Page last updated at 14:39 GMT, Tuesday, 9 February 2010

Toyota fights back as problems escalate

By Jorn Madslien
Business reporter, BBC News

Toyota Prius
Critics say Toyota's recall of Prius models with potentially faulty brakes and its efforts to reassure customers have come too late

Toyota's difficulties are mounting.

Having already lost most of its friends - both within the motor industry and outside, with no one coming out to defend it over its recall of cars with faulty accelerator or brake pedals - the crisis has now moved to the geopolitical stage.

Japan's transport minister Seiji Maehara
Each country needs to consider how to prevent this from becoming a diplomatic problem
Japan's transport minister Seiji Maehara

"This whole ordeal has blown up to be a lot larger than Toyota had expected," observes Manabu Seto of Car Watch Magazine.

Japan's transport minister Seiji Maehara has publicly criticised Toyota Motor president Akio Toyoda, insisting he had responded too late to concerns over the brakes on the firm's flagship Prius models.

It seems Mr Maehara is even concerned that Toyota's tarnished image could damage both the reputation of Japanese companies and products abroad.

He is not only concerned about consumers developing a new level of scepticism about Japanese firms' supposed superior quality, but also about how trading partners relate to each other at government level.

"Each country needs to consider how to prevent this from becoming a diplomatic problem," Mr Maehara insists, as he gets ready to meet US ambassador John Roos to discuss Toyota's recalls and to "exchange views on protecting free markets and strengthening Japan-US relations".

Toyota bashing

It is difficult to say whether Mr Maehara, in making such statements, has himself made the recalls a diplomatic issue, or whether his involvement could help to calm the waters.

Juan Aibar of Spain drives his Toyota during the 8th stage Tabenkrout - Tabenkrout, Mauritania, of the second edition of the Africa Eco Race
Toyota is not alone in the wilderness; rivals have also been hit by recalls

But it is safe to say that the blame game is widening.

"We're not talking about the pure recall-related business situation here," says Koji Endo, managing director of Advanced Research Japan, referring to how US Transportation Secretary Ray LaHood recently pledged to "hold Toyota's feet to the fire to make sure they are going to do everything they said they were going to do to make the vehicles safe".

"We're probably talking about something else, and that's not necessarily friendly political consideration against Toyota," says Mr Endo.

Kazutaka Oshima, president of Rakuten Investment Management, meanwhile, seems convinced the US authorities are using Toyota's problems to bolster support at home, both for President Barack Obama's administration and for US carmakers General Motors (GM), Ford and Chrysler.

"For the Obama administration, which is worrying about its falling support rates, the best way of letting off steam about the jobless situation is to target Toyota, which has overtaken the Big Three," he says.

Cautious rivals

Such criticism is unfounded, others argue.

"There is no evidence that the US government would be so reckless as to try to intentionally harm Toyota to benefit the car company it now owns, GM," says Michael Auslin at the American Enterprise Institute.

Similarly, US carmakers, or indeed any other rival in the industry, will be cautious about overtly trying to take advantage of Toyota's problems by insisting they offer better, safer products.

Toyota Motor president Akio Toyoda
When we do make omissions or mistakes, we always make repairs, correct matters and replace the faulty parts
Toyota Motor president Akio Toyoda

Toyota's luxury brand Lexus was rated the market leader in automotive consultants JD Power's 2009 Initial Quality Study, with Toyota itself in seventh place - well above the industry average.

So while there are signs that Toyota may no longer be offering the absolute best quality, its rivals also know that any insistence that they themselves are immune from problems could backfire.

After all, every major carmaker has been hit by large-scale recalls in the past. For instance:

  • In October 2009, Ford completed a recall affecting 14 million vehicles with potentially faulty cruise control deactivation switches. Risk: fire.
  • In August 2008, GM recalled some 850,000 vehicles with potentially faulty windshield wiper systems. Risk: fire.
  • In December 2007, Chrysler recalled some 575,000 vehicles with potential gear problems. Risk: cars could shift out of park without the ignition turned on.

So while both GM and Ford are offering additional $1,000 (£640) discounts for Toyota or Lexus drivers who buy one of their cars, neither firm has opted to change their marketing strategies and allow dealers to make direct comparisons with their Japanese rival.

Taking action

Meanwhile, there are are signs that Mr Toyoda is finally on the front foot, proactively addressing a crisis that could remain a major headache for Toyota for years to come.

"Let me assure everyone that we will redouble our commitment to quality as a lifeline of our company," he says as he gets ready to travel to the US to defend his company.

"With myself taking the lead, and by keeping to the 'genchi genbutsu' [go and see for yourself] principle, all of us at Toyota will tackle the issue in close co-operation with dealers and with suppliers together."

Mr Toyoda also says he is not claiming that Toyota is infallible and never makes mistakes.

"However, when we do make omissions or mistakes, we always make repairs, correct matters and replace the faulty parts, as we have done in the past and will continue to do with confidence in the future," he says.

It turns out the fight-back is part of a carefully worked out strategy.

"The first thing we have to do is to recall these cars, have them repaired or modified and ensure customers that the car that they have, that they own, is totally OK," explains Etienne Plas, spokesman for Toyota Europe. "That's the first thing, the first priority.

"Then in a second step, of course, we will have to work further on rebuilding the trust and the confidence of the customers in our brand."

Crisis communication experts accept that this represents a good strategy.

But they also point out that, as with the recalls, Toyota should have done it a long time ago.

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