Car Czar Consulting
The Secrets of Profitable Automotive Retail
Toyota Sales Falter On Recall Crisis; Apology To Customers May Not Fix Valuation Issue

 Powered by Max Banner Ads 

Czar Nicholas II of Russia

Car Czar Consulting says: “So sorry,” says Toyota’s CEO in so many words. The question is, will that be enough to persuade consumers not to dump the affected models? Used vehicle values are already effected.

Toyota’s Chief Apologizes as Company Races to Fix Recall Crisis

Jan. 30 (Bloomberg) — Toyota Motor Corp. President Akio Toyoda apologized for a widening recall crisis as the company prepares to explain plans to fix an accelerator pedal flaw that sparked a congressional inquiry and sales halt on eight models.

“I am deeply sorry that we’re giving cause for concern to customers,” Toyoda said in an interview yesterday with Japan’s NHK television network in Davos, Switzerland, posted to U.S. broadcaster ABC News’ Web site. “We’re preparing to explain the facts to our customers as soon as we can so that we can remove that anxiety.”

The world’s largest automaker, founded by Toyoda’s grandfather in 1937, has discussed its strategy with the National Highway Traffic Safety Administration, said Brian Lyons, a Toyota spokesman. He didn’t have details on when the fixes begin. Pedal parts from supplier CTS Corp. will be either replaced or new assemblies will be installed, he said.

Toyota aims to limit consumer fallout from 2.3 million U.S. vehicles it’s recalling for pedals that may stick. The company on Jan. 26 suspended sales of its top-selling Camry and Corolla cars in the U.S. and Canada and halted lines at five North American plants until CTS pedals are fixed. The flaw also sparked model recalls in China and of as many as 1.8 million autos in Europe.

“The possibility of having parts in the marketplace as early as next week is incredible, but it’s going to take months to get all these vehicles fixed,” said David Champion, director of automotive testing for Consumer Reports.

Shares Plunge

Toyota lost 14 percent of its market value last week as shares fell for a sixth day in Tokyo yesterday, down 2 percent to 3,490 yen. The automaker’s American depository receipts traded in New York fell 0.9 percent to $77.00 yesterday.

Toyota is putting together a marketing program to discuss how it plans to resolve the issue, Lyons said. He said he couldn’t comment on reports that Toyota will publish an “open letter” in major U.S. newspapers tomorrow.

“We’re making every effort to explain as soon as possible in language that’s easy to understand,” Toyoda, 53, told NHK. “We’re doing what’s best for our customers, and they can drive our cars with assurance.”

Congressional Hearing

The House Energy and Commerce Committee is to hold a hearing Feb. 25 on the sudden acceleration of Toyota vehicles, which has been linked to 19 deaths in the past decade, said U.S. Representative Henry Waxman, a California Democrat and chairman of the panel. The House Committee on Oversight and Government Reform plans a separate Toyota hearing on Feb. 10.

Toyota has said its North American plants that make Camry, Corolla and Avalon cars; Matrix hatchbacks; Highlander, RAV4 and Sequoia sport-utility vehicles; and Tundra pickups are receiving replacement parts from CTS. The timing of shipping parts to U.S. dealers is still being assessed, Lyons said.

Mike Goss, a spokesman for Toyota’s manufacturing unit, said there’s no decision on when assembly will resume and that “sales will dictate” how soon lost production will be made up.

‘Unprecedented’ Sales Halt

Consumer Reports said in a statement yesterday that it temporarily suspended its “recommended” status for the eight Toyota models affected by the sales and production halt. That rating for General Motors Co.’s Pontiac hatchback, a version of Matrix that’s included in the recall, is also being suspended, the magazine said.

“In the automobile industry it’s unprecedented to have this many vehicles suspended from sale at one time,” Champion said.

In a separate action, Toyota in November said it would recall 4.3 million U.S. vehicles as a result of floor mats that may interfere with accelerator pedals, also causing sudden acceleration. A further 1.09 million U.S. vehicles were recalled for that issue this week.

CTS, based in Elkhart, Indiana, issued a statement yesterday to make clear that its parts weren’t linked to the November recall, which also involves Lexus vehicles and older Toyota models.

Consumer Lawsuits

Toyota faces at least seven lawsuits by individual plaintiffs claiming deaths or injuries caused by sudden acceleration. Since November, consumers have also filed at least seven lawsuits seeking class-action status against the company, including one yesterday.

