After a long spell as the apple of the media's eye, Toyota is now officially in the bad news barrel. So far the Japanese automaker has announced the recall of 5.3 million vehicles for floor mat issues that may lead to unintended acceleration and a separate recall of 2.3 million vehicles for sticking gas pedals (watch the explanatory video). The entire ordeal has been a public relations nightmare, and as you'd expect, Toyota's stock is taking a hit.

Last week alone shares in the automaker plunged by a jaw-dropping 14 percent. That's a drop of $21 billion (with a B) in market value. The lion's share of the losses are likely due to investors' unease at how the the mounting recalls are playing out, but we suspect that part of the issue has to do with Toyota's handling of the recalls to date.

Last fall Toyota appeared to be calling the original recall of 3.8 million vehicles for floor mat issues a voluntary matter, only to be rebuked by the National Highway Traffic Safety Administration (NHTSA), which insisted that the recall was mandatory. More recently Toyota announced that it was shipping new pedals to factories, only to change its mind and send the parts to dealerships after an angry response from dealers and the public. Mizuno Credit Advisory director Tatsuya Mizuno reportedly told Business Week that Toyota has "wasted too much time without doing anything," adding that the automaker used to have foresight for taking action but is now, "very far behind the curve."

Other than a 75 second television interview by Toyota president Akio Toyoda in Davos, Switzerland, Toyota hasn't said much of anything about the recalls. That will reportedly change this week as the Japanese automaker hits the news circuit in an attempt to allay customer fear about the recalls. Toyota U.S.A president Jim Lentz will appear on the Today Show Monday morning, followed by a conference call with other media outlets. BusinessWeek reports that Toyota may also be close to announcing a fix for at least one of the recalls, which should help investors feel a bit more comfortable that the situation is being handled.

Toyota also took out full-page ads in 20 major markets to explain why it has temporarily suspended production at several plants. Oddly, the full page ad didn't focus on the recalls. The ad (shown above, click to enlarge) says "A temporary pause. To put you first," in very big letters, followed by an explanation as to why the plants were temporarily shut down in comparatively tiny letters. The ad doesn't give any specifics about the recall, but it directs customers to the automaker's website for information about the Toyota recall.

While Toyota's ad blitz will no doubt be crucial to winning back its very faithful customers and the company's considerable reputation for quality and reliability, still more hurdles lie ahead. The next major step will be the announcement of a fix, followed by a potentially embarrassing February 25 meeting with the House Energy and Commerce Committee to discuss the unintended acceleration claims and the NHTSA's handling of the matter. Beyond that Toyota will need to absolutely nail the execution of the recall and get as many vehicles repaired as quickly as possible. Lets just hope dealers can fix this problem fast than Toyota can explain it.



[Source: Business Week]