwill be implemented by the Certification & Administration Dept.

2) Construction of organizations and systems for proper response to risks and optimal distributionof managerial resources(1) Construction of a system enabling early detection of and response to risks
・Establish a dedicated organization for overseeing and managing the promotion of compliance across theentire Company and overseeing and managing the risks arising in corporate activities.
・Implementation of a comprehensive company-wide inspection of regulatory and quality risks.

(2) Achieving a sound check and oversight function
・Establish the position of Global Chief Compliance Officer, Chief Quality Officer and Chief Legal
Officer overseeing the entire Company regarding the functions of compliance, laws and regulations, andquality.
・Establish in both the industrial vehicle and engine divisions a “Regulation Certification &Administration Department” having a certification function independent from engineering departments.
・In order to strengthen the check function exercised by headquarters on business divisions, reorganize theQuality Control Dept. into “Quality Management Dept.” and carry out a review of the audit process incollaboration with outside agencies in order to improve its effectiveness.

(3) Construction of company-wide collaborative systems that span all business divisions anddepartments
・Organizational change from having, within the engine engineering department, separate organizations
based on use, for engines for industrial vehicles and automobile engines, to having separateorganizations based on functions, such as design, control, compliance, etc.
・Introduce an internal recruitment system and promote job rotation in order to improve personnel fluidity
and prevent persons in charge from becoming entrenched at their positions.
3) Fostering a corporate culture where if there are mistakes, they are noticed, work pauses, andeveryone works together on a solution(1) Strengthening compliance awareness・.
III. Responsibility and dispositions
As announced on March 17, 2023, in response to the matter at hand, the related officers have alreadydeclined compensation; going forward, in light of the investigation results, the Officer Personnel
Committee, among others, will give further consideration to this matter, including proper systems, and if
decisions of additional dispositions are made, the Company will give notice at such time.
IV. Impact on business results
The Company is currently studying the impact that the content of this announcement will have on the
Company’s consolidated results. If a matter requiring disclosure arises, the Company will promptly makedisclosure.

End of Document

Reference Materials
I. Overview of the Investigation Report by the Special Investigation Committee (Chairman, Hiroshi
Inoue, Attorney and Certified Fraud Examiner)
The Special Investigation Committee divided the violations it identified in its investigation into the categories
of “intentional improper conduct to obtain certification”, “other intentional misconduct”, “improper conduct
caused by lack of understanding of laws and regulations”, and “improper conduct regarding mass production
sampling inspections”; and reported on their causes, the root causes of the conduct overall, and advice onrecurrence prevention.

1. Details and causes of violations found by the Special Investigation Committee
1) Intentional improper conduct to obtain certification
This refers to rewriting test results in order to obtain certification and otherwise knowingly violating
domestic laws and regulations and intentionally disguising facts, and similar conduct.
(1) Specific examples
・ Because the NOx values after deterioration durability operation exceeded domestic regulation values,
the data was rewritten so that it appeared that the regulation values were satisfied. (Former 1DZ Engine)
・ Because PM values rose during deterioration durability operation, the fuel injection device was
improved, and thereafter, the emission component values assuming that the improved device wasinstalled were estimated, and those figures were used as the test results. (1KD Engine)(2)
Causes① Lack of compliance awareness
The Committee points out that there is insufficient, or lack of, compliance awareness on the part ofrelated persons.
② Unreasonable development schedules
Development policies and mass production launch dates were set without sufficient consideration, andschedules were set that prioritized the mass production launch date and did not fully consider the timerequired for deterioration durability testing; in these and other ways, the development schedule was not
something that could be called reasonable.
③ Dysfunction amongst managerial personnel
While managerial personnel were aware of the development schedule problems, they did not negotiatewith other departments or report to superiors and seek resolutions or otherwise try to resolve theproblems. They did not show a stance of engaging with the on-site problems and jointly considering andexecuting with on-site staff measures to resolve these problems, and an environment was not in place
where the problems that work sites faced would be properly escalated.
④ Inadequacies in organization and systems necessary to promote development and production while
complying with laws and regulations
Because the development reference timetables and deterioration durability testing implementation
timing were not stipulated matters and there was no dedicated regulation certification department, there
was no check function operating on the development function from the perspective of compliance withdomestic laws and regulations. Further, because the functions and systems of the Quality Assurance
Department were insufficient, at the development stage, there was no check function operating on theschedule and targets from the perspective of quality assurance for mass production products.
4) Other intentional improper conduct
This refers to conduct such as rewriting data for the purpose of concealing variations in values, eventhough there were not any pressing circumstances such as where domestic certification wouldn’t beobtained without engaging in improper conduct.
(1) Specific examples

