Toyota, the world’s leader in auto sales by volume, announced yesterday that it was recalling eight of its most popular vehicles due to a potentially deadly manufacturing defect. The unprecedented decision is reflective of the carmaker’s commitment to safety, even if the news will almost surely undermine its reputation for strong quality. The massive, total recall follows earlier, smaller recalls of over six million vehicles in the U.S. for the same issue. According to reports, there are some issues with the accelerator pedals in these models, which could lead to uncontrolled acceleration and the driver losing control of the vehicle.
Some might think that Toyota has no room to complain in a global economy that has seen two major carmakers (GM and Chrysler) declare bankruptcy in the past year. But Toyota has done its fair share of losing, too – over seven billion dollars in the past two years. The company was aiming to return to profitability by April of this year, but it is currently very unlikely that this will happen. Starting on the first day of February, Toyota will suspend all production of the eight vehicles in question for at least a week at many of its North American production plants. In the U.S., Toyota’s second-largest market for sales worldwide, the eight vehicles represented fifty-seven percent of all sales. The vehicles affected are: the Avalon (2005 – 2010), the Camry (2007 – 2010), the Corolla (2009 – 2010), the Highlander (2010), the Matrix (2009 – 2010), the RAV4 (2009 – 2010), the Sequoia (2008 – 2010), and the Tundra (2007 – 2010). As you can see from the years on those, all the carmaker’s newest models are affected.
Toyota did not speculate on how long the sales suspension on these vehicles would last, which has led some industry experts to worry that any fixes might not be fast ones that will quickly make dealerships able to get selling again. And although Toyota is seeming to indicate that the problems are exclusive to its U.S. division, Japanese consumers obviously didn’t share that confidence: the carmarker’s stocks dropped over four percent in Tokyo early today.
Right now, the biggest risk to Toyota is its sterling reputation being tarnished. According to the R.L. Polk & Co. firm, Toyota had the highest customer loyalty score in the nation last year. What that has meant for the company besides bragging rights has been lower advertising and marketing costs to draw people into buying its vehicles, and the best advertising of all – word of mouth – totally free of charge. Toyotas also held their values better in resales and trade-ins, and kept customers very brand-loyal. Both of these things have historically kept sales values high for Toyota. If that reputation is hurt in any way, it will undoubtedly be a long and expensive process for Toyota to repair it and build it up again.
Experts say that the size and impact of the Toyota fallout will not be fully felt for a while, possibly not until current Toyota owners begin trading in their current Camrys, Corollas, and others. If the values of these cars have untowardly declined, the company may face larger problems than anticipated. Analysts say that a big part of how the public will perceive things will depend on Toyota’s reaction to the problems. If they are graceful, things will be much better for the auto manufacturer.
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