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NYT: Toyota’s slow awakening to deadly issue
Carmaker’s handling of recall shows how it lost sight of its bedrock principle
By Bill Vlasic
The New York Times
updated 9:55 a.m. CT, Mon., Feb. 1, 2010

DETROIT – The 911 call came at 6:35 p.m. on Aug. 28 from a car that was speeding out of control on Highway 125 near San Diego.

The caller, a male voice, was panic-stricken: “We’re in a Lexus … we’re going north on 125 and our accelerator is stuck … we’re in trouble … there’s no brakes … we’re approaching the intersection … hold on … hold on and pray … pray …”

The call ended with the sound of a crash.

The Lexus ES 350 sedan, made by Toyota, had hit a sport utility vehicle, careened through a fence, rolled over and burst into flames. All four people inside were killed: the driver, Mark Saylor, an off-duty California Highway Patrol officer, and his wife, daughter and brother-in-law.

It was the tragedy that forced Toyota, which had received more than 2,000 complaints of unintended acceleration, to step up its own inquiry, after going through multiple government investigations since 2002.

Yet only last week did the company finally appear to come to terms with the scope of the problem — after expanding a series of recalls to cover millions of vehicles around the world, incalculable damage to its once-stellar reputation for quality and calls for Congressional hearings.

With prodding from the National Highway Traffic Safety Administration, Toyota halted production and sales of eight models, including its top-selling Camry sedan.

And late last week, the government allowed the company to go ahead to try yet another new fix for its vehicles, which it is expected to announce on Monday.

At almost every step that led to its current predicament, Toyota underestimated the severity of the sudden-acceleration problem affecting its most popular cars. It went from discounting early reports of problems to overconfidently announcing diagnoses and insufficient fixes.

As recently as the fall, Toyota was still saying it was confident that loose floor mats were the sole cause of any sudden acceleration, issuing an advisory to millions of Toyota owners to remove them. The company said on Nov. 2 that “there is no evidence to support” any other conclusion, and added that its claim was backed up by the federal traffic safety agency.

But, in fact, the agency had not signed on to the explanation, and it issued a sharp rebuke. Toyota’s statement was “misleading and inaccurate,” the agency said. “This matter is not closed.”

The effect on Toyota’s business is already being felt. Its sales in the United States in January are expected to drop 11 percent from a year earlier, and its market share in the United States is likely to fall to its lowest point since 2006, according to Edmunds.com, an automotive research Web site.

The company has not yet projected the cost of its recalls and lost sales. But a prolonged slowdown in sales could substantially hurt a company that once minted profit.

Toyota’s handling of the problem is a story of how a long-trusted carmaker lost sight of one of its bedrock principles.

Company failed to pull the ‘andon cord’
In Toyota lore, the ultimate symbol of the company’s attention to detail is the “andon cord,” a rope that workers on the assembly line can pull if something is wrong, immediately shutting down the entire line. The point is to fix a small problem before it becomes a larger one.

But in the broadest sense, Toyota itself failed to pull the andon cord on this issue, and treated a growing safety issue as a minor glitch — a point the company’s executives are now acknowledging in a series of humbling apologies.

“Every day is a lesson and there is something to be learned,” Yoshimi Inaba, Toyota’s top executive in North America, said at the Detroit auto show in January. “This was a hard lesson.”

In Davos, Switzerland, on Friday, Akio Toyoda, the grandson of Toyota’s founder who now heads the company, told a Japanese broadcaster that he was “deeply sorry” for the problems.

Toyota’s safety problems may prove to be a hard lesson for the N.H.T.S.A., as well. Six separate investigations were conducted by the agency into consumer complaints of unintended acceleration, and none of them found defects in Toyotas other than unsecured floor mats.

In at least three cases, the agency denied petitions for further investigative action because it did not see a pattern of defects and because of a “need to allocate and prioritize N.H.T.S.A.’s limited resources” elsewhere, according to agency documents.

‘Everybody’s a Toyota lawyer now’
The investigations, and Toyota’s handling of the problem, will be the subject of Congressional hearings.

