The Wall Street Journal
Three or four years ago senior Honda executives demanded to know from their underlings how arch-rival Toyota could expand its production and sales so quickly and still keep its quality intact.
Now they're getting the answer: Toyota's once-vaunted quality actually was eroding. This week the company suspended the sale of eight different models, including the popular Corolla, Camry and Avalon, for potential safety problems. Next week Toyota will halt production at the five North American factories that make those vehicles.
The company also expanded a recall that already was the largest in automotive history. Some 4.8 million Toyota cars and trucks might suffer from sticking accelerator pedals or faulty floor mats that seem to grab the accelerator (some have been recalled for both reasons) and can cause the car to accelerate out of control. Several deaths have been attributed to the problem.
How could this possibly happen to the car company that was the undisputed leader in quality, the company that all the others from Germany and America and even Japan wanted to emulate? The answer is almost too simple.
Toyota is suffering from trying to get too big, too fast. In the early years of this century the company sensed weakness among its Detroit rivals in the American market, and also opportunity in China and other emerging markets outside the U.S. So it began a headlong expansion spree around the world.
In doing this Toyota abandoned one of the shibboleths of its conservative culture: never building a new product in a new factory with a new workforce. Any new Toyota factory, anywhere in the world, would first build a vehicle that Toyota was making at one of its existing plants. That approach minimized quality-control variables.
But in 2006 Toyota started building its first full-size pickup truck at a new factory with a new workforce in San Antonio, Texas. That truck, the Tundra, was recalled both for the gas-pedal issue and for another problem, potential corrosion of the vehicle's frame.
When this newspaper's Norihiko Shirouzu first began writing about Toyota's quality glitches in 2006 and 2007, some company executives reacted angrily, saying he was blowing the issue out of proportion. But numbers don't lie. In 2005 Toyota recalled 2.38 million vehicles in the U.S., which was slightly more than the number of cars and trucks the company sold in America that year. Last August the company recalled 700,000 cars in China because the power-window controls might short-circuit. The recent gas-pedal recall also affected China and Europe. Toyota's quality problem has gone global.
Consumer Reports, the bible of the car-buying public, now rates Ford's quality higher than Toyota's. Last year the Japanese company lost $4 billion, its first annual loss in nearly 60 years, and it is heading for another loss in the current fiscal year ending March 31. The production halt announced this week will add to the red ink.
The immediate question is what Toyota's dramatic moves will do to its reputation. Consumers might (and should) give the company credit for taking unprecedented and costly action in the interest of protecting their safety. But many Toyota owners are worried, and brand-loyalty ratings have begun to drop.
In last year's J.D. Power Customer Retention Survey, Toyota lost the top spot to Honda for the first time since the poll began six years ago. Toyota and Lexus still hold the second and third positions in the survey, but the trend has to be discomfiting. General Motors, meanwhile, has begun offering special discounts to Toyota owners who trade in their cars, a marketing move that might backfire the next time GM has a big recall.
Another question is how quickly Toyota can resolve the unintended acceleration issue. It's a problem with a curious history. In the mid-1980s Audi was accused of having a similar problem, and its U.S. sales almost evaporated. But the issue, fed by media hysteria, turned out to be bogus.
Toyota's acceleration problem appears to be the real thing. The company has pinpointed specific likely causes—linkages in the gas-pedal mechanism and the size of the floor mats.
In an era when cars have more microchips than many desktop computers, these things are amazingly low tech. Reports yesterday said Toyota was zeroing in on a repair: inserting a "spacer" in the pedal mechanism that would increase the tension in a spring and help prevent sticking.
Finally, the big question is whether and how quickly Toyota can right itself as a company. The new management team led by Akio Toyoda, a scion of the founding family, seems contrite and worried, which is a good sign.
The company has enormous financial and technical resources, and it remains the leader in gas-electric hybrid technology. Toyota is reversing its overexpansion and reducing excess capacity by closing an assembly plant in California (which was a joint venture with GM), and postponing plans to build another plant in Tupelo, Miss.
One pressing need is for Toyota to develop a new generation of talented and trusted local leadership in the many countries where it operates. Because it is Japan's biggest auto maker by far, Toyota tends to be insular. The near-term temptation will be to circle the sedans in Toyota City, site of the company's headquarters, but it's impossible for a small inner circle in Japan to run a global company effectively in the long run.
General Motors held the title of "world's largest car company" for decades before things began to go wrong there. Toyota grabbed the top spot last year, and things started going awry in just a matter of months.