Safety Research & Strategies Inc., an independent auto- industry researcher based in Rehoboth, Massachusetts, said yesterday it’s documented 2,262 reported incidents of sudden acceleration involving Toyota vehicles since 1999. Those resulted in 815 crashes, 341 injuries and 19 deaths, the research group said.

U.S. dealers who sell Toyota’s namesake brand may lose as much as $2.47 billion in combined monthly revenue because of the sales halt, said John McEleney, chairman of the National Automobile Dealers Association and owner of McEleney Toyota in Clinton, Iowa.

The Toyota City, Japan-based automaker said yesterday it would also recall eight models in Europe, including some Corolla and Avensis cars. Toyota’s effort to fix the pedals doesn’t extend to Japan, where it uses parts made by Denso Corp.

Toyota is posting the latest information on the U.S. recall and fix on its Web site. The company’s U.S. sales unit is based in Torrance, California.

Runaway Toyota cases ignored; Safety investigators dismissed numerous reports of sudden acceleration, then said data were lacking.

Fatal plungeBulent Ezal said his Camry suddenly accelerated before it plunged off a Pismo Beach cliff in 2007, killing his wife. (Pismo Beach Police Department / May 3, 2007)

November 8, 2009, LATimes, More than 1,000 Toyota and Lexus owners have reported since 2001 that their vehicles suddenly accelerated on their own, in many cases slamming into trees, parked cars and brick walls, among other obstacles, a Times review of federal records has found.

The crashes resulted in at least 19 deaths and scores of injuries over the last decade, records show. Federal regulators say that is far more than any other automaker has experienced.

Owner complaints helped trigger at least eight investigations into sudden acceleration in Toyota and Lexus vehicles by the National Highway Traffic Safety Administration in the last seven years. Toyota Motor Corp. recalled fewer than 85,000 vehicles in response to two of those probes, and the federal agency closed six other cases without finding a defect.

But those investigations systematically excluded or dismissed the majority of complaints by owners that their Toyota and Lexus vehicles had suddenly accelerated, which sharply narrowed the scope of the probes, the Times investigation revealed.

Federal officials eliminated broad categories of sudden-acceleration complaints, including cases in which drivers said they were unable to stop runaway cars using their brakes; incidents of unintended acceleration lasting more than a few seconds; and reports in which owners did not identify the possible causes of the problem.

NHTSA officials used the exclusions as part of their rationale to close at least five of the investigations without finding any defect, because — with fewer incidents to consider — the agency concluded there were not enough reported problems to warrant further inquiry. In a 2003 Lexus probe, for example, the agency threw out all but one of 37 customer complaints cited in a defect petition. It then halted further investigation, saying it “found no data indicating the existence of a defect trend.”

Meanwhile, fatal crashes involving Toyota vehicles continued to mount.

In a written statement, the NHTSA said its records show that a total of 15 people died in crashes related to possible sudden acceleration in Toyota vehicles from the 2002 model year and newer, compared with 11 such deaths in vehicles made by all other automakers.

The Times located federal and other records of 19 fatalities involving Toyota and Lexus vehicles from the same model years in which sudden or unintended acceleration may have been a factor, as well as more than 1,000 reports by owners that their vehicles had suddenly accelerated. Independent safety expert Sean Kane, president of Safety Research and Strategies, said he has identified nearly 2,000 sudden-acceleration cases for Toyota vehicles built since 2001.

Other experts say the numbers may be far higher, pointing to a 2007 NHTSA survey of 600 Lexus owners that found 10% complained they had experienced sudden acceleration.

Most sudden accelerations did not result in a crash, but there were notable exceptions. Bulent Ezal, a retired engineer, plunged 70 feet off a Pismo Beach cliff into the Pacific Ocean surf. He was hospitalized with minor injuries, but his wife of 46 years was killed.

“By the time they pulled me out, the tide was about to cover the car,” Ezal said.

He said his 2005 Camry had suddenly accelerated in a parking lot.

In its research, The Times examined thousands of federal defect investigation records, complaints filed with NHTSA by Toyota and Lexus owners, lawsuits against the company, and reports by independent safety experts and local police agencies.