But the publicity surrounding the accident near San Diego, and Toyota’s repeated inability to quell consumer concerns with a definitive solution, has also prompted a flood of lawsuits reminiscent of the litigation a decade ago arising out of the rollovers of Ford Explorers equipped with Firestone tires.

In addition to cases related to individual accidents, several class-action suits have been filed against Toyota. The cases are expected to focus on why the government and the carmaker were unable to identify problems beyond the floor mats, despite mounting instances of runaway cars.

David Ennis, a Washington lawyer, said he was working on three lawsuits that had been in the works for five months. “Over the last 24 hours, everybody’s a Toyota lawyer now,” he said last week.

Toyota now believes that the trouble with its cars is twofold — a combination of loose floor mats that can interfere with accelerator pedals, and a pedal that itself can stick when a driver depresses it.

Toyota has told its dealers that it will announce its fix for the faulty accelerators on Monday, but has yet to release details. The CTS Corporation, the supplier of the pedals used in recalled models, is making replacement parts. But Toyota is also expected to try to repair or modify the pedals in some vehicles.

Before last August, Toyota had issued three limited recalls to replace floor mats and change an interior part that could catch on accelerator pedals.

But after the fatal crash near San Diego, and the public release of the 911 tape, Toyota was forced to, as it said in the fall, “take a closer look.”

That crash, said Clarence M. Ditlow, executive director of the Center for Auto Safety in Washington, “was a watershed event.”

“It captured on tape the deaths of four people in an uncontrolled acceleration where the driver was an experienced highway patrol officer,” he said. “If he couldn’t bring the car under control, who could?”

A lawyer for the Saylor family said he wished that the federal government had acted more quickly about concerns over the sudden acceleration.

“They’re clearly starting to become more interested in the problem and more attentive to it,” said the lawyer, John Gomez, of San Diego. “Do I wish they would have done more sooner? Obviously.”

In one federal inquiry on Toyota models built from 2002 to 2005, investigators found that 20 percent of the 432 complaints studied involved “sudden or unintended acceleration.”

But no defects were uncovered in any of the vehicles, and the rate of incidents was considered “unremarkable” in the context of the millions of cars on the road.

The petitioner in that case, Jordan Ziprin of Phoenix, said the regulators had focused exclusively on mechanical issues with his car, a 2002 Camry.

“I believe this is an electronic issue, but they have been avoiding that possibility entirely,” Mr. Ziprin said in an interview.

Electronic system at fault?
Several lawsuits against Toyota also suggest that the company’s electronic system could be at fault.

A Toyota spokesman said the company had looked extensively at its computerized electronic throttle system, which controls the speed of its cars, and had found no faults.

“If we found anything, we would take appropriate action,” said the spokesman, Mike Michels. “But we continue to think it’s entirely unlikely that an electronic malfunction is the cause.”

A lawyer for a California man whose wife died in a 2007 crash of a Camry said the company was avoiding a potentially more pervasive problem by focusing on mats and stuck pedals, rather than its electronics.

“There are thousands of these complaints, and we’re not seeing floor mats and we’re not seeing stuck throttles,” said the lawyer, Donald H. Slavik, of Milwaukee. The traffic safety agency “simply doesn’t have the resources to analyze the electronic systems of these cars.”

The agency, which is part of the Transportation Department, has stepped up its oversight of Toyota drastically since the fatal accident that involved the Saylor family.

Agency officials, who spoke on the condition of anonymity because the case was still being investigated, say their responsibility is to identify defects in autos, not to develop remedies to fix them. That responsibility, these officials said, rests with the automaker.

Many complaints by consumers were eliminated by the agency during its investigations because of possible driver error, or the lack of sufficient information about the circumstances of the incidents.

The agency separated braking problems from acceleration issues, further narrowing the number of complaints that could be linked to a faulty pedal or an electronic malfunction. Cases involving brief periods of acceleration were also considered separately from those that involved prolonged, high-speed incidents, many of which involved accidents.

Sean Kane, whose consulting firm, Safety Research and Strategies, counts plaintiffs’ lawyers among its clients, contends that the agency did not push Toyota for more data, and too quickly accepted the company’s explanations about floor-mat problems.