・ Emission values were measured multiple times, and only some of the measurement results were used.
(4Y Engine/1FS Engine/ 1KD Engine for Construction Machinery)・ In in-house output tests concerning engine output, fuel injection amounts were changed to ensure that output
values exceeded development target values and that the torque curve would not be distorted by swings in
output values. (diesel engines for automobiles)(2) Causes① Lack of compliance awareness and trivialization of data integrity (data accuracy)
There were problems in the attitude that engineers had regarding compliance with accuracy of data, as isrequired of them.
② Lack of managerial and supervisory awarenessOn the grounds that they had no knowledge or experience regarding engine calibration work or
deterioration durability testing, managers fully delegated work to engineers in charge, were not aware of
the problems, and lacked awareness of their responsibility to supervise the engineers in charge to ensurethat their conduct was appropriate.

3) Improper conduct caused by lack of understanding of laws and regulations
This refers to conduct undertaken without awareness of violation of domestic laws and regulations, arisingbecause of ignorance of the detailed domestic regulatory rules for deterioration durability testing.
(1) Specific examples
・During deterioration durability testing, parts were replaced and damaged parts were repaired without
report to the domestic authorities, and the replaced parts were not preserved. (4Y Engine/1FS Engine)(2) Causes
Because there was no department dedicated to regulation certification, the engineering department
engineer in charge of engine calibration work studied and considered the regulations himself as thework progressed, and there were gaps in the proper understanding of the information on laws andregulations. The rules as stipulated by laws and regulations had not been put into the form of written
internal rules.
4) Improper conduct regarding mass production sampling inspections
This refers to improper conduct in the mass production sampling inspections carried out by the Quality
Assurance Department following launch of mass production.
(1) Specific examples
・During mass production sampling inspections, software other than ECU software for mass production
was used to measure emissions.
・The inspection frequency specified in internal rules was not adhered to, and control limit values, control
standard values, etc. were not stipulated in accordance with internal rules.
(2) Causes
The awareness of the need to comply with the stipulated quality assurance process had grown thin, there
was a lack of compliance awareness, and there were deficiencies in rules concerning inspection
implementation and review, and retention and management of related documents, among other things.
2. Root Causes
1) Corporate culture and organizational climate(1) Contractor’s mentality
The Company had developed a “contractor’s mentality”, where the Company had little power to discoveror resolve problems on its own. Regarding engines for industrial vehicles that the Company had developed on
its own, it was necessary to understand the content of laws and regulations and the challenges they presented,
and derive solutions; however, by the impact of this “contractor’s mentality”, where the Company had notlearned the mode of behavior where it would take responsibility and address the matter itself, the Company
was not able to address the new challenges arising from the introduction of stringent emissions regulations.

