Toyota’s Reputation Needs Some TLC
LOS ANGELES - As carefully crafted brand images go, it's hard to beat Toyota's.
Over a generation or so, Toyota built its reputation - and U.S. market share - on dependability, at a time when General Motors, Ford Motor and Chrysler couldn't shake being identified with lemons.
The Japanese automaker initially built its lineup around fuel-efficient cars, while Detroit was focused on gas-guzzling SUVs.
Mostly non-union Toyota opened U.S. plants and promised no layoffs for permanent workers. Detroit, meanwhile, laid off employees by the thousands and shuttered dozens of UAW-represented plants.
But Detroit's nemesis lately has suffered through its own run of bad press, much of it involving a consumer hot-button: vehicle safety.
The company that once could do no wrong has stumbled badly though a series of embarrassments of disclosures, allegations and recalls. Experts now are debating how deeply these will eat into the consumer trust that is Toyota's most potent asset - and what it must do to recover.
Clarence Ditlow, executive director of the Center for Auto Safety, sees real problems. "You have a company whose reputation is built on quality. It's going to do damage to Toyota for the U.S. in the foreseeable future," he says.
Others, however, believe Toyota's bank of goodwill is formidable enough that current troubles can be quickly overcome.
"They will emerge stronger than ever," predicts Jeffrey Liker, a University of Michigan professor who authored the best-selling book The Toyota Way.
This much is indisputable: It's been an awful year for the world's largest automaker.
In addition to the safety issues, Toyota only now has started to recover from unprecedented monthly sales drops this year. Last spring. the Japanese parent company closed its first money-losing fiscal year since its official founding in 1950.
Toyota has had to trim plans made during years of unbroken U.S. sales increases. It has shelved plans for new plants. It has mothballed a new Mississippi plant that was to build the Prius here for the first time. It is closing a plant it ran with General Motors in Fremont, Calif., idling hundreds of workers.
But as bad as the business problems have been, nothing has stung like the criticism over safety. Among mounting problems:
- Toyota ordered its largest recall ever - upward of 4 million vehicles - over a defect that caused what the government calls "unintended acceleration." Floor mats could jam the gas pedal wide open.
The problem has been blamed for 13 crashes, five fatalities and 17 injuries.
The most prominent crash killed an off-duty California Highway Patrol officer and three family members in August in a runaway Lexus near San Diego.
- The National Highway Traffic Safety Administration issued a rare public rebuke, saying Toyota prematurely tried to blame the entire acceleration problem on floor mats when a NHTSA report cited other potential vehicle problems and contributing factors.
- Consumer Reports says its analysis of NHTSA data found Toyota had 40% more "unintended acceleration" incidents than any other automaker in its 2008 models.
- NHTSA ordered a recall of 110,000 model year 2000-03 Toyota Tundra pickups to correct a design that could allow corrosion to cause the undermounted spare tires to fall off and affect braking ability.
- NHTSA is looking into whether it should formally investigate engine-stalling problems in 2006 Toyota Corolla and Matrix vehicles. The agency has received 26 complaints.
- A former in-house Toyota lawyer has filed a lawsuit that alleges the automaker didn't fully disclose rollover crash test results to NHTSA as the government was trying to formulate new standards for roof strength. The lawyer, Dimitrios Biller, also alleges that Toyota withheld data from plaintiffs' lawyers in rollover accident lawsuits against the automaker, resulting in more than a dozen formerly settled lawsuits being reopened.
"It was the perfect storm," says Jake Fisher, a senior automotive engineer for Consumer Reports about the cascade of safety allegations. "If people are now questioning whether Toyota is going to be safe and reliable, that could really hurt their sales."
That would hurt a nascent sales recovery by Toyota. Better results in recent months and a big share of last summer's cash-for-clunkers trades have left Toyota's 2009 sales through 11 months down 23.8% - almost exactly the industry's overall average decline in the recession, Autodata figures show.
And by holding steady with the industry decline, Toyota actually gained some U.S. market share from those with greater falls and will finish the year as the second-largest-selling automaker in the U.S., behind only General Motors.
