For years Toyota slowly built a reputation for a level of quality that helped it standout from domestic automakers and even some of its Japanese counterparts. Perhaps partly driven by the company’s unique culture and way of producing cars, the Japanese automaker kept producing vehicles that not only were well-built, but also featured high-mileage, relative affordability, and were known for being long-lasting. The automaker also became the top producer of hybrid vehicles, with the Prius becoming the highest selling hybrid car around the world.
In January 2009, Toyota surpassed General Motors in becoming the world’s largest automaker, and sadly that’s where things began to unravel.
In the 2009 JD Power and Associates Customer Retention Study, Toyota fell from the number one position to third behind Mercedes-Benz and Honda. Holding on to a top three position is still admirable, but the drop may have also been an indication of subtle wavering in Toyota’s seemingly untarnishable reputation for quality.
While several Toyota models were still winning awards for dependability, further JD Power studies in 2009 also ranked Buick and Jaguar as the two highest-ranking nameplates in vehicle dependability overall – above Lexus and Toyota.
Another sign of unsteadiness at Toyota was the reshuffling of top management as Executive Vice President Akio Toyoda, grandson of the company’s founder, replaced Katsuaki Watanabe in June of 2009. The new President stepped in just as bigger problems began to emerge. A critic of existing management, Toyoda had been concerned about the company as it overextended itself in pursuit of becoming the world’s largest automaker.
As the world fell into a global economic crisis, this overextension was immediately felt. In November 2008, an emergency committee comprised of top management was formed to find new ways to cut costs and boost auto sales. Meanwhile, sales in the US, Japan, and Europe began to tumble. This slowdown forced Toyota into a frenzy, and penny-pinching measures were employed such as turning down thermostats, cutting production, and laying off temporary workers.
During the bankruptcies and near bankruptcies of Detroit’s Big Three, Toyota’s troubles may not have been quite as pronounced. However, companies like General Motors and Ford, which were once at the forefront the industry’s struggles, soon began to find themselves on steadier footing, thanks to help from the U.S. Treasury as well as from the welcomed addition of new cars and innovative technologies.
Detroit was finally producing positive headlines when Toyota first announced recalls on some of their most popular models. In September, 3.8 million Toyotas were recalled, the company’s largest-ever recall, to address floor mats that potentially could interfere with accelerator pedals and cause unintended acceleration. This recall later expanded to 4.3 million vehicles. While the problem was at first focused on improperly fitted floormats, the issue grew, involving the mechanical components of the accelerators themselves.
Last week, an additional 2.3 million vehicles were recalled to fix accelerator pedals that could become stuck. It was identified that in rare cases an accelerator mechanism could become worn prematurely causing the accelerator to return to idle slowly, become difficult to press, or in some cases get stuck completely.
With problems mounting and safety becoming an increasing concern among consumers, Toyota decided to halt sales and production of the recalled models as of Tuesday night in order to ensure the faulty gas pedals were fixed. Dealers were forced to stop selling some of the manufacturer’s most popular models, including the Camry and Corolla.
As this downward spiral seems unlikely to get worse, even complaints filed with the NHTSA regarding the brakes of the popular Prius hybrid have been adding up as well, alluding to yet another impending problem. Even despite these nightmarish issues, the end for Toyota is nowhere in sight and their role as the top Japanese automaker is unlikely to wane – at least not too much. By looking at the Lexus playbook, Toyota may be able to overcome these recent quality and safety snafus and turn the halting of sales into a recommitment to quality. Years ago, Lexus faced substantial quality issues and Toyota acted fast to coddle Lexus owners and ensure customers remained satisfied even despite being inconvenienced.
Although lingering safety concerns have forced Toyota to do the unthinkable, other automakers, particularly the Big Three, may reap the benefits as a public relations fallout is likely to ensue. On Wednesday, just one day after Toyota’s shocking announcement to halt sales of many popular models, General Motors has announced new incentives to entice would-be Toyota customers, including a $1,000 lease waiver and zero percent financing for up to 60 months. Now armed with a clean slate and a leaner batch of brands, GM may be seizing this opportunity to regain some of its lost luster.
Update 4/9/2010 : Although thought Toyota continues to repair its brand and strengthen its relationship with existing customers, the window of opportunity for others to gain is quickly closing. The automaker sprung into action to improve internal communications and protect quality, and thanks to aggressive incentives that has reignited foot traffic among Boston Toyota dealers and at countless other showrooms across the country, Toyota’s reputation may be salvageable yet.
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