Safety sells — or so Toyota hopes. The carmaker will invest $50 million in what it has dubbed the Collaborative Safety Research Center, in Ann Arbor, Mich. — a facility the company says will work to improve vehicle design and address the much-discussed issue of driver distraction.
The timing of the announcement is less than coincidental. The Japanese giant, the world’s largest car manufacturer, is desperately struggling to reverse a series of setbacks related to the safety scandal that led it to recall more than 11 million vehicles in 2010, most of them in the United States. That has not only led to record fines but also a slump in sales that last year saw Toyota slip behind rival Ford in the U.S.for the first time in several years.
The question is whether “the worst is over,” as one auto analyst suggests, or whether Toyota runs into more problems in 2011, a year in which the courts will be asked to rule on a flood of lawsuits arising from allegedly defective Toyota products.
“Toyota did receive damage” from last year’s safety scandal, Akio Toyoda, the carmaker’s CEO and grandson of its founder, acknowledged this month during his first visit to the North American International Auto Show in Detroit. At the event, the 54-year-old executive had hoped to focus on Toyota’s new Prius brand-within-a-brand — a new “family” of vehicles sharing the name of the world’s best-selling hybrid — but found he couldn’t dodge the safety issue as he met with the media.
The past year has been a tough one for Toyoda. Last winter he was summoned to Washington for a Capitol Hill hearing shortly after the carmaker announced a second recall of vehicles for so-called unintended acceleration.
Toyoda promised Congress the company would redouble efforts to bring quality under control, and since then the maker has taken a number of steps, including the appointment of a North American safety “czar” and now the creation of the new Michigan safety research center.
“The worst is over” for Toyota, suggested Jim Hall, senior analyst with the Detroit automotive consulting firm 2953 Analytics. That is, at least, “until something else comes up,” he added.
Still, from the point of view of the public, it’s hard to see what’s changed at Toyota.
Just a month ago the automaker announced the recall of nearly 100,000 of its new Sienna minivans. Days later, it agreed to pay a record $32.4 million fine levied by the National Highway Traffic Safety Administration — the largest ever in the U.S. — over investigations into its response to a pair of vehicle recalls.
And before the year was over came word that Toyota had paid a $10 million to settle a wrongful death suit brought by the heirs of a California state trooper and three members of his family who died in the fiery crash of a runaway Lexus.
It’s no surprise that the automaker’s once-sterling image has taken a beating. In a striking letdown for Toyota, the carmaker’s public perception took a severe dive in Consumer Reports' latest Car Brand Perception Survey. The influential magazine found Toyota’s score slipped by 46 points to 147, only three better than Ford, which rose 35 points to a score of 144. The brands, the magazine reported, are in a “statistical dead heat,” but momentum favors the domestic carmaker.
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What that means might be read through U.S. vehicle sales numbers for the final quarter of 2010. Toyota was the only major automaker to suffer a decline as industry sales were soaring to their highest levels since the start of the recession.
Part of the problem for Toyota is that the carmaker must now “overreact,” notes analyst Hall. In years past, a number of the more recent vehicle recalls, he believes, might have been handled as less embarrassing "technical service bulletins." But these days Toyota officials don’t want to risk being accused of soft-pedaling safety problems.
That said, Jim Lentz, Toyota's top American executive, insists things are looking up for the carmaker. During an industry conference this month, Lentz said that while internal consumer research showed the carmaker took a beating last year, Toyota has regained ground, “so our [scores] are leading in many categories” once again.
The head of Toyota’s U.S. sales subsidiary has noted that complaints about unintended acceleration “have fallen off the map,” reflecting the company’s contention that the vast majority of problems were the result of driver error, rather than product defects.Story: Auto industry rebound trickling down to workers
That position could get a boost this year when a NHTSA-sponsored study is expected to reach a similar conclusion. But the wild card is what happens in court, where hundreds of lawsuits against Toyota are being argued. The decision to pay off the family of the California trooper is likely to only embolden plaintiffs to push their cases — and use the media to try to force a settlement with the automaker.
Toyota officials also insist their sales slump isn’t quite as bad as it seems. They note that a number of key products have reached the end of their lifecycle, including the midsize Camry, which saw sales decline 10 percent last month, and the compact Corolla, which saw sales fall 35 percent. Both vehicles are facing stiff new competition, especially the Corolla, with the launch of well-reviewed new compacts from Ford, Chrysler, Chevrolet, Hyundai and Toyota’s traditional rival, Honda.
So the coming months will remain difficult for Toyota. The carmaker has a dearth of new products to bring to market for the rest of the 2011 model year. And at a time when it is struggling to rebuild both its image and its momentum, that will only complicate matters.
But don’t write the company off, warns analyst Hall. He believes “they’re going to fight like the devil” to turn things around. And if past is prologue, you can bet on Toyota’s determination to maintain its leadership no matter how tough the competition gets.
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