This week, Toyota recalled 4.2 million cars around the world. As its president admits, they are not pretty cars – so now that its much-vaunted reliability record is in question, what is around the next corner for the company?
TOYOTA IS “grasping for salvation”, according to its president. The prescient comment came not at the end of this torrid week for the car giant, but last October as Akio Toyoda, grandson of the founder, greeted the media after taking the helm of the biggest car firm in the world.
He was describing the state of a firm that had seen off the once invincible triad of US auto giants to take top spot in the car industry, but was starting to look like its rapid expansion had been carried out too quickly.
Perhaps he had some inkling of the storm that was to come.
Last week it instigated a global recall of 4.2 million vehicles – more than 18,000 in Ireland and nearly 1.8 million in Europe – over a potential risk of sudden acceleration. On Thursday it admitted there were problems with the brake system on the company’s iconic hybrid Prius, the car that drove the brand’s recent success in the US market.
These followed a recall in the US at the end of last year over similar reports of sudden acceleration that the firm blamed on faulty floormats. In total, in the past three months, Toyota has had to recall over 8.1 million vehicles, more than its total group sales last year. The recall in Europe is greater than its sales across the continent for the past two years.
Last week, Toyota claimed it was reacting immediately to the discovery of the problem but needed time to work out how many cars and which models might be involved. They seemed proactive, even though senior management declined to appear on the airwaves. It later emerged the firm had received the first reports – from Ireland – of problems with accelerators as early as January 2009.
Yesterday the firms president finally faced the media for the first time since the controversy began and apologised to customers. However, the delay in recalling the estimated 300,000 Prius models – despite acknowledging problems with the brake system – may seem to owners like a further fudge.
SOME TOYOTA EXECUTIVES may believe they are victims of a media crusade against the brand, spurred on by a US auto industry struggling for survival. Firms such as General Motors and Chrysler have witnessed Toyota devouring their market shares in their home market over the last decade.
Yet the media frenzy is driven by much more than US auto industry schadenfreude. A car firm that hones its sales pitch on reliability will always get pummelled when its vehicles are linked to a safety fault. At the core of car safety is that drivers must be able to control the acceleration of the tonne or more of metal in which they are travelling, and be able to bring it safely to a halt.
Even the slightest doubt about those fundamentals and the impact on sales is potentially enormous, as other car firms can attest. In the 1980s, Audi was faced with claims of acceleration problems in the US. By 1991, its sales there had plunged by 83 per cent from a peak in 1985. A spokesman said yesterday that it effectively wiped out a decade’s worth of sales for the brand. In 2001 Mitsubishi, which seemed to procrastinate before making a recall of two million cars, was pushed to the brink of bankruptcy.
Last week Toyota estimated the cost of the recall at €1.5 billion next year. The long-term cost may be far more significant. The problem is that while Toyota is adamant it has uncovered the potential problems, questions remain. Several of the class lawsuits in the US, for example, claim an electronic throttle system called ETCS-i is at fault, and not the pedals.
Lawyers claiming an electronic defect contend that floor mats or stuck pedals don’t explain the sudden-acceleration incidents that triggered their lawsuits. Toyota strenuously denies the problems have any link with the electronic system.
Two inquiries into the Toyota recalls are opening in the US by the Energy and Commerce Committee into the Toyota recalls. The findings of these may reveal just how long it took the firm to push the recall button.
In the meantime, Toyota owners here must wait for the first official contact from the firm. Letters are due to be sent out next week to the 18,130 owners affected. Toyota says it will contact the 58 Irish owners of the new generation Prius individually in the coming days.
The impact of the recalls on the Toyota brand could last for several years.
For customers it might not end with a brief visit to the dealers for repairs. Memories of these recalls will also hang over the used car market for some time too, likely to affect the premium prices once paid for used Toyotas. The problem for the Japanese brand is not simply that its marketing tagline – “the best built cars in the world” – is quickly becoming a punchline.
Its core customer base puts reliability at the top of their list for choosing the brand, well ahead of looks or driving performance. Toyota’s president, Akio Toyoda, accepted the firm’s cars lacked “flavour” during press briefings last October. With its reputation for reliability severely dented in the public’s mind, what else does the brand have to offer?
