Toyota 's showroom in Tokyo. A flood of recalls in the U.S. has shaken the confidence of many loyal customers in Japan. (Shizuo Kambayashi / Associated Press / January 28, 2010)
January 29, 2010
By John M. Glionna and Coco Masters
Reporting from Tokyo and Seoul - For 15 years, Tokyo taxi driver Kiyomi Hashimoto has been a loyal Toyota man. Not once has he considered changing brands or even the possibility of car problems.
But now, sitting in his black Prius, pondering the news of Toyota's recent U.S. recalls, there are cracks in his once armor-plated confidence in the world's biggest automaker.
"I never once thought I'd have a problem before," he said. "Now, I'm not so sure."
News that the preeminent icon of Japanese industry had halted U.S. sales of eight popular models because of a design defect -- after issuing recalls of 7.6 million cars and trucks in the U.S. in the last few months -- has had a sickening effect on the national psyche.
In recent years, Toyota has emerged as Japan's most potent corporate champion, its race to catch and surpass General Motors Co. as the world's largest automaker chronicled by a slavishly loyal news media.
With other Japanese companies, such as Sony Corp., on their heels in global markets, Toyota remained the symbol of the country's claim to manufacturing and design greatness.
"Automaking is perhaps Japan's premier industry, and the perception here is that one of our national champions has embarrassed us," said Christopher Richter, senior research analyst in Tokyo for Calyon Capital Markets Asia, a Hong Kong brokerage house.
On Thursday, Toyota announced that it was recalling vehicles in China and Europe for the same gas pedal problem involved in the U.S. recalls.
Toyota vehicles sold in Japan aren't affected by the recalls. But many here question whether the safety flaw in accelerators and floor mats is a byproduct of that drive for growth, particularly in foreign markets that Toyota has relied on to compensate for long-term flat or declining sales in the Japanese domestic market.
How, they ask, could such a fate befall a company that for decades has staked its reputation on high quality and safety?
"Toyota needs to reassure customers that their safety is its top concern," Richter said. "Because right now you've got millions of people in America who own Toyotas, and they don't know if they can take them out of the garage."
Some analysts say Toyota has only itself to blame. "It's hubris, in a word," said John R. Harris, a Tokyo-area communications consultant specializing in the auto industry. While maintaining what Harris calls "a cloak of false humility," Toyota "secretly set its sights on catching General Motors as the world's top-selling carmaker." "They snuck up behind GM, all while keeping their head down. But as they got closer, they got caught by this desire to be No. 1," he said.
No Toyota pitchman would have ever acknowledged such a goal, Harris said, "but behind it all was this huge ambition. As the ambition got ahold of them, they overreached."
Industry insiders are also speculating on whether Toyota's latest troubles might spell the end for the company's president, Akio Toyoda, the publicity-shy grandson of the firm's founder who assumed the top post in June.
Many blame Toyoda's predecessor, Katsuaki Watanabe, for the apparent lapse in safety. He was at the helm in 2006 when recalls mounted to more than 1 million a year, and he sent two executives to clean up the quality problems. He reported two years later that the focus on improvement had worked as recalls dropped dramatically.
In pursuing a long-held company goal of garnering 15% of the world's new-car market, Watanabe had some missteps along the way. Toyota, for instance, built a $1.3-billion plant in San Antonio to make its Tundra heavy-duty truck. The plant was completed in 2006 as the housing market started falling apart and sales of full-size trucks plummeted.
Still, "there is the possibility that Toyoda could end up taking responsibility," said Masahiro Fukuda, a manager at Fourin Inc., an industry research company in Nagoya, Japan.
Toyota has much to lose, in terms of consumer trust, by how it handles the accelerator glitch.
Shares of the company's Asian rivals, including South Korean automakers Hyundai and Kia Motors, have gained in recent days on speculation that they are poised to benefit from Toyota's massive recall and its tainted image. Toyota's U.S.-traded shares have plunged 15% since mid-January, losing $2.10 Thursday to $77.67.
Many say the automaker privately set aside its "Toyota way" mantra of quality, becoming less cautious and more aggressive in its sales push to catch GM. It expanded too quickly and ignored its tradition of disciplined growth. And as its profits grew, it spent less wisely, some analysts believe.
"Underneath it all, they are still tremendously arrogant," Harris said. "They've been the gorilla of the industry long before they passed GM in the meaningless measure of sales volume."
Others were less critical, blaming the accelerator problem on Toyota parts supplier CTS Corp. in Elkhart, Ind., which manufactured the accelerator pedals involved in the latest Toyota recall.
"It's a parts problem, not a Toyota problem," said Dan Lucas, a senior analyst at Australian investment bank Macquarie. "But they will take responsibility; they don't walk away from their cars."
He didn't think that Toyota's reputation for quality would take a hit over the recall. "This part was made by a non-Japanese company. The Japanese companies still do it better," Lucas said.
Tatsuo Yoshida, a senior analyst with UBS Securities Japan, also played down the significance of Toyota's turmoil, calling it "just a product recall."
"It's a big deal because of the number of vehicles involved. . . . And it's happened to GM and to Ford in the past," he said, noting that neither company apologized. "I think it's strange if the top person of a Japanese car company has to bow every time there's a recall."
This isn't the first time a Japanese automaker has been entangled in a safety scandal. In 2004, Japanese news reports said that Mitsubishi Motors Corp. and a subsidiary company had systematically hidden defects involving 800,000 vehicles over a 20-year period. Three top executives, including Takashi Usami, former chairman of the firm's truck and bus division, were charged with covering up defects that caused an accident in 2002, killing one person and injuring another. The three were acquitted in 2006.
For decades, Toyota avoided such devastating news coverage.
Then the Japanese government's Consumer Affairs Agency in December, after receiving reports that floor mats in Toyotas and other makes had jammed gas pedals and brakes, warned drivers that improperly aligned mats in their vehicles might worsen an accelerator problem.
Even though Japan isn't affected by the recalls, analyst Fukuda said Toyota needs to make a strong domestic appeal and say that it is swiftly handling the issue.
"Japanese drivers think of the problem as far away, but there are surely some consumers who are increasingly uncertain about Toyota's cars," he said.
The company said today, however, that its president, Toyoda, had no plans to respond to reporters' questions about the recalls and planned to attend the annual World Economic Forum, now underway in the Swiss resort of Davos, as scheduled.
Although it remains unclear how domestic consumers will respond to Toyota's most recent recalls, Japanese news media are warning of possible damage to an already-reeling Japanese economy.
Meanwhile, at the company's Toyota City headquarters, fingers are being pointed, many believe.
"Toyota people are mortified by this. They take quality seriously because it goes to the heart of their self-esteem," Harris said.
"That said, heads are rolling as we speak, I'm sure."
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