“The agency has not been very forceful with Toyota at all,” Mr. Kane said. The agency “always took the low-hanging fruit for an explanation, which is the floor mat.”

‘It’s not a typical case’
The discussions between federal officials and Toyota intensified in December, when the acting chief of the agency, Ronald Medford, flew to Japan to hold meetings with senior company executives, according to a government official with knowledge of the trip who was not authorized to speak publicly.

On Jan. 19, two days before the recall for the sudden-acceleration problem, Mr. Inaba of Toyota met in Washington with Mr. Medford and the new head of the agency, David Strickland.

The mounting number of complaints and accidents has led the agency to be more outspoken than it usually is during continuing investigations.

Last week, the transportation secretary, Ray LaHood, said in an interview with a Chicago radio station that Toyota had halted production of recalled vehicles “because we asked them to.”

Indeed, Toyota had to be told by regulators to shut down production and suspend sales of the cars and trucks in the latest recall until it had the parts necessary to fix them. It was yet another example of a slow response from a company long known for its meticulous approach to building cars and servicing customers.

Mr. Michels, the Toyota spokesman, said the company never before had to halt production or stop selling millions of vehicles involved in a recall.

“It’s not a typical case,” he said. “Usually in a ‘stop sale’ it’s a very small quantity.”

In its attempts to play down the problem, Toyota may have raised more doubts among consumers.

“It thinks it can control this crisis, and in the process has thrown its own credibility out the window,” said Mr. Kane, the safety consultant whose firm has documented thousands of reports of unintended acceleration.

Fear about driving the vehicles
Some owners of recalled Toyotas are now saying they are afraid to drive them. “I live only a half mile from the office and I drive there,” said Elaine Byrnes, a Camry owner in Los Angeles. “If I had to go farther, I wouldn’t consider it.”

And the scrutiny of Toyotas will not end with its new plan to replace the pedals. Accidents are receiving swift attention from federal regulators.

On Dec. 26, a 2008 Toyota Avalon — one of the cars under recall — crashed just outside of Dallas. A police officer in Southlake, Tex., Roderick Page, said in an interview that “for undetermined reasons, the vehicle left the main roadway, and went through a metal pipe fence, striking a tree and causing the vehicle to flip and land upside down in a pond.”

All four people in the car died. “There was no evidence that they attempted to hit the brake or slow down,” he said. “Honestly, my reaction is, ‘Wow.’ ”

Two weeks later, an investigator from the National Highway Traffic Safety Administration visited Southlake to inspect the car, accompanied by a Toyota engineer. Mr. Page said one factor they immediately ruled out was the floor mats, which were in the trunk.

This article, “Toyota’s Slow Awakening to a Deadly Problem,” first appeared in The New York Times. Matt Richtel contributed reporting from San Francisco, Clifford Krauss from Houston and Matthew L. Wald from Washington.

Copyright © 2010 The New York Times

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Toyota’s problems are growing

Recall may push Toyota to tipping point
GM, Ford, others move in to grab share from wounded Japanese giant
By Paul A. Eisenstein
updated 8:06 a.m. CT, Wed., Feb. 3, 2010

What a difference a year makes. As the otherwise dismal 2009 got under way for the auto industry, it looked like Toyota, the new global sales leader, was in the driver’s seat. But 12 months later, the hobbled Japanese giant is looking a lot more like the walking wounded.

Few could have anticipated the problems that have befallen the Japanese maker, which ended 2009 with a record recall that was expanded in January, leaving millions of customers waiting for word on when they can get potentially sticky gas pedals repaired.

With Toyota’s reputation for building safe, reliable vehicles in tatters, competitors have taken aim, hoping to gain lost ground. Among the makers who see an opportunity to take market share from their Asian nemesis are General Motors, Ford and South Korea’s Hyundai.

“This is embarrassing for us having this kind of recall situation, but it doesn’t mean we’ve lost our edge on quality,” Toyota Motor Sales USA President Jim Lentz told reporters this week. He acknowledged, however, that the reputation for quality is the “cornerstone” of the brand’s enviable presence in the U.S. market.

