• Feb 4, 2010
We're very pleased to announce that veteran automotive journalist and Publisher of It's been said that when the gods want to punish a company, they first give it 40 years of success. Okay, we might quibble with the precise number, but that certainly seems to fit Toyota. Even with last year's bankruptcy at General Motors providing perspective, it's hard to find any more rapid fall from grace.

It was just a year ago that the giant maker seemed to have everything going for it. It had toppled GM, the long-time automotive king-of-the-hill, to become the world's biggest carmaker. It was routinely touted as the benchmark for what industry types like to call QRD, or quality, reliability and dependability to everyone else. Its Toyota Manufacturing System was the benchmark that everyone else set out to emulate. And as former Ford Vice Chairman Allan Gilmore was fond of repeating, the Japanese maker had "more money than God."

Yet, it didn't take long for things to turn upside-down following the release of the global 2008 sales numbers. Even as Toyota was savoring victory in its battle with GM, which was quickly plunging towards Chapter 11, Toyota's financial house turned out to be in alarming disorder, the maker reporting its worst – indeed its first – loss since the guns fell silent at the end of World War II.
Paul A. Eisenstein is Publisher of TheDetroitBureau.com, and a 30-year veteran of the automotive beat. His editorials will bring his unique perspective and deep understanding of the auto world to Autoblog readers on a regular basis.

In fact, there were already plenty of warning signs of trouble to come. In an annual measure of factory floor productivity, the Harbour Report, Chrysler – yes, Chrysler – had actually caught up to the vaunted Asian maker and GM and Ford weren't far behind. In fact, warned the eponymous Ron Harbour, Toyota could very well lose its lead as a result of the concessions Detroit's Big Three had won from the United Auto Workers Union in 2007.

And that didn't even take into account the massive givebacks that the UAW reluctantly approved last year to help keep GM and Chrysler alive. For much of the last 25 years, since Toyota and the other Japanese automakers began opening their "transplant" assembly lines in North America, the Detroit Three have had to spend at least $2,000 more to produce the typical midsize car than pace-setter Toyota. The latest concessions have turned that upside down, says David Cole, director of the Center for Automotive Research, or CAR, in Ann Arbor, MI.

That $2,000 to $3,000 cost advantage is money GM, Ford and Chrysler can either put in the pocket of shareholders; use to build better, more lavishly-equipped vehicles; offer to buyers in the form of even bigger incentives or – as it now seems – spread the money out among all those options.

There was another telling hint of trouble even before Toyota's global sales victory, when the influential Consumer Reports took the rare step of lifting the Recommended Buy rating from several Toyota models, including the star-crossed Tundra, for quality problems. If the folks at the non-profit Consumers Union only had a crystal ball.

To be fair, even the best manufacturers are going to run into trouble. Recalls are the price of doing business and it helps to understand why Toyota's recalls have generally been rare, but the numbers large. The maker has made a maxim of maximizing economies of scale – cutting costs by sharing platforms, parts and components among numerous vehicles. It's great when all goes well, but a disaster when, well, when you have loose carpets and sticky accelerator assemblies.

In fact, Toyota is not unique here. Ford has recalled millions of cars to fix potentially fire-prone ignition switches. And the Dearborn maker will be even more prone to large-scale problems as it moves forward with its One Ford strategy, commonizing