Consumer Fraud

Sudden acceleration, other woes spell long recovery for Toyota

Toyota has fallen, but it might take years for it to get back up. According to Forbes, the Japanese auto giant’s share of the U.S. market has slid from 17 percent for all of 2009 to 11.5 percent in September. Making matters worse for the company is the fact that its sales were eclipsed last month by Chrysler Group LLC, an automaker that almost ceased to exist a couple of years ago and one which historically has always trailed far behind Toyota.

Just four years ago, Toyota usurped General Motors as the world’s leading automaker, so what happened?

Most analysts point to the sudden unintended acceleration problems that caused several Toyota cars, trucks, and SUVs to speed out of control as the origin of its downturn. In late 2009, Toyota began its first of 3 separate but related safety recalls for sudden acceleration defects. The recalls lasted into 2010 and involved at least 8 million vehicles. Several other safety recalls not related to the sudden acceleration recalls continued to trouble Toyota, calling into question the company’s dedication to quality and reliability.

A massive public relations campaign and a number of alluring dealer incentives helped Toyota maintain much of its customer base, but just as the company started to rebound, the great Tohoku earthquake and tsunami struck the home country last March, devastating entire regions and bringing much of Toyota’s production to a standstill.

Damaged factories and disrupted supply lines slowed production even in the U.S., and soon dealerships everywhere had a relatively scant inventory. The lack of Toyota vehicles apparently gave new-car buyers an opportunity to familiarize themselves with other brands, while at the same time Detroit again started making cars Americans wanted.

Forbes quotes analyst Peter Nesvold of Jeffries & Co., who told investors Friday that Detroit has come such a long way that Toyota no longer stands out among automakers.

“Quality is now a given,” Mr. Nesvold wrote. “Toyota’s historical reputation for quality was no longer the differentiating factor that it had been for many years.”

And as if that weren’t enough, the increasing value of the Japanese Yen is making it ever more difficult for Toyota and other manufacturers to produce at home and sell their products in markets with weaker currencies.



Bloomberg Businessweek