Toyota has seen better months than February when the automaker recalled millions of vehicles amidst a sticky pedal and unintended acceleration problem that led to sales decline of 8.7 percent. To win back the consumer, Toyota offered incentives including extended warrantees, auto maintenance plans and zero percent financing, and it appears to be working as Toyota sales in the United States are up 47 percent for the first 8 days of March compared to last year.
David Strickland, administrator of the National Highway Traffic Safety Administration (NHTSA), spoke in front of Congress today and told the Energy and Commerce subcommittee his agency did its job in handling the recall: “I don’t see Toyota as an indicative example of failure. I see it as NHTSA doing its job. I think Toyota and the wide-ranging recalls that it’s executed, that’s the kind of response I would want as an administrator.”
Strickland also told Members that his agency would look more thoroughly into electronic throttle technologies as some lawmakers are calling for federal standards for data recorders on automobiles – similar to a black box on an airplane. But just how dangerous was it to drive around in a recalled Toyota? Statistically speaking, not very says Carnegie Mellon Professor and risk expert Paul Fischbeck. He calculated the unintended acceleration increased the risk of driving only 2 percent. To put this in perspective Fischbeck said,
“Walking a mile is 19 times or 1,900 percent more dangerous than driving a mile in a recalled Toyota. Driving while using a cell phone would increase risk much more than the chance of having a stuck accelerator. The stuck accelerator problem does make driving riskier and needs to be fixed. But at the same time, the increased risk is very small.”
So when Transportation Secretary Ray LaHood responded to the Toyota recalls by saying, “stop driving it”, hopefully he didn’t mean to walk instead.
Toyota’s Chief Executive Officer Akio Toyoda testified yesterday about safety and quality control after his company recalled 8.5 million cars and trucks worldwide – 6 million in the United States. A deeply remorseful Toyoda feared the company may have been growing too quickly and outlined how the company would move forward with the recall.
Earlier testimony included an anecdote from Lexus owner Rhonda Smith, who avoided catastrophe after her vehicle unexpectedly sped to 100 miles per hour, but she managed to eventually pull over. Smith berated Toyota and the National Highway Traffic Safety Administration (NHTSA) saying, “Shame on you, Toyota, for being so greedy, and shame on you, NHTSA, for not doing your job.” Transportation Secretary Ray Lahood questioned whether or not the regulators have the proper expertise to monitor and identify any electronic problems. Chairman of the House of Representatives Energy and Commerce Committee said the solution will “require legislation.” To add to Toyota’s problems, a federal grand jury in New York and the Securities and Exchange Commission issued a subpoena to Toyota in order to “produce certain documents related to unintended acceleration of Toyota vehicles and the braking system of the Prius.”
Automobile safety and reliability is undoubtedly a serious concern and the CEO of Toyota made that clear. They’ve recalled more than 8 million vehicles and have halted production in suspended manufacturing to focus on the problem. Only time will tell if Toyota failed to disclose pertinent information but signs point to Toyota handling the recall in an effective and timely manner. They’re planning to add brake override systems to new vehicles.
Toyota’s reputation has taken a hit and it has every incentive to fix the problem efficiently. Toyota estimated the recall will cost $2 billion by the end of March but that number could rise. Falling consumer demand will ultimately take the biggest toll on Toyota’s bottom line if the company does not take the right steps to repair its image. Toyota’s stock price fell 21% in the past month. Toyota will lose billions more if consumers lose trust and cease to buy the automaker’s vehicles. Despite calls for stricter oversight and more regulation, the market will determine the fate of Toyota — that’s the way it should be.
It’s easy to understand why a government that now owns a major stake in General Motors would want to put continuous bad press on a rival automaker, but given Toyota’s integral stake in the U.S. economy, it would not be prudent to come down extra hard on Toyota. In a Washington Post op-ed yesterday Mississippi Governor Haley Barbour (who has a Toyota plant in his state) writes, “We cannot lose sight of the company’s importance to America’s economy — and should not ignore its continued commitment to doing things the right way. Although Toyota was founded in Japan more than 70 years ago, after five decades of doing business in the United States it is as much an “American” car company as any other.” When priority number one for U.S. citizens and Members of Congress alike is the economy, rushing too quickly can have negative effects on foreign investment as well.
Toyota made mistake that tragically resulted in 34 deaths since the year 2000 and a number of other life-threatening scares. Let Toyota, and the market, correct it.