Toyota officials say they're pleased with their sales results, especially an uptick in November, and are confident recent safety questions won't dent the company's image or sales recovery.
"Our reputation for 30 years is built on quality, reliability and durability," says Bob Carter, a group vice president for Toyota's U.S. sales operation.
One move to protect that reputation, he says, is a permanent fix for the floor-mat issue. Owners initially were told to remove the driver's mat. Now they've been notified to bring in their vehicles for a temporary solution that involves cutting off part of the gas pedal. A final fix, expected by April, will be the installation of a newly designed gas pedal.
Evaluating Toyota's overall response to the mounting trouble, Carter says, "I am absolutely confident we acted appropriately."
Deadly crash sounded alarms
Others aren't so sure.
Toyota's biggest trouble, the unintended acceleration charges, burst into the open after the August crash in Santee, Calif., near San Diego.
A 911 call was received from a passeneger of off-duty highway patrol officer Mark Saylor, who was driving a Lexus ES 350 loaner from a dealer. The caller said the sedan was racing out of control at more than 100 mph and Saylor could not stop it. The car ended up crashing into another vehicle, killing Saylor and the others.
A NHTSA report found that the gas pedal design could allow a loose floor mat to jam it wide open. But it also cited other factors in the car's design that could make it difficult to stop in a runaway situation:
- Saylor's Lexus, and many others, have an off-on button instead of a traditional key-twist ignition. Toyota's design requires - though it is not marked with a warning - pressing the button for three continuous seconds to shut off the engine.
- The automatic transmission lever's design could make it confusing and difficult to find the neutral position in an emergency.
- The power brake system requires 150 pounds of pressure on the pedal, instead of the normal 30 pounds, to stop the car at high speed with the throttle open.
In Tokyo in October, Toyota's new president, Akio Toyoda, publicly apologized to surviving members of the Saylor family and acknowledged the safety issue.
"Customers bought our cars because they thought they were the safest. But now we have given them cause for grave concern," he said at a press conference. "I can't begin to express my remorse" for the crash.
Toyota's Carter insists that floor-mat jams remain the only confirmed cause of unintended acceleration.
But a review of NHTSA safety records by the Los Angeles Times found more than 1,000 Toyota and Lexus owners have reported sudden acceleration since 2001 - resulting in at least 19 deaths - and that jammed floor mats were not cited as a contributing cause in many of the incidents.
Safety experts say more research is warranted. "There is increasing evidence that the problem is not just caused by floor mats," says Sean Kane of Safety Research&Strategies.
He also criticized Toyota for being too slow to respond when problems were first reported and says that has prolonged and deepened its public-relations trouble.
Icons have farther to fall
Crisis public-relations experts say a run of bad news often strikes hardest against corporate darlings such as Toyota.
"It is the companies that often had honeymoons with the public that have the most trouble," says Eric Dezenhall, who heads a crisis PR firm in Washington, D.C. Plus, Toyota is a bigger target now that it outsells all but GM.
"There is something cosmic that happens when a company hits the top," Dezenhall says. "That's when the Visigoths show up at the gate with slingshots and torches."
Toyota "has gone from Teflon to Velcro" in its ability to deflect critics, says another crisis PR executive, Michael Gordon in New York. Now it needs to get in front of the problem, he says, and not let developments dribble out.
Toyota's long run of success may be its weakness in trying to deal with trouble, however, says David Cole of the Center for Automotive Research near Detroit. It perfected a system of quality and efficiency that has built its success. But the downside of that success is that organizational change now comes slowly.
The Toyota Way author Liker says he doesn't think consumer faith in Toyota has been shaken so far. To the brand's fans, "The specific problems with recalls probably seem odd but will not shake their impression based on their experience. There has not been enough damage to change the impression."
Auto industry consultant Rebecca Lindland of IHS Global Insight holds a similar view.
"There is a lot of not-so-great news for Toyota, but they have built up decades of goodwill. In that goodwill, there is a lot of forgiveness."