Toyota took cost-cutting approach on lurching Lexus models, records show

The automaker struggled to diagnose performance problems with the 2002-06 ES models and limited the scope of repairs, company records show.

May 23, 2010|By Ken Bensinger and Ralph Vartabedian, Los Angeles Times

Five months before the new 2002 Lexus ES hit showroom floors, the company's U.S. engineers sent a test report to Toyota City in Japan: The luxury sedan shifted gears so roughly that it was "not acceptable for production."

The warning was sent to Toyota Executive Vice President Katsuaki Watanabe on May 16, 2001. Days later, another Japanese executive sent an e-mail to top managers saying that despite misgivings among U.S. officials, the 2002 Lexus was "marginally acceptable for production." The new ES went on sale across the nation on Oct. 1, 2001.

In years to come, thousands of Lexus buyers would discover firsthand that the vehicle's transmission problems, which caused it to hesitate when motorists hit the gas, or lurch forward unintentionally, were far from fixed.

The 2002-2006 ES models would become the target of lawsuits, federal safety investigations and hundreds of consumer complaints, including claims of 49 injuries.

Internal Toyota records reviewed by The Times provide an inside look at how the world's largest automaker struggled for years to identify the causes of nagging performance issues in one of its top-selling luxury vehicles. They also show that the automaker sought to cut costs by limiting the scope of repairs.

"The objective will be to limit the number of vehicles to be serviced to those owners who complain, and to limit the per-vehicle cost," a Toyota staff attorney wrote in an Aug. 15, 2005, memo explaining the automaker's legal defense strategy.

Toyota was fined a record $16.4 million last month for delays in notifying federal safety officials about defects that could lead to sudden acceleration. Though the 2002-2006 ES models were not included in Toyota's recall of nearly 10 million vehicles worldwide for unintended acceleration, the car's history has nonetheless caught the attention of congressional investigators.

A House committee has subpoenaed thousands of internal documents from Toyota, including nearly 250 dealing explicitly with that generation of the ES, which were collected or produced by the automaker to defend itself against a 2005 lawsuit.

In statements to The Times, Toyota Motor Corp. officials said they followed industry practice for notifying customers about repairs.

"Given the concerns raised by some customers about this drivability issue, we did not meet the very high customer satisfaction standards we set for ourselves," Toyota said. "However, we fully stand behind the engineering and production quality of the vehicle, as well as our after-sale customer service and technical support."

The documents show that Toyota repeatedly tried to solve the lurching problem by modifying the car's computer software. But Toyota told The Times that the Lexus ES issues concerned "drivability" and were not related to the sudden-acceleration problems experienced in other vehicles.

Hattie Lesure, however, said the Lexus ES 300 she bought for $35,000 in August 2002 had an alarming tendency to jump forward without warning. "My fear was that it could surge into another car," the Moreno Valley retiree said.

After her Lexus dealer and Toyota's U.S. sales unit disputed Lesure's claim, she filed a lawsuit against the automaker, which was settled for about $3,000.

When Lesure bought the ES, Toyota was quietly rolling out a new version of the software used to control the car's drivetrain in an attempt to remedy the car's performance woes. But the automaker decided to fix only a fraction of the vehicles, the documents show.

The repair "should only be utilized for critical customer complaints," wrote Gary Heine, quality-assurance powertrain manager for Toyota's U.S. sales division, in an e-mail to customer service managers on Aug. 27, 2002, according to a chronology Toyota lawyers prepared for litigation in late 2005.

Other customers — presumably those who did not complain loudly enough — were not included in the software upgrade until late 2003, when Toyota instructed dealers on how to reprogram the onboard computer and advised more than 100,000 ES owners to bring their cars in for a "product enhancement."

But many customers complained that the fix didn't work, internal memos prepared for Toyota executives in Japan show, leading some officials to question the wisdom of sending notices in the first place.

In an Aug. 3, 2005, e-mail to a superior, then-Toyota staff attorney Dimitrios Biller described a meeting he had with the then-head of Lexus in the U.S., Bob Carter, on whether to notify ES owners about a new software update. Carter now heads the Toyota brand here.

"Bob is opposed to the idea of sending such a letter out to all owners of all 2002 to 2005 ES 300 and ES 330 vehicles because a substantial majority of these people are satisfied with their vehicles," Biller wrote. "Once they become sensitized to the hesitation and/or lurching, they will become 'dissatisfied' Lexus owners."

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