Every time it seems that the smoke has begun to clear, another fire flares up for Toyota.
Since September 2009, the company has launched a series of recalls aimed at addressing reports of unintended acceleration in its cars. Its dealers have repaired millions of cars. Its chairman has apologized on Capitol Hill. Its North American President has apologized on YouTube.
Yet Toyota’s troubles are far from over. Federal authorities continue to investigate thousands of claims -- including allegations that possible defects may have caused at least 51 deaths, according to Bloomberg. Lawsuits from customers, and now shareholders, are pending. And, an Associated Press analysis shows that more than 100 owners have filed formal complaints alleging that their Toyotas accelerated out of their control even after the dealership fixed the supposed defects.
Toyota’s high-profile recall is far from old news. But enough time has passed since the blaze began that we can begin to assess who has been damaged and who has benefitted from Toyota’s very public fall from grace.
The Biggest Winners:
1. Drivers and Passengers Everywhere
As cars have grown more complex in the last decade, some safety advocates believe that too little attention has been focused on how that complexity compromises safety. More parts, after all, means more things that can go wrong.
Your car is, in all probability, the most complex machine you have ever encountered. According to an article published in Spectrum, the journal of the Institute of Electrical and Electronics Engineers, “Even low-end cars now have 30 to 50 ECUs [microprocessors] embedded in the body, doors, dash, roof, trunk, seats, and just about anywhere else the car’s designers can think to put them.” That’s 50 desktop computers worth of processing power, even in a subcompact car with a cheap price tag.
Thanks to Toyota’s problems, however, press attention is now focused on the work of engineers trying to figure out the complex puzzle of sudden acceleration claims. That attention will, in all likelihood, make cars safer.
A few ideas have already taken root. Federal regulators are considering making a brake override system mandatory on all cars. The system -- a simple safety device that ensures that, when both pedals are depressed, only the brake pedal works -- is already found on most cars built by Nissan, Mercedes-Benz and several other manufacturers. Regulators are also looking into how electronic interference can be tested for, and prevented, in future cars. Even if the government chooses not to mandate a solution, litigation-wary automakers are likely working on the problem anyway.
It’s unlikely that cars will be any less complex 10 years from now. But, thanks to the spotlight on Toyota drivers’ concerns, it’s likely that they will be safer.
As Toyota has struggled, a handful of rivals have prospered -- and none have done better than Ford. In February, with Toyota’s struggles dominating headlines, the Japanese automaker’s U.S. sales dropped by nine percent. Meanwhile, Ford saw its results increase by a jaw-dropping 43 percent.
There is no way to officially determine how many of those buyers would have gone to a Toyota dealership had the news not been dominated by the company’s troubles. But the numbers are suggestive. While Ford usually relies on pickup truck sales to boost its bottom line, there’s evidence that the Detroit-based automaker is now beating Toyota at the Japanese company’s game: sedan sales. Toyota’s bread-and-butter Camry saw a 20 percent sales drop in February, for instance, while the comparable Ford Fusion’s sales nearly doubled.
Some Japanese automakers have worried publicly that Toyota’s troubles could drag their sales down. Honda Chief Financial Officer Yoichi Hojo even told the Wall Street Journal in February that he worried Toyota’s troubles could have a “ripple effect” on Japanese automakers.
So far, the numbers haven’t borne that out. Honda sales have picked up as Toyota’s have fallen -- but not as fast as those of the third-largest Japanese automaker. Nissan saw a 32 percent sales jump in February. Most of the increase came from small car sales, with the new Cube wagon and the ultra-cheap Versa subcompact leading the way. American automakers will introduce a new wave of inexpensive small cars over the next year, but until they do, Nissan dealerships may continue to steal small-car buyers from their Toyota rivals.
4. Future Toyota Owners
Here’s a potentially unpopular statement: the biggest winners in this melee might well be people who buy Toyotas now.
