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Business

Toyota's status veers off track

12 Feb, 2010 03:00 PM9 minutes to read
Observer

Accelerators that stick, brakes that don't; but poor PR has put the biggest dent in one of the world's most trusted car brands.

When Catherine Block took her Toyota Aygo to her local dealer after a terrifying drive between Folkestone and Canterbury in southern England, she told mechanics: "It was a good job my brakes worked. Otherwise I would be dead."

They laughed, she recalls.

"They probably thought I was being melodramatic."

This was hardly the case: during the 35-minute drive, she drove up a steep hill at full pelt without pressing on the pedal once - because the accelerator had stuck.

The 28-year-old student had taken her car into the Toyota dealership at least three times because of the sticky accelerator.

On her first visit, mechanics said the problem was caused by the floor mat, then they wondered if the radio equipment she had installed was the cause.

Eventually, at the beginning of December, they replaced the pedal and the problem seemed to have been solved. The dealership said hers was an isolated, unique case.

It has since emerged Toyota had known about customers complaining about such "sticky" accelerator pedals in Britain since late 2008.

The company admits 26 of the cases it encountered in Europe had been reported as "customer satisfaction issues" at the time.

It now admits that between November and January - the fault appears to surface during cold weather - 20 more vehicles were affected in Britain alone.

Car companies are obliged to alert the Vehicle and Operator Services Agency (Vosa), which registers recalls on faulty cars, of any safety issue that may merit a recall.

Toyota UK went public only after pressure from British Government safety officials, who were alerted by their United States counterparts handling a deluge of complaints about stuck accelerators.

The carmaker gave detailed information to Vosa on January 22, leading to the recall of 180,000 cars in Britain.

Toyota's failure to tell its dealers about the fault is what angers Block most: "The dealer did not have all the information available. This was a one-off as far as I was concerned."

Since the fault is partly caused by wear and tear, as well as cold weather, she cannot be certain the accelerator will not stick again.

Toyota's public relations efforts, which accompanied its first public announcement in Britain about the faults late last month, have hardly reassured her.

"I'm left in the dark - no one has bothered to contact me to check the repair has worked. When I did ring the Toyota helpline, they said 'ring your dealer', who told me: 'It sounds like you know more about it than we do'."

When it finally came, Akio Toyoda's apology fell some way short of the "mea culpa" some had demanded from the Toyota president.

"I apologise from the bottom of my heart for all the concern we have given to so many customers," he said, having emerged to address a recall that threatens to inflict almost irreparable damage to his firm's brand. But there were no pleas for forgiveness. Toyoda's performance was a case study in the subtle difference between an apology and an admission of culpability.

Still, his appearance came as a surprise. The 53-year-old, who was made president last June as the firm looked to its founding family to revive flagging sales, had for two weeks resisted calls to speak publicly about the biggest crisis in Toyota's 73-year history.

All the media had managed to cajole out of him until then was a rushed apology. Appalled consumers, particularly in the US, made it clear it was not the bold statement of reassurance they were seeking.

By late last month, events had turned the pressure into an irresistible force: a $2 billion global recall of more than eight million cars affected by a faulty accelerator; threats of civil action and new lawsuits in the US; and now another potential recall of the car that was supposed to define Toyota's future.

Toyoda's comments underlined the extent of the public relations nightmare the company has created for itself. Toyota's inept PR performance has done little to dispel the notion it behaved in precisely the way we have come to expect of the most powerful members of corporate Japan.

Things went from bad to worse this week, when Toyota recalled about 437,000 third-generation Prius and other hybrid vehicles worldwide to fix brake problems, including 260 in New Zealand.

The petrol-electric vehicle is the world's best-selling hybrid, held up by its makers as the ultimate in fuel-efficient technology. To be fair, Toyota is partly a victim of circumstance.

Plunged into the cultural quicksand of crisis management in a globalised economy, it had little idea of where to turn for help.

Yet that has done nothing to dispel the perception that in its pursuit of profit Toyota has lost sight of the principles on which it built its success: quality, reliability and, yes, safety.