(2) Trivializing engines for industrial vehicles
The management and the executives of the Engine Division trivialized engines for industrial vehicles, abusiness which, compared to engines for automobiles, was small in scale. They thought there was little
difficulty involved in the development of these engines.
(3) Low risk sensitivity among executives at the Engine Division
Because of this “contractor’s mentality” and the “trivializing of engines for industrial vehicles”, whenemissions regulations for engines for industrial vehicles were introduced, the details of those regulations andthe risks they involved were not accurately understood, and no review was made of the organizational systemfor ensuring compliance with regulations and appropriate obtaining of certification.
2) Adverse effect of the business divisions system and lack of management’s efforts to address such
effect(1) Imbalanced power dynamic between TMHC (industrial vehicles business divisions) anddepartment responsible for engines for industrial vehicles
In the business divisions system used by Toyota Industries, TMHC and the department responsible forengines for industrial vehicles did not have a relationship where they could negotiate as equals, and they did
not have constructive discussions with the point of the two divisions developing better engines.
(2) The initiatives by management to correct relationships and achieve total optimization wereinsufficient
It is the responsibility of management to consider in a company-wide manner risks and business problems
that business departments are unable to fully handle on their own, and thus seek total optimization; these
efforts were insufficient. The debate regarding improvement of the relationship between TMHC and theEngine Division and giving incentive toward development of better engines for industrial vehicles was not
something that should have been led by the business divisions, but was something that management needed tocarry out, as a managerial goal of Toyota Industries overall.
3. Advice on Recurrence Prevention Measures
1) Fostering a compliance culture(1) Enabling individuals to make the right decisions
・Management and executives themselves should always show an attitude of prioritizing compliance overeverything else and in specific situations should act as a model in their response.
・Compliance education and training should be enhanced and strengthened so that all officers andemployees observe the principles of judgment and behavior for fulfilling their own roles andresponsibilities, no matter the situation, and properly understand the changes in the various risks theCompany faces and changes in the perceptions of society.
(2) Adherence to engineering ethics
・Education and training to confirm, maintain, and strengthen the fundamental engineering ethics, including
data integrity; emphasis by management on the importance of pride as an engineer.
(3) Enabling the organization to make the right decisions
・In order to ensure that the report lines function, management and business division executives should
create an atmosphere where the problems work sites face can be easily reported, accept reports withsincerity, take the initiative themselves and show a willingness to tackle problems, and foster a culture
where problems are escalated.
・By welcoming internal whistleblower reports and by responding to internal reports by showing thatmanagement will do whatever it can to resolve the problems, enable the whistleblower system to function
the way it is supposed to, where persons making internal reports feel psychologically secure and problems
are directly escalated.

2) Putting mechanisms in place to help prevent and quickly discover improper conduct(1) Putting rules in place
・Rules that include development reference timetables including deterioration durability testing
commencement timing and the requirements of laws and regulations should be put in place.
(2) Separation of those in charge of development and of certification(3) Ensuring checks in the development process
・Ensuring that the dedicated regulation certification department is sufficiently robust and exercises checks
on, provides information to, and performs an external affairs function for, engineering departments.
・Strengthening of the mechanisms for ensuring substantial participation by the Quality Assurance
Department in the review regarding transition to the development process; strengthening of the Quality
Assurance Department systems and personnel development.
(4) Enhancing oversight functions
・Securing of personnel and enhancement of a system for ensuring the effectiveness of business divisioninternal audits; implementing personnel development from a long-term perspective.
・Strengthening of the head office quality management function for supervising and supporting the quality
assurance activities of the business divisions; collaborating with audit departments.
(5) Promoting systemization for automatic data recording and data alteration prevention
3) Reform of the awareness and behavior of management(1) Initiatives towards reform of corporate culture and organizational climate
・Escape from the “contractor’s mentality” by having individual employees understand the meaning of thework they do and are aware of the responsibility that comes with the work and by the management
showing the way with its own behavior
・ Reform of overall Company awareness through an accurate understanding of the circumstances behind thetightening of regulations concerning the industrial vehicles businesses and of the challenges in responding
to the same.
(2) Improving the risk sensitivity of the Engine Division executives and management
・Advance the reform of employee awareness by having management heighten its own risk sensitivity to“quality improprieties” and exhibit a strong resolve.
・Reform of the risk management system surrounding businesses; involvement by management in a leadingrole.
(3) Managerial determinations that are not bound by the confines of the business divisions
・A framework for minimizing the demerits of the business divisions system, where discussions take place
for total optimization transcending the boundaries of business divisions, and company-wide managerial
determinations are made for the purpose of enhancing corporate value.
Investigation Report（Published Version）
Investigation Report（Summary Version）