A quick look at the numbers can help keep the drama in perspective: Since the year 2000, Toyota and its Lexus and Scion subsidiaries have sold more than 21 million cars in the United States. In that time, the federal government received about 3,300 complaints of unintended acceleration -- the majority of which it will probably never be able to verify. But even if every single one of those allegations turned out to be true, that means only 0.015 percent of Toyota owners have claimed a problem -- and more than 99.98 percent have not.
In J.D. Power and Associates’ most recent Vehicle Dependability Study, Toyota’s cars showed fewer problems than the industry average during the first three years of ownership. Yet, thanks to bad publicity from the recall affair, Toyota has launched its most significant round of incentives in years. Through March 31, Toyota buyers in most parts of the country can quality for interest-free financing, with cash-back rebates also available on some models. Returning Toyota buyers may also qualify for two years of no-cost maintenance. See our Toyota Deals page for details.
The Biggest Losers:
The biggest loser in the Toyota recall affair is the most obvious one. Before the recall crises began, about 17 percent of the cars sold in the United States were Toyotas -- giving the company a larger share of the U.S. market than any other automaker. By the end of February, that number had fallen to 13.4 percent.
March sales figures will likely show a rebound, but the numbers are still well below where the company hoped to be. It’s unclear how much long-term damage has been done to the reputation of an automaker once known for an image of bulletproof reliability.
But there is plenty of hope for Toyota. Remember the Firestone tire recall? That company recalled 6.5 million of its tires after investigators blamed more than 200 deaths, most in Ford Explorers, on tread separation in Firestone tires. At the time, many questioned whether the company could survive. Yet Firestone bounced back, reaching profitability just two years after its record-breaking recall.
Toyota’s challenge is immense. But it’s been done before.
2. Current Toyota Owners
If there’s a Toyota in your driveway, the odds of it accelerating without your input seem incredibly low. But your odds of selling it or trading it in for its full value aren’t high either.
The used-car value experts at Kelley Blue Book have dropped their estimate of the average Toyota’s worth by as much as three percent in recent months. In the company’s most recent forecast, it said that the value of used Toyotas has finally begun to grow -- but is still rising at a rate below the industry average. For a brand long known for above-average resale value, that’s sobering news.
Ironically, Toyota itself may be helping Toyotas to depreciate more quickly than the average car. As part of its recovery effort, the automaker has launched a round of attractive lease deals. That can trigger a larger-than-normal round of lease returns, as customers come back for a new Toyota with a lower payment -- which floods the used-car market with Toyota products, driving down their value.
3. Federal Auto Safety Regulators
When the smoke finally does clear, we’ll be forced to ask an uncomfortable question: who was watching our back?
The National Highway Traffic Safety Administration (NHTSA), the federal agency charged with writing and enforcing auto safety regulations, may not come out of this mess with clean hands. After media sources reported on accidents linked to unintended acceleration allegations, reporters began to comb through the agency’s database of consumer complaints. There, they discovered that consumers had complained about sudden acceleration in Toyota cars far more than they had for other automakers. Why hadn’t the high number of complaints triggered an investigation before the accidents were reported?
That’s just one question Congressional investigators have asked NHTSA officials in recent months. According to the Washington Post, agency officials told investigators that the NHTSA didn’t actually employ any electrical engineers capable of looking into the complaints. They later backed off of that claim in a statement, saying that the agency “has numerous engineers on staff,” but did not clarify what that means. It can’t mean much. Despite receiving more than 30,000 defect complaints in an average year, NHTSA administrator David Strickland told Congress, the agency’s investigation staff is quite small. According to CBS News, it numbers just 57 employees, with only 18 full-time investigators.
Congress members, questioning agency leaders in a February 2010 hearing, focused attention on an internal Toyota memo. In the document, Toyota boasted about how it had saved more than $100 million by convincing the NHTSA to limit an earlier recall related to unintended acceleration complaints. Why, some have asked, can the agency be talked into such limits?
To be fair to the NHTSA, its problems may not be the fault of its workers. Another point that came out during the Toyota hearings is that, while the number of cars on the road has doubled since 1980, the agency has the funding to employ half the number of workers today that it had then.
If the recall crisis triggers a long-needed funding increase at the NHTSA, the agency may come out a winner in the end.