Toyota Recalls Become ‘Reinforcing Cycle’ as Scrutiny Increases

February 09, 2010, 09:21 PM EST
By Jeff Plungis and Alan Ohnsman

Feb. 10 (Bloomberg) -- Toyota Motor Corp.’s perceived delays in fixing vehicles prone to unintended acceleration are intensifying scrutiny of the company’s products and leading to more reviews and recalls, automotive analysts said.

“Some of this is a negatively reinforcing cycle,” said Jeremy Anwyl, chief executive officer of Edmunds.com, a Santa Monica, California-based automotive research Web site. “To the outside world, it appears Toyota is trying to hide something. The more it appears that way, the more people start digging.”

The world’s biggest automaker announced yesterday its latest recall, of 437,000 hybrids including the Prius, the top- selling vehicle in Japan. Also yesterday, U.S. safety officials said they were reviewing Toyota’s Corolla, the world’s best- selling car, after complaints about how it steered.

“The king isn’t perfect,” said Jim Hossack, an industry analyst at AutoPacific Inc. in Fountain Valley, California. “Toyota had such a strong reputation for quality for so long, that it’s inevitable this would become such a big thing.”

Toyota has recalled almost 8 million vehicles on five continents to repair defects linked to unintended acceleration. At least three U.S. congressional committees plan hearings into how Toyota and the U.S. National Highway Traffic Safety Administration handled complaints about the problem.

The Toyota City, Japan-based company lost about $31 billion in market value since Jan. 21, when it began calling in autos to fix potentially sticky pedals.

Long Time Building

“Safety is involved here: this isn’t some spare-tire or a corroding tailgate recall,” Hossack said.

The intensity of the backlash against Toyota was greater because the company denied that consumer complaints about sudden acceleration indicated a real engineering problem, said Clarence Ditlow, executive director of the Center for Auto Safety, a Washington-based advocacy group.

“This has been building for a long time,” Ditlow said. “In Toyota’s drive to be the No. 1 manufacturer, it lost sight of the engineering that got it there in the first place.”

Recalls aren’t a problem for consumers, as long as the problem is clearly identified and fixed, said Mike Quincy, an automotive specialist at Consumer Reports magazine, whose vehicle ratings influence sales.

The Yonkers, New York-based magazine removed its recommendation from Toyota models that were suspended from sale in the U.S. The endorsements will probably be restored, Quincy said.

Congress Awaits

“It seems like the perfect storm right now for Toyota,” he said. “Is this a nationwide, blood-in-the-streets kind of catastrophe? No. It’s been blown out of proportion.”

According to Safety Research & Strategies Inc., a Rehoboth, Massachusetts, group that provides data to plaintiffs’ attorneys and consumers, there were 2,262 documented incidents in the U.S. of unintended acceleration involving Toyota vehicles from 1999 through Jan. 29, 2010. NHTSA confirms at least 2,000 such U.S. complaints in that period.

Safety Research found at least 19 deaths linked to sudden acceleration of Toyota vehicles.

From 1999 through January 2010, Toyota sold 22.03 million Toyota, Lexus and Scion vehicles in the U.S. Using the safety group’s figure, the problem occurred in 0.01 percent of the vehicles Toyota sold in the period.

The company got a temporary reprieve when the House Oversight Committee postponed because of snowstorms a hearing that was scheduled for today. The hearing was reset for Feb. 24, the day before another hearing by the House Energy and Commerce Committee.

The Senate Commerce Committee announced yesterday a hearing for March 2.

Once Congress gets involved, “they add theater,” said Hossack, a former engineer for Ford Motor Co. and Mazda Motor Corp. “It will be all to the aid of senators and congressman running for re-election. Not sure that it will yield anything of significance.”


--Editors: Joe Winski, Larry Liebert

To contact the reporter on this story: Jeff Plungis in Washington at +1-202-624-1835 or jplungis@bloomberg.net.

To contact the editor responsible for this story: Larry Liebert at +1-202-624-1936 or lliebert@bloomberg.net

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source: http://www.businessweek.com/news/2010-02-09/toyota-recalls-become-reinforcing-cycle-as-scrutiny-increases.html