Special Coverage

Toyota's Safety Crisis

Toyota Motor Corp. executives steadfastly have maintained the biggest reason for the brand’s success, both in the U.S. and around the world, could be summed up in one word: quality.

However, its sterling reputation for fit, finish and reliability, built over years of sometimes-steady but more-often-steep growth, now is being tarnished by widespread recalls.

“For me, it’s too little, too late,” Ian Mitroff, a senior research associate at the Center for Catastrophic Risk Management at U.C. Berkley.

Of Toyota’s move to pull eight models from the market in the wake of its latest recall, Mitroff asks: “Why didn’t the (corporate) culture pick this up earlier and do the right thing?”

Mitroff is co-author of Corporate Tragedies, which examined the infamous Tylenol recall in 1981, when cyanide-spiked capsules caused multiple deaths. Pharmaceutical maker Johnson & Johnson was a victim, he says, while in this case, Toyota is a villain.

“It’s almost like (Toyota was) forced when all this (news) came out to do this,” Mitroff says. “They didn’t act proactively. There’s a big difference between proactive and reactive crisis management.”

Subject to a recall for sticky accelerator pedals and the subsequent sales halt are ’10 Toyota Camry, Corolla, Avalon and Matrix passenger cars and Highlander, Sequoia, Tundra and RAV4 light trucks.

This is consistent with federal legislation that compels companies to stop selling any products they know to be defective.

General Motors Co. has nixed sales of its late-model Pontiac Vibe, a platform-mate of the Matrix, until a fix is developed. The ban affects just six units – one ’10 model and five from ’09 – because Vibe production ended last year when GM phased out its Pontiac brand.

Mitroff says it is possible Toyota could come out of the public’s crosshairs unscathed.

“There’s no question certain companies will weather a crisis, whether people don’t care about it or the perception of the brand is good…they may well be lucky,” he says.

Mitroff associates a bad-news fatigue phenomenon with the current scandal surrounding golfer, and brand in his own right, Tiger Woods.

“After awhile you say, ‘I don’t care,’” Mitroff says of the constant revelations about Woods’ extramarital affairs.

But “the point about crisis management is you don’t want to depend on luck. You want to depend on doing the right thing.”

Toyota apparently withstood backlash from its 2009 recall of 3.8 million Toyota and Lexus vehicles. The campaign was prompted by the potential for sudden acceleration when gas pedals were pinned to the floors of vehicles by ill-fitting mats.

In November, Toyota Motor Sales U.S.A. Inc.’s sales rose 11.5%, while the industry grew 8.9%, Ward’s data shows. And although the overall industry saw an increase of 7% in sales in December, Toyota’s was three times that, up 22.9% from like-2008, just shy of that recorded by rival Ford Motor Co.

But with last week’s recall of 2.3 million vehicles that Toyota blames on faulty, sticking accelerator pedals from a supplier, industry observers wonder if the auto maker’s image will again emerge intact.

“This shows Toyota is not bullet-proof,” a former domestic OEM safety executive tells Ward’s. “Any small, incremental difference is an advantage for the competition. This could be enough to sway customers over to someone else – GM, Ford. This is huge.”

Toyota is under fire by customers and industry watchers for not acting sooner when sudden-acceleration complaints first surfaced. Reports of such incidents go back years, and now Toyota admits the Tundra fullsize pickup was implicated by some as far back as March 2007, one month after the current-generation truck went on sale in the U.S.

Toyota at the time regarded the issue as one of drivability, not safety, the auto maker told the National Highway Traffic Safety Admin. in a letter.

Prior to last week, Toyota maintained the 2009 recall, occurring after the well-publicized death of a California Highway patrol officer and his family in a Lexus ES 350 sedan, would be sufficient to resolve issues with so-called runaway vehicles.

While the auto maker promised to further investigate reports of unintended acceleration, its executives dismissed any issue beyond ill-fitting floor mats, including those associated with the electronic throttle control unit.

“There is no greater expert on this whole subject than (the National Highway Traffic Safety Admin.),” Bob Carter, group vice president and general manager-Toyota Div., told Ward’s in December.

The safety agency, after studying the issue of unintended acceleration in Toyotas for many years, never uncovered any electrical system issue with the auto maker’s models, he said.

Supplier CTS Corp., which manufactured the pedals linked to the most recent recall, says in a statement today the work was done “to Toyota's design specifications.” But the supplier says it is working with the auto maker on a new component with “tougher specifications.”

The replacement part now is being tested, CTS says.

The gravity of the Toyota situation is not lost on Jon Harmon, a former Ford public relations executive and author of Feeding Frenzy, a book about the blue oval company’s handling of the Firestone tire debacle.

“They’re in the most difficult situation imaginable,” Harmon says of Toyota. And halting sales of suspect vehicles is the “right thing,” though the auto maker could be faulted for not moving faster.

“Their brand is so strong that if they keep doing the right thing, and hopefully they find a fix soon, they can weather (the crisis),” he tells Ward’s.

Often times in a crisis situation, a company will say it won’t do something, only to later do it, Mitroff says.

“More often than not, what you say in the beginning you’ll never do, you’re forced to do later, either by public opinion or data or facts come out.”

Mitroff advises Toyota now to “root out” any other potential issues lurking that could further harm the company’s standing.

“You want to really, really show (the public) how much you really care,” he says.

Meanwhile, the American International Automobile Dealers Assn. declares its support for Toyota.

“Throughout this process, Toyota has remained committed to consumer safety and product quality – the foundation of its business,” AIADA Chairman Russ Darrow says in a statement.

“Toyota’s dealers are prepared to weather this short-term challenge in order to preserve their customer’s safety and trust. Toyota is communicating openly and honestly with its dealers and we are confident that, in the long run, this decision will only increase the loyalty of its customers.”