Toyota's recall troubles shock hometown

TOYOTA - Even in its hometown, the great carmaker has lost some of its mystique.

Rising out of the barren winter rice fields of central Japan, this city of 400,000 people is probably the most Toyota-friendly place on the planet.

Renamed after the company 51 years ago, it hosts the corporate headquarters as well as enormous factories and is beholden to the carmaker for tens of thousands of jobs and the bulk of its tax income.

Residents of Toyota say they, like the rest of the world, were surprised by the safety problems that have led to a mass recall of Toyota vehicles.

But it was the company's response that was more shocking - the global icon came across as dithering and unprepared.

"Maybe Toyota isn't any different from ordinary companies," said Akari Mizunaga, who works at a local trading company which depends on Toyota for much of its business.

As the company grew in the 1930s from its roots as a producer of mechanical looms, it has transformed a rural town into a thriving municipality. Toyota dealerships are strung along the city's main street, and the carmaker's curly T logo is everywhere - on cars, signs and buildings.

"You can't really separate the town from the company," said Hideki Nagata, who works independently in auto repair. "And now there is this sense of - are we OK?"

None of the people interviewed in Toyota said they would hesitate to buy one of the company's vehicles in the future, and several said they thought the carmaker would now work harder to ensure quality. But there was a palpable disappointment in the way it had handled the safety concerns, almost as if let down by a relative.

Akio Toyoda, who took over the company in June, is a grandson of Toyota's founder and was seen as a charismatic choice who would lead it back from deep losses incurred during the global economic slump.

But the company's leader kept a low profile after Toyota announced a recall last month to fix defective gas pedals in a number of its mainline models that could cause sudden acceleration. Together with earlier recalls, that has covered over seven million cars in the US, Europe and China.

Toyoda was briefly cornered for an interview by a Japanese TV crew a week later in Switzerland, then finally gave a press conference on Saturday, which was widely panned by Japanese media as belated and unconvincing.

The company name is spelled and pronounced differently from the founding family name because Toyota is written in Japanese script with eight brush strokes, considered luckier than the 10 required for the family name.

Toyota's problems have even spread to the prized Prius hybrid after complaints in the United States and Japan about problems with its complex braking system. The quality issues threaten two of the company's core assets - its sterling reputation for reliability and safety, and its world-beating technology.

In the company museum at corporate headquarters - where the address is 1 Toyota Town - there is nothing subtle about the safety message.

Main exhibits are devoted to subjects like "Active Safety", "Passive Safety" and "Intelligent Safety". A large room in a prime location next to the entrance is devoted to the hybrid, with a dissected, flashing Prius demonstrating how it works.

Kazuhide Ueyama, 54, visited the museum at the weekend on a tour from his home in Osaka, about 160km away.

"This trip was planned before these problems came up, but everyone was talking about it on the bus over here," he said, referring to the recall woes.

"I have no doubt they will deal with the problems firmly, but it does raise some questions."

The city, 240km southwest of Tokyo, has suffered in the latest global downturn along with the company, which cut temporary workers at its Japan plants to 3000 at the end of last fiscal year from 9000 a year earlier.

Toyota sank to its first annual loss in nearly 60 years last fiscal year, and as the carmaker's tax payments fell the city's income also shrank.

The Toyota city government expects its corporate tax revenue to fall 96 per cent to 1.6 billion ($26 million) this fiscal year through March, down from 44.2 billion the previous year.

City officials don't release a breakdown of contributions by individual companies, but confirmed that Toyota's contribution is "well over" 50 per cent.

Local media reports have put the figure at 70 per cent.

The city has attempted to cover the shortfall by relying on cash reserves, tripling the amount of debt it issues, and postponing long-term projects.

Despite the loss, many point to the company's strong financial standing. Unlike competitors in the US, the company boasts solid finances - at the end of last year it said it had about US$24 billion ($35 billion) in cash and cash equivalents.

A report from investment research firm Morningstar after the gas pedal problems came to light called Toyota's balance sheet "fortress-like".

Last week Toyota said it would become profitable again in the current fiscal year through March, after earlier forecasting more deep losses.

It now expects a profit of 80 billion, versus an earlier projection for a 200 billion loss.

But that was without any potential costs from the latest Prius problems factored in.

Until the recent safety issues, the company was seen by some as more creditworthy than the Japanese Government. On Saturday, however, ratings agency Standard & Poor's put Toyota under review for a possible downgrade.

Jun Morikawa, who works at a company that transports car parts for Toyota, was among many who voiced concern about the recalls and the financial implications.

"The company just managed to get into the black, and now it looks like it might fall back into the red," he said.

For many Japanese, Toyota is a source of pride because of the legend of its success - from when its founders tore apart a Chrysler in 1933 to see how it worked, to the company eventually passing General Motors and becoming the No 1 carmaker in the world two years ago.

Now the fear in Toyota is that the company's recent stumbles could see it lose the top spot. "This is a chance for American companies like GM, who could catch up," said Ueyama.

- AP