Ext User(a9x5l)
01-08-2006, 08:23 PM
Toyota Motor Corp. CEO Katsuaki Watanabe bowed deeply before the cameras
on July 20 in a humbling moment for the mighty Japanese automaker.
Toyota has come under intense scrutiny as prosecutors in Japan investigate
its handling of vehicle defects. Separately, the government told Toyota to
review its policy on recalls and respond to the Transport Ministry by
Friday.
Ritual apologies are common in Japan, where executives are expected to
convey their regret for corporate shortcomings.
It's unusual, however, to see executives from Japan's leading industrial
company on the defensive.
"That was a very big deal in Japan," said Daniel Baum, a Tokyo-based auto
analyst.
Just as Toyota is poised to pass General Motors Corp. to become the
world's largest automaker, a surge in recalls and the investigation in
Japan risk tarnishing the company's sterling reputation for quality.
Watanabe, a former purchasing manager who became CEO a year ago, senses
the danger. Toyota has grown into the world's richest and second-largest
automaker by offering cars and trucks renowned for their reliability.
"I take this seriously and see it as a crisis," Watanabe said at the
company's midyear news conference. "The world-class quality that we've
achieved is our lifeline."
As Toyota's expansion turns up pressure on other automakers, rivals are
quick to seize on any sign that the formidable Japanese carmaker may be
over-reaching.
Industry experts also question whether Toyota can maintain its torrid
growth pace without compromising quality.
If the trouble is limited to the recent revelations and recalls, Toyota
will ride out this bumpy stretch with little or no damage to its image,
analysts say. That's if no more bad news trickles out.
For a company as large as Toyota, which will build close to 9 million
vehicles this year, some defects and recalls are inevitable.
But last year, Toyota's recalls in the United States were more than double
2004 levels, even as total industry recalls declined.
This past month alone, the Japanese automaker has recalled more than 1
million vehicles worldwide.
Problems range from trim parts that can come loose and fall near the gas
pedal of Toyota Highlander and Lexus RX sport utility vehicles to faulty
engine parts in Echo compacts.
Signals are mixed
By other gauges, Toyota's quality is still top-notch, although competitors
have narrowed -- in a few cases closed -- the gap.
"Toyota does exceptionally well, both in terms of design and defects, and
they do better on defects," said Neal Oddes, director of product research
and analysis at J.D. Power and Associates.
He said Toyota had shown improvement in both J.D. Power's initial quality
study and in its vehicle dependability survey, which rates three-year-old
cars. "Even though they're experiencing recalls now, their quality both in
the short term and long term continues to improve," Oddes said.
Toyota officials say their warranty costs -- the cost of repairing
vehicles under warranty -- also show that quality is improving.
But the investigation in the southern island of Kyushu was disturbing
because it raised the specter of a cover-up.
"The danger is, people will think, 'This is what Mitsubishi did,'" said
Andrew Phillips, Tokyo-based analyst for Nikko Citigroup Ltd., referring
to a spate of vehicle defects concealed by managers at Mitsubishi Motors.
"At Mitsubishi, it was systematic," he said, while police in Kyushu have
said they do not suspect a widespread cover-up.
In the Kyushu case, prosecutors are looking into whether three Toyota
quality-control managers were negligent in their response in the 1990s to
reports of a steering defect. The problem is suspected of being the cause
of an accident that occurred in August 2004, when the driver of an
11-year-old Toyota Hilux Surf sport utility vehicle struck another car,
injuring five people.
Two months later, Toyota recalled 330,000 Hilux Surf SUVs built between
December 1988 and May 1996.
Because the automaker uses the same components across a wide range of
vehicles, the problem eventually led to recalls of more than 1 million
vehicles worldwide.
Toyota says its managers acted correctly, and it is cooperating with the
investigation. According to local media reports, the automaker said it had
received only five reports of steering problems by 1996 and had
strengthened the relay rods in the steering systems.
The case highlights the pressure on auto executives dealing with reports
of problems. Recalls are costly and damaging to a brand's reputation, but
downplaying problems can be extremely risky.