Maybe it isn't good to be king after all.
Now they're getting the answer: Toyota's once-vaunted quality actually was eroding. This week the company suspended the sale of eight different models, including the popular Corolla, Camry and Avalon, for potential safety problems. Next week Toyota will halt production at the five North American factories that make those vehicles.
The company also expanded a recall that already was the largest in automotive history. Some 4.8 million Toyota cars and trucks might suffer from sticking accelerator pedals or faulty floor mats that seem to grab the accelerator (some have been recalled for both reasons) and can cause the car to accelerate out of control. Several deaths have been attributed to the problem.
How could this possibly happen to the car company that was the undisputed leader in quality, the company that all the others from Germany and America and even Japan wanted to emulate? The answer is almost too simple.
Toyota is suffering from trying to get too big, too fast. In the early years of this century the company sensed weakness among its Detroit rivals in the American market, and also opportunity in China and other emerging markets outside the U.S. So it began a headlong expansion spree around the world.
In doing this Toyota abandoned one of the shibboleths of its conservative culture: never building a new product in a new factory with a new workforce. Any new Toyota factory, anywhere in the world, would first build a vehicle that Toyota was making at one of its existing plants. That approach minimized quality-control variables.
But in 2006 Toyota started building its first full-size pickup truck at a new factory with a new workforce in San Antonio, Texas. That truck, the Tundra, was recalled both for the gas-pedal issue and for another problem, potential corrosion of the vehicle's frame.
When this newspaper's Norihiko Shirouzu first began writing about Toyota's quality glitches in 2006 and 2007, some company executives reacted angrily, saying he was blowing the issue out of proportion. But numbers don't lie. In 2005 Toyota recalled 2.38 million vehicles in the U.S., which was slightly more than the number of cars and trucks the company sold in America that year. Last August the company recalled 700,000 cars in China because the power-window controls might short-circuit. The recent gas-pedal recall also affected China and Europe. Toyota's quality problem has gone global.
Consumer Reports, the bible of the car-buying public, now rates Ford's quality higher than Toyota's. Last year the Japanese company lost $4 billion, its first annual loss in nearly 60 years, and it is heading for another loss in the current fiscal year ending March 31. The production halt announced this week will add to the red ink.
The immediate question is what Toyota's dramatic moves will do to its reputation. Consumers might (and should) give the company credit for taking unprecedented and costly action in the interest of protecting their safety. But many Toyota owners are worried, and brand-loyalty ratings have begun to drop.
In last year's J.D. Power Customer Retention Survey, Toyota lost the top spot to Honda for the first time since the poll began six years ago. Toyota and Lexus still hold the second and third positions in the survey, but the trend has to be discomfiting. General Motors, meanwhile, has begun offering special discounts to Toyota owners who trade in their cars, a marketing move that might backfire the next time GM has a big recall.
Another question is how quickly Toyota can resolve the unintended acceleration issue. It's a problem with a curious history. In the mid-1980s Audi was accused of having a similar problem, and its U.S. sales almost evaporated. But the issue, fed by media hysteria, turned out to be bogus.
Toyota's acceleration problem appears to be the real thing. The company has pinpointed specific likely causes—linkages in the gas-pedal mechanism and the size of the floor mats.
In an era when cars have more microchips than many desktop computers, these things are amazingly low tech. Reports yesterday said Toyota was zeroing in on a repair: inserting a "spacer" in the pedal mechanism that would increase the tension in a spring and help prevent sticking.
Finally, the big question is whether and how quickly Toyota can right itself as a company. The new management team led by Akio Toyoda, a scion of the founding family, seems contrite and worried, which is a good sign.
The company has enormous financial and technical resources, and it remains the leader in gas-electric hybrid technology. Toyota is reversing its overexpansion and reducing excess capacity by closing an assembly plant in California (which was a joint venture with GM), and postponing plans to build another plant in Tupelo, Miss.
One pressing need is for Toyota to develop a new generation of talented and trusted local leadership in the many countries where it operates. Because it is Japan's biggest auto maker by far, Toyota tends to be insular. The near-term temptation will be to circle the sedans in Toyota City, site of the company's headquarters, but it's impossible for a small inner circle in Japan to run a global company effectively in the long run.
General Motors held the title of "world's largest car company" for decades before things began to go wrong there. Toyota grabbed the top spot last year, and things started going awry in just a matter of months.
Maybe it isn't good to be king after all.
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