Toyota has been under a spotlight since Aug. 28, when off-duty California Highway Patrolman Mark Saylor and three members of his family died in a Lexus ES 350 that accelerated to more than 100 mph and crashed in San Diego County.

Toyota has blamed the Saylor crash on an incorrectly installed floor mat that jammed the accelerator pedal. The company announced a recall of 3.8 million vehicles in September and is designing a fix aimed at preventing sudden acceleration caused by floor mats.

The recall affects the following Toyota models: the 2007-2010 Camry, the 2004-2009 Prius, the 2005-2010 Avalon, the 2005-2010 Tacoma and the 2007-2010 Tundra, as well as the 2007-2010 Lexus ES 350 and the 2006-2010 Lexus IS 250 and IS 350.

Last week, the NHTSA called the issue a “very dangerous problem” and said the remedy remains to be determined.

The agency declined a request for interviews, but issued a statement defending its past actions, saying its officials have continuously monitored Toyota vehicles for potential defects and that many of the reports of sudden acceleration involved only momentary surges of engine power that did not result in any loss of vehicle control.

“NHTSA takes every allegation of safety problems seriously and that is why we read every consumer complaint within one business day of its receipt,” the agency said. “In the case of complaints about sudden acceleration in Toyota vehicles NHTSA moved very quickly to respond to them.”

Toyota Motor Corp. defended its Toyota and Lexus vehicles and the validity of prior investigations.

“Over the past six years, NHTSA has undertaken several exhaustive reviews of allegations of unintended acceleration on Toyota and Lexus vehicles. In each case, the agency closed the investigation without finding any electronic engine control system malfunction to be the cause of unintended acceleration,” the company said in a statement.

Whatever the cause, Toyota and Lexus owners have grappled with the dangerous consequences.

* Jean Bookout awoke in an Oklahoma hospital a month after a crash in her 2005 Camry.

She said the car sped out of control on a freeway, then smashed into an embankment after she swerved it onto an exit ramp, leaving behind long skid marks from attempts to stop the vehicle with her brakes and emergency brake.

Bookout sustained permanent memory loss, and her best friend died.

“I did everything I could to stop the car,” she said Tuesday.

* Nancy Bernstein, a vice president for a Long Beach community garden and former science teacher, said she was taken on an 8-mile high-speed ride by her 2007 Prius while she was following her husband in a group bicycle tour in Wisconsin. She said her Prius accelerated from 45 mph to 75 mph on a winding, two-lane highway crowded with 100 cyclists.

“I was sure I was going to kill someone on a bicycle or myself,” she recalled. “I stood on the brakes with both feet. All of a sudden, I see fire. I thought, sure, my brakes are on fire. I thought about maybe trying to sideswipe a tree to slow down.”

Eventually she was able to stop at the bottom of a hill, using her brakes and emergency brake. A local resident rushed out with a fire extinguisher.

* Dr. David. W. Smith, an emergency room physician from San Dimas, has yet to receive a satisfactory answer from Toyota about his Lexus GS 300. Smith said he was driving with his cruise control in Central California on Highway 99 last year, not touching the accelerator, when suddenly the vehicle accelerated to 100 mph.

The brakes did not release the cruise control or slow down the vehicle, Smith recalled. Finally, he shifted into neutral and shut off the engine. “I am sure it is the cruise control,” he said. “I haven’t used it since.”

In reviewing consumer complaints during its investigations, the NHTSA relied on established “positions” that defined how the agency viewed the causes of sudden acceleration. Cases in which consumers alleged that the brakes did not stop a car were discarded, for example, because the agency’s official position was that a braking system would always overcome an engine and stop a car. The decision was laid out in a March 2004 memorandum.

When asked to submit its own complaint data to the NHTSA, Toyota eliminated reports claiming that sudden acceleration occurred for “a long duration,” or more than a few seconds. Elsewhere, the company said a fail-safe in its throttle system makes such an event impossible.

NHTSA officials acknowledged in a statement that the exclusions were made, but defended the practice.

“While some vehicles may be excluded from the scope of an investigation into a specific defect allegation, all are continuously reviewed, along with other relevant information, in order to identify other emerging issues of concern,” the statement said.

A reduced pool of reports created the appearance that the problem was much smaller than the total number of complaints suggested, making a broader vehicle recall seem less necessary, critics say.

