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Toyota tackles new challenges in US market

By Andrew Slade, Gavel Media Team, on February 19, 2010 12:06 AM

By Andrew Slade, News Editor – (Photo courtesy of thestudentroom.co.uk)

When Toyota Motor Corporation issued multiple safety recalls on more than eight million of its vehicles in the United States alone over the last several months, the company further strained its already challenging financial state. With pressure from American regulators now mounting, there is internal concern regarding the auto manufacturer’s ability to restore its image in its largest market.

Last year, Toyota reported an annual net loss of $4.4 billion, a record for the company that posted profits of $17.3 billion the year prior. Like the “Big Three” American automakers, however, Japan-based Toyota struggled in the midst of a global economic slump. After slowing production and laying off thousands of part-time employees, the company was forced to take out loans from the Japanese government.

As though the general financial woes facing so many companies were not enough, recent months have brought news of numerous potential safety issues on Toyota’s vehicles. While millions of cars in their line-up were recalled after confirmed instances of sticking accelerators and a tendency of pedals to get stuck under floor mats, more recent reports indicate brake problems in the highly popular Prius hybrid, as well as possible steering issues in the Corolla and driveshaft troubles in the Tacoma pick-up truck.

Given the extent and severity of these quality control failures, Congress has announced that it will be conducting hearings with Toyota and federal regulators to determine whether consumer concerns were taken seriously enough. Also in contact with investigators on the House Oversight and Government Reform Committee are America’s largest car insurance companies, one of which has already confirmed that it provided accident case information involving “sudden unintended acceleration” in Toyota vehicles to the National Highway Traffic Safety Administration in 2007.

Toyota Motor Corp President Akio Toyoda has stated that it was never the company’s intent to mislead regulators or the public. Speaking to the press in Japan, The New York Times has reported that Toyoda plans to institute a complete overhaul of Toyota’s approach to vehicle quality and safety.

Unfortunately for the world’s largest automaker, the global image of the Toyota brand has been tainted, as indicated by Kelley Blue Book’s report on the sudden fall in prices of used Toyotas. Given historical instances of similar situations, it is unlikely that any future improvements initiated by Toyota executives will be enough to restore short-term consumer confidence in their product.

In the mid-1980s, for instance, Audi was at the center of a safety controversy regarding the same issue of sudden unintended acceleration in its sedans. The German automaker was slow to react, initially suggesting that reported accidents were the result of driver error. Like Toyota, it took quite a bit of time for Audi to recognize the legitimacy of its consumers’ claims. By the time they responded, the damage was done and it took over a decade for their sales to recover.

What is making it even more difficult for Toyota to start work on repairing its image is the seemingly endless stream of new safety concerns. The most recent claims regarding the Corolla’s steering system are still under review, but Toyota executives have conceded that there could be problems with that model’s brakes or tires that are causing the issue. The longer these reported safety failures continue to flow, the longer it will take Toyota to reestablish its reputation as a financially sound manufacturer of affordable, high-quality automobiles.

Another potential thorn in the side of this corporate giant is a hefty fine from the U.S. government for failing to promptly notify the National Highway Traffic Safety Administration of its cars’ sticking gas pedals. Legally, carmakers must report such safety issues to the NHTSA within five days of discovery. If it is proven that Toyota failed to do this, the company could face penalties in excess of $16 million.

According to The New York Times, Toyoda cited a mindset of quantity over quality in discussing what brought about all of these problems.

“We so aggressively pursued numbers that we were unable to keep up with training staff to oversee quality,” he said. Toyoda continued, also noting his company’s slowness in acting on the concerns of Toyota consumers.