Toyota on Tuesday reported a 16 percent drop in U.S. sales last month, posting its worst result in 12 years, after taking the highly unusual step of halting sales on eight models with the defective part. GM and Ford were among the brands that posted double-digit gains in January.

Like every manufacturer, Toyota has had to deal with recalls over the years, but never have they been so large nor with such potentially life-threatening problems. In October, the maker announced it would recall 3.8 million vehicles due to “carpet entrapment,” the possibility that loose floor mats could jam their accelerator pedals, as appeared to happen in an accident that killed a California Highway Patrol officer and three members of his family.

At the time, Bob Carter, Toyota division general manager, insisted that complaints about other potential causes of so-called “unintended acceleration” were “unwarranted speculation.” But the company now admits that even then it was beginning to receive credible reports that gas pedals could stick on their own. That finally led to the latest recall announced Jan. 19 and then expanded even further. Initially Toyota said the recall would affect another 2.3 million vehicles, but that number has grown to 4.5 million in recent days, while the first recall’s tally has jumped to 5.3 million.

Complicating matters, Toyota has taken the highly unusual step of advising dealers not to sell eight of its more popular models, which together account for about 4,000 units of volume daily. And it has idled five North American plants for at least a week until replacement parts can be shipped to the factories.

GM was first to fire a salvo at its archrival, which displaced the humbled American maker as global sales king at the end of 2008.

GM spokesman Tom Wilkinson said the company’s dealers “were getting inundated” with calls from Toyota owners looking to trade in. So the Detroit maker sweetened the pot with an offer for any potential customer trading in a Toyota. GM buyers can get either $1,000 in cash, $1,000 off lease payments or a zero-interest, 60-month loan. The program, which began last Wednesday, runs through the end of February.

It has been more than a bit controversial with some industry executives considering the sales grab a cheap shot. Toyota executives, they note, supported General Motors last year when the big American maker needed a massive government bailout to survive.

But some inside GM feel that were it not for Toyota, GM wouldn’t have been in trouble in the first place. And besides, said spokesman Wilkinson, “Carmakers are always looking for a competitive advantage.”

GM’s strategy was quickly copied by a number of rivals, including Ford and Hyundai.

In years past loyal Toyota customers might simply have waited until the hold on sales of the eight affected products was lifted, but that seems less likely now, due to the severity of the problems and uncertainty over a fix. And there are some customers who simply cannot wait, perhaps because they have vehicles coming off lease that need be replaced immediately, or because they are driving a clunker that won’t make it to the end of winter.

And if quality is a key driver, the fact is that the gap among manufacturers has been narrowing significantly in recent years, said Dave Sargent, director of automotive research at California-based J.D. Power and Associates. Indeed, more than a few recent studies have found Toyota slipping behind. GM’s Buick brand recently topped the Toyota’s luxury Lexus line in J.D. Power’s long-term reliability study.

Meanwhile, the highly influential Consumer Reports has praised Ford for delivering “world class quality” on a par with the best imports, while GM’s newest models, such as the Chevrolet Malibu sedan and Equinox crossover also were singled out.

That’s something General Motors has been actively telling customers in a recent series of TV commercials that skip the serene driving shots in favor of direct comparisons, often against Toyota.

This is “absolutely” an opportunity for GM and Ford, said Power’s Sargent. “They stand to gain significantly from this. Their images are clearly improving, and for each and every Toyota model affected by the recall, they have a direct competitor available.”

For his part, Toyota’s Lentz declined to forecast the potential impact of the recall on the company’s sales and market share, but neither did he deny that the company could be at a tipping point.

“It all depends on how well we take care of the customers” with the two recalls, Lentz said. “If we do well, the impact will be minimal, so the heat is on us to do this well.”