Before the bottom fell out of the global car market Toyota was celebrating record profits on its way to ending General Motors' 77-year reign as the world's biggest carmaker.

Its headquarters in the city once known as Koromo are at the heart of an operation that now employs 300,000 people around the world, making and selling cars in 150 countries.

Toyota simply had so far to fall, and in such a short time, that it has been in a state of denial, although that does not excuse the PR shipwreck of the past fortnight, say industry watchers.

At home, Toyota has fared better at playing down the crisis. The consensus in Japan appears to view the recall as a blip rather than an incubator for a long-term crisis. Some news channels relegated Toyoda to the second item behind the retirement of a scandal-hit sumo wrestler.

But in America, the woes of Toyota have been met with a mixture of shock and schadenfreude.

In a country that has an intimate cultural relationship with cars, the Japanese carmaker has long been seen as an interloper, even though it makes many of its cars in America and Americans have shown no reservations about buying them.

Perhaps that explains the first reaction of the US Secretary of Transportation, Ray LaHood, who confirmed early last week the US Government was considering imposing fines of more than US$16 million ($23 million) on the giant firm. "We're not finished with Toyota," he said.

He followed that up with a statement at a hearing in Congress, and told lawmakers he had simple advice for Toyota owners: "If anybody owns one of these vehicles, stop driving it and take it to a Toyota dealer."

Not surprisingly, those comments triggered a rush among the owners of Toyota's 2.3 million recalled cars, who flooded dealerships with panicked phone calls. Toyota's stock price slumped dramatically.

The subject has quickly become a topic for comedians. Jon Stewart of The Daily Show did an impression last week of the likely reaction of bosses at the Big Three - Chrysler, General Motors and Ford - to the Toyota recall news: "Boys, we're back in the game! All we had to do was have the leading competition become a deathtrap."

But beneath the sound and fury, the massive vehicle recall has had a sobering impact on American consumers.

Despite its foreign ownership, Toyota operates many car-making plants in America that have been praised for creating thousands of jobs, especially in the South, where it has been credited with reviving the fortunes of several struggling cities and towns. Any threat to Toyota will threaten those jobs.

There is no evidence of wrongdoing by anyone at Toyota. But the class actions, which are already starting to stack up on behalf of aggrieved owners, will no doubt challenge those running the company about what they knew about the fault and when, and what they did about it.

Toyota aficionados have been quick to defend it, accusing the media of whipping up a frenzy and exaggerating the danger of the fault.

Edmund King, president of the Automobile Association in Britain, said: "To some extent there is a sense of a positive backlash in support of Toyota. Toyota has a fight to get its reputation back. But I don't think it's insurmountable."

Paul Newton, automotive analyst from IHS Global Insight, said the company had been far too slow to respond to the problem in Britain, as it had in most countries where it operates.

"PR-wise, Toyota has handled the issue dreadfully. They have been somewhat in denial," he said.

"People are now looking at the company and asking what else is it hiding."

Toyota UK has also been giving conflicting information. As the furore over the accelerator pedals mounted, Toyota said it could get the details within two days and would write to those affected this week.

But on Monday, it said it would take at least three weeks to obtain from the licensing agency, the Driver Vehicle Licensing Authority, the names and addresses of the owners of the models it intended to recall in Britain.

The attempt at speedy, decisive management of the whole affair is not helped by Toyota's huge and unwieldy size. It is now the biggest carmaker in the world, with subsidiaries in most countries that are unable to handle the fault independent of the headquarters in Tokyo.

King said: "Toyota being such a large globalised organisation will have slowed decision-making and communication. If it was up to Toyota UK, they probably would have acted more quickly.

"The first rule of crisis management is to identify and isolate the problem and be open about it. Last week, Toyota executives were on the radio, but maybe they should have been doing that at the beginning."

Toyoda has announced he will lead a new division that will draw on outside help to improve quality control, an admission of powerlessness unthinkable only months ago.

For millions of motorists who expected much more from Toyota, it is, at least, a start.

- THE OBSERVER

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