“NHTSA has ways of pigeonholing reports, categorizing them as brake failure rather than sudden acceleration,” said attorney Edgar Heiskell of Charleston, W.Va., who is suing Toyota over a fatal crash in Flint, Mich. “By excluding these braking and long-duration events, they have taken 80% of the cases off the table.”

In 2004, the NHTSA began a probe into a defect petition filed by Carol J. Mathews, a registered nurse who was then director of health services for the Montgomery County, Md., school system. Matthews reported that she had her foot on the brake of her 2002 Lexus ES when it took off and hit a tree.

In its subsequent investigation, the NHTSA and Toyota both winnowed down other reports of sudden acceleration involving 2002 and 2003 Lexus ES and Camry models.

When the agency asked Toyota to disgorge all of the reports it knew about, the company eliminated an unknown number in five broad categories, including cases in which drivers said they were unable to control a runaway engine by applying the brakes.

In closing the probe, federal investigators said only 20 cases were considered relevant.

But The Times’ examination of consumer complaints and a sampling of reports from Toyota dealers found more than 400 reports of sudden acceleration involving those models. And federal records show that the NHTSA knew about 260 of those cases and another 114 cases identified by Toyota.

As for its position that brakes can always overcome a vehicle’s engine, the safety agency and Toyota now acknowledge that a braking system cannot always counter a wide-open throttle, as is the case in sudden acceleration.

The NHTSA began investigating the problem of sudden acceleration in the mid-1980s, after a flood of complaints about the Audi 5000. One outgrowth of the subsequent investigation was the NHTSA view that acceleration events at high speed are a different issue than events at low speed.

In 2005, for example, Jordan Ziprin of Phoenix, who had experienced a minor accident he blamed on sudden acceleration, filed a defect petition with the NHTSA that included nearly 1,200 owner complaints about Toyota vehicles. The automaker argued that the majority should be eliminated because they dealt “with two completely different issues.”

When owners said the “vehicle unintentionally or suddenly ‘accelerated,’ ” Toyota claimed that represented a different issue than when they said “the vehicle ’surged’ or ‘lurched.’ ” The NHTSA ultimately went a step further, eliminating every single complaint except Ziprin’s, finding them to have “ambiguous significance.”

The agency also has thrown out evidence for other reasons. In 2008, the NHTSA opened a probe of the Toyota Tacoma after a consumer found that the truck had accumulated 32 times as many sudden-acceleration complaints as any other pickup. But Toyota at the time said the complaints stemmed from “media and Internet exposure.” The NHTSA closed the case without a finding after it whittled down a list of more than 450 complaints to just 62.

“To this day I still can’t find evidence online of a flood of media exposure,” said William Kronholm, the Helena, Mont., man who said he requested the investigation after he experienced two acceleration events in his 2006 Tacoma. “They never dealt with the question I presented in any real way.”

The NHTSA has declined to reconsider previous investigations, even in the face of new evidence.

In March, Jeffrey Pepski of Plymouth, Minn., formally requested that the NHTSA reopen two closed investigations into Toyota and Lexus vehicles for the acceleration problem, arguing in part that 10 other motorists had experienced sudden acceleration that could not be explained by floor mats.

The NHTSA looked at the 10 cases and tossed them out. The agency’s way of looking at them sharply contrasted with the drivers’ original accounts.

In one case, the driver of a 2007 Lexus ES 350 reported that the sedan accelerated into a building, bounced backward, struck another vehicle and ended up on top of a snowbank.

But federal officials described the same case as a “single incident of alleged engine surge while parking vehicle. No trouble found by dealer.”

The NHTSA denied Pepski’s petition last week, arguing that further study was “not warranted.”

Spread the Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Facebook
  • LinkedIn
  • StumbleUpon
  • Google Bookmarks
  • Reddit
  • Technorati
  • del.icio.us
  • Sphinn
  • YahooBuzz

Post to Twitter Post to Yahoo Buzz Buzz This Post Post to Delicious Delicious Post to Digg Digg This Post

1 Comment to “Toyota Sales Falter On Recall Crisis; Apology To Customers May Not Fix Valuation Issue”

  1. This is a great blog. I visit here frequently and we get always valuable updates, regards!

Leave a Reply

Anti-Spam Protection by WP-SpamFree

Copyright 2009 All rights reserved, Automotive Consulting Services, LLC.