© 2010 msnbc.com. Reprints

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Toyota Braces for big sales hit from recall

Toyota braces for big sales hit from recall
Analysts estimate cost to come to between $900 million and $2.2 billion
msnbc.com news services
updated 8:17 a.m. CT, Tues., Feb. 2, 2010

NAGOYA/DETROIT – Toyota Motor’s unprecedented recall of millions of vehicles with accelerator problems is taking a toll on sales and may force the world’s largest automaker to cut its 2010 forecasts.

Auto sales figures for January, due later on Tuesday, are expected to show a sharp drop for Toyota after it pulled eight of its most popular models from showrooms last week following complaints over sticking accelerator pedals.

“The sales forecast is something that we’re extremely worried about,” Executive Vice President Shinichi Sasaki told a news conference in the first public comment from an executive at Toyota’s head office. The company will report its third-quarter earnings on Thursday.

On top of a separate recall for slipping floormats, also linked to unintended acceleration, some 8.1 million Toyota vehicles are now being recalled, more than its total group sales last year.

Sasaki said it was too soon to put a number on the ultimate cost of the recall. But Tatsuo Yoshida, an auto analyst at UBS in Tokyo, estimated the recalls are likely to cost about $900 million, and lost sales are already costing Toyota another $155 million a week.

Two other analysts estimated the costs for the recall and the shutdown to around roughly $1.1 billion to $2.2 billion.

“It’s a positive that we now can grasp what the direct costs might be, but Toyota has yet to address uncertainties about indirect costs, such as litigation costs and costs of incentives to win back customers,” said JP Morgan analyst Kohei Takahashi.

Although Toyota says the occurrence of problems is rare, public confidence is being shaken by coverage of the saga, including the harrowing details of the crash of a Lexus, blamed on unexpected acceleration, which killed an off-duty California state-trooper and three members of his family last year.

Toyota President Akio Toyoda, the grandson of the company’s founder, has not formally addressed the public or media on the recall problems. While in Davos, Switzerland last weekend, he appeared briefly on broadcaster NHK and apologized to consumers.

The company’s U.S. head, Jim Lentz, appeared on TV on Monday and also expressed his regret as part of a public relations blitz in Toyota’s largest market.

Meanwhile, Europe’s No.2 carmaker PSA Peugeot Citroen said it would discuss with Toyota in coming days how to proceed with its own recall of just under 97,000 Citroen C1s and Peugeot 107s, built on the same assembly lines as Toyota’s Aygo at a joint plant in the Czech Republic.

The spokesman confirmed PSA cars used the same pedal as Toyota and said two cases that could potentially be linked to a sticking accelerator pedal had been reported around the end of 2009 and the start of 2010, but the link was not confirmed.

“We haven’t had any accidents reported in our network,” the spokesman stressed.

The spokesman said he could not say how much the recall campaign would cost, nor how long it would take.

“Decisions about recall campaigns are made jointly, so during this meeting with Toyota we’ll decide on the details of the campaign, the type of repair that will be carried out and when the campaign can be launched,” he told Reuters.

Toyota detailed its plans on Monday to fix the faulty pedals on at least 4.2 million vehicles in North America and Europe with a small metal spacer to prevent sticking.

Toyota said it would restart production on Feb. 8 of the eight models including its popular Camry, Corolla and Rav4 models after an unprecedented one-week shutdown at six plants in the United States and Canada.

Sasaki said costs were not taken into account with the recall and said they would monitor sales before reviewing their 2010 forecast. Last month Toyota forecast global auto sales would rise 6 percent this year, but has since said that did not take the impact of the recalls into account.

Toyota faces a growing number of lawsuits claiming it and its U.S. supplier CTS Corp endangered drivers by not acting sooner to fix problems with faulty accelerator pedals.

Lawsuits announced on Monday in the U.S. claimed Toyota had ignored signs of trouble with some of its top-selling models.

The suits are part of what is expected to be a wave of litigation against the automaker for claims ranging from losses on car resale values to injury and death.

Analysts and dealers said it would take months for the automaker to fix all of the vehicles at risk of having an accelerator pedal stick in the open position.

Rivals such as General Motors Co, Ford Motor Co and Hyundai Motor Co have been offering discounts targeting Toyota customers.

The AP and Reuters contributed to this report.

© 2010 msnbc.com

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