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Toyota recalls undermine Japanese confidence in an industrial titan

Recalls in the U.S., China and Europe have had a sickening effect on the national psyche in Japan.

January 29, 2010|By John M. Glionna and Coco Masters
  • Toyota 's showroom in Tokyo. A flood of recalls in the U.S. has shaken the confidence of many loyal customers in Japan.
Toyota 's showroom in Tokyo. A flood of recalls in the U.S. has shaken… (Shizuo Kambayashi / Associated…)

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.

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