The Financial Gazette

Richard Wiley

THE massive recall affecting various Toyota models in the USA has received fairly extensive general press coverage the world over but with the emphasis leaning towards the sensational rather than the analytical. What is going on?

The answer is that no one is totally sure as different angles to the story have been dredged up, moulded by the agenda at hand.  There is, for example, a school of thought that the extent of the problems faced by Toyota has been exaggerated by a patriotic press determined to “stick one in the faces” of the Japanese who have inexorably eroded market share that was once the preserve of the American big three.  Toyota after all is the number two seller in the USA. I don't think I subscribe to that theory except to say that there is no doubt whatsoever that the domestic press has demonstrated an enviable ability to sensationalise issues that aren’t quite as grave as they make out. After all, recalls are regular affairs in a country obsessed with suing the pants off any corporate that deviates even a teeny-weeny amount off the straight and narrow.   Many years back, and I speak solely from memory here, a US citizen rammed his automatic Audi into a wall and couldn't open the door fast enough to get to a lawyer and claim damages. This triggered the now infamous “unintended acceleration” saga that very nearly sank Audi as a brand in America. Ever-yone who ever owned an Audi joined the fray and the end result, apart from the near decimation of US sales, was a redesign of the shift mechanism of all auto-transmission Audis to make it nearly impossible to get the car into a forward gear without standing on the brakes. Subsequent engineering papers proved conclusively that there was absolutely no foundation to the “unintended acceleration” claims and that so-called victims had planted their size 10s fair and square on the accelerator pedal and not the brake!
Toyota is faced with a not dissimilar claim apparently centred on sticking accelerator pedals. It seems that there have indeed been some instances, regrettably fatal, where the occupants of either Lexus or Toyota models have lifted off and found their steeds galloping on with undiminished vigour.  For sure, this can be frightening and dangerous but I find it very hard to believe stories that affected cars have defied all efforts by the drivers to slow down. Emergency braking is so self-obvious, but maybe not to the average driver clinging to wheel with one hand while hanging the other out of the window.  I'd have thought that switching off the ignition would also help but there again, some of these fancy new cars don’t have the age-old “key in the ignition” system so there might be some excuse for not carrying out an apparently simple procedure. The sticking accelerator syndrome is not quite as simple as it may appear on paper as the fault is attributed either to ill-fitting floor mats which get entangled under the pedal or to an inherent design problem within the pedal cluster itself. To make such an issue out of errant mats is plain daft in my book as things like this can be so-easily detected and at least temporarily fixed by the owner.  The design side is another story altogether and it’s costing Toyota a bundle as millions of cars globally are recalled for a so-called fix.  
Not only were the US and Canadian production plants closed for part of  February, dealers were also offering affected customers the use of hire cars while their own vehicles were being sorted. For the record, the following production lines were involved:   Camry, Corolla, Sequoia, Tundra, Highlander, RAV4, Avalon and Matrix. Some of these will be wholly unfamiliar to us peasants in Africa. While sales of all eight models listed were suspended, I should point out that not every derivative of each model range was necessarily affected.
For a manufacturer with the reputation of Toyota, this accelerator issue has had appalling negative affects on customer perceptions. Personally, I can’t see that all the brickbats are deserved and I’m certain that the hullabaloo is way beyond what is justified.  After all, recalls are common in the motor business and are only to be expected given the high tech nature of the products at hand.  However, I’m equally certain that to a certain extent, Toyota has been the architect of its own misfortune. It is after all, a simply gigantic organisation and one that is not exactly familiar with dealing with public outcries, whatever the origin of those outcries may be.  These factors combined to ensure that the reaction to the US-sourced problems was sluggish and lacking focus.  Just to stress this point, I should mention that for years, Toyota has emphasised the depth of its American roots, yet when American "lawmakers" called on Toyota’s US chief, James Lentz, to present to a congressional committee, he answered that Japan had made the decision about recalls and not Toyota US.  Sounds to me exactly like the problems Toyota’s late-lamented F1 team faced — big brother is watching from afar and pulling the strings in a manner that may not necessarily suit those on the ground, or more importantly, be appropriate for those on the ground. 
Because Toyota didn’t grasp the nettle, so to speak,  customers and critics saw an opportunity to plunge the dagger in even deeper by identifying more problems with various Toyota and Lexus models.
Specifically, certain 2010 Lexus and Prius models are the subject of a voluntary recall to check the ABS braking software. Some owners claim to have noticed an inconsistent feeling in the pedal! 2010 Tacoma 4WD models are also being called in for an inspection of potentially-cracked driveshafts while the latest 4 cylinder Camry models must be returned to the dealer for inspection of a power steering pressure hose which is reputedly marginally too short and could suffer from contact with other components.  None of these issues would have raised an eyebrow were it not for the accelerator story.
Of course, it’s not just US owners affected by the recalls (some 8 million in total) but this is where the epicentre of Toyota’s financial well-being is located.   Pundits are trying to quantify the sales damage (let alone the physical cost of “repairs” and customer PR) that will be wrought while lawyers are licking their chops preparing a string of law-suits instigated by Toyota owners who claim the value of their vehicles will be negatively affected by the recall saga.
To put “sales” into perspective, Ford recorded a 25% increase in January against a 16% reduction for Toyota compared with the same month in 2009.  For the record, VW gained 41,4% but off a much smaller base. It was Ford in particular that gave up market share to Toyota in the halcyon days for the Japanese manufacturer and they, along with General Motors are seeing huge opportunities opening up to regain lost ground. For the month of February, Ford is offering an extra $1 000 on each Toyota trade-in while GM is offering interest-free finance for 60 months to Toyota sellers.   By the time you read this, February sales figures should be available and they won't be kind to Toyota.
It’s not just reduced sales per se that are causing anguish. The dealers themselves, many of whom gave up local franchises, are hurting badly.

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