The years-long cover-up of vehicle defects at Mitsubishi led to criminal
convictions and nearly ruined the carmaker.
In Japan, Baum said, automakers may be tempted to avoid the bad publicity
of recalls and alert only dealers of problems that need fixing. "What they
have is six-month checkups, and there are a lot of things they can do in
the guise of half-yearly checkups," said Baum.
"There are a lot of things they can hide."
Toyota owns all of its Japanese dealers.
Baum, an analyst with consulting firm HSLD International, says the current
case is unlikely to undermine Toyota's hold on the Japanese market --
where its share exceeds 40 percent. "This is the first slap on the wrist
for Toyota," he said. "If the steering problem is all they've got, I think
they've got it contained."
Piling on safeguards
In recent years, Toyota has worked hard to introduce new quality-control
processes in tandem with its rapid growth.
As the company builds more plants and absorbs thousands of new workers and
managers, it has revised its training methods.
Assembly directions are now depicted in diagrams that can be understood by
workers in Princeton, Ind., truck plant as well as those in Toyota's new
factories in China.
Last fall, Toyota established a training facility at its Georgetown, Ky.,
plant patterned after the Global Production Center in Japan to teach
standard production methods to new U.S. hires.
In June, Toyota stressed the importance of quality by placing
responsibility for quality with Executive Vice President Akio Toyoda,
grandson of the company's founder. Toyota brought back the head of its
European operations, quality expert Shinichi Sasaki, to assist him.
Nikko Citigroup analyst Phillips says the age of some of the recalled
vehicles leads him to suspect that Toyota's quality suffered in the early
1990s. At that time, the strength of the Japanese yen was eroding the
profitability of Japan's automakers.
In a recent report, Phillips advised investors that, while the rising
recalls were "clearly a negative," they reflect tighter controls.
"Over the past couple of years, they have become a lot stricter," he said.
"They've gone back with a finer-toothed comb and some of these things come
up."
And they're causing headaches for Toyota many years later.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20060731/AUTO01/607310359/1148/rss25
--
a9x5l
on July 20 in a humbling moment for the mighty Japanese automaker.
Toyota has come under intense scrutiny as prosecutors in Japan investigate
its handling of vehicle defects. Separately, the government told Toyota to
review its policy on recalls and respond to the Transport Ministry by
Friday.
Ritual apologies are common in Japan, where executives are expected to
convey their regret for corporate shortcomings.
It's unusual, however, to see executives from Japan's leading industrial
company on the defensive.
"That was a very big deal in Japan," said Daniel Baum, a Tokyo-based auto
analyst.
Just as Toyota is poised to pass General Motors Corp. to become the
world's largest automaker, a surge in recalls and the investigation in
Japan risk tarnishing the company's sterling reputation for quality.
Watanabe, a former purchasing manager who became CEO a year ago, senses
the danger. Toyota has grown into the world's richest and second-largest
automaker by offering cars and trucks renowned for their reliability.
"I take this seriously and see it as a crisis," Watanabe said at the
company's midyear news conference. "The world-class quality that we've
achieved is our lifeline."
As Toyota's expansion turns up pressure on other automakers, rivals are
quick to seize on any sign that the formidable Japanese carmaker may be
over-reaching.
Industry experts also question whether Toyota can maintain its torrid
growth pace without compromising quality.
If the trouble is limited to the recent revelations and recalls, Toyota
will ride out this bumpy stretch with little or no damage to its image,
analysts say. That's if no more bad news trickles out.
For a company as large as Toyota, which will build close to 9 million
vehicles this year, some defects and recalls are inevitable.
But last year, Toyota's recalls in the United States were more than double
2004 levels, even as total industry recalls declined.
This past month alone, the Japanese automaker has recalled more than 1
million vehicles worldwide.
Problems range from trim parts that can come loose and fall near the gas
pedal of Toyota Highlander and Lexus RX sport utility vehicles to faulty
engine parts in Echo compacts.
Signals are mixed
By other gauges, Toyota's quality is still top-notch, although competitors
have narrowed -- in a few cases closed -- the gap.
"Toyota does exceptionally well, both in terms of design and defects, and
they do better on defects," said Neal Oddes, director of product research
and analysis at J.D. Power and Associates.
He said Toyota had shown improvement in both J.D. Power's initial quality
study and in its vehicle dependability survey, which rates three-year-old
cars. "Even though they're experiencing recalls now, their quality both in
the short term and long term continues to improve," Oddes said.
Toyota officials say their warranty costs -- the cost of repairing
vehicles under warranty -- also show that quality is improving.
But the investigation in the southern island of Kyushu was disturbing
because it raised the specter of a cover-up.
"The danger is, people will think, 'This is what Mitsubishi did,'" said
Andrew Phillips, Tokyo-based analyst for Nikko Citigroup Ltd., referring
to a spate of vehicle defects concealed by managers at Mitsubishi Motors.
"At Mitsubishi, it was systematic," he said, while police in Kyushu have
said they do not suspect a widespread cover-up.
In the Kyushu case, prosecutors are looking into whether three Toyota
quality-control managers were negligent in their response in the 1990s to
reports of a steering defect. The problem is suspected of being the cause
of an accident that occurred in August 2004, when the driver of an
11-year-old Toyota Hilux Surf sport utility vehicle struck another car,
injuring five people.
Two months later, Toyota recalled 330,000 Hilux Surf SUVs built between
December 1988 and May 1996.
Because the automaker uses the same components across a wide range of
vehicles, the problem eventually led to recalls of more than 1 million
vehicles worldwide.
Toyota says its managers acted correctly, and it is cooperating with the
investigation. According to local media reports, the automaker said it had
received only five reports of steering problems by 1996 and had
strengthened the relay rods in the steering systems.
The case highlights the pressure on auto executives dealing with reports
of problems. Recalls are costly and damaging to a brand's reputation, but
downplaying problems can be extremely risky.
The years-long cover-up of vehicle defects at Mitsubishi led to criminal
convictions and nearly ruined the carmaker.
In Japan, Baum said, automakers may be tempted to avoid the bad publicity
of recalls and alert only dealers of problems that need fixing. "What they
have is six-month checkups, and there are a lot of things they can do in
the guise of half-yearly checkups," said Baum.
"There are a lot of things they can hide."
Toyota owns all of its Japanese dealers.
Baum, an analyst with consulting firm HSLD International, says the current
case is unlikely to undermine Toyota's hold on the Japanese market --
where its share exceeds 40 percent. "This is the first slap on the wrist
for Toyota," he said. "If the steering problem is all they've got, I think
they've got it contained."
Piling on safeguards
In recent years, Toyota has worked hard to introduce new quality-control
processes in tandem with its rapid growth.
As the company builds more plants and absorbs thousands of new workers and
managers, it has revised its training methods.
Assembly directions are now depicted in diagrams that can be understood by
workers in Princeton, Ind., truck plant as well as those in Toyota's new
factories in China.
Last fall, Toyota established a training facility at its Georgetown, Ky.,
plant patterned after the Global Production Center in Japan to teach
standard production methods to new U.S. hires.
In June, Toyota stressed the importance of quality by placing
responsibility for quality with Executive Vice President Akio Toyoda,
grandson of the company's founder. Toyota brought back the head of its
European operations, quality expert Shinichi Sasaki, to assist him.
Nikko Citigroup analyst Phillips says the age of some of the recalled
vehicles leads him to suspect that Toyota's quality suffered in the early
1990s. At that time, the strength of the Japanese yen was eroding the
profitability of Japan's automakers.
In a recent report, Phillips advised investors that, while the rising
recalls were "clearly a negative," they reflect tighter controls.
"Over the past couple of years, they have become a lot stricter," he said.
"They've gone back with a finer-toothed comb and some of these things come
up."
And they're causing headaches for Toyota many years later.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20060731/AUTO01/607310359/1148/rss25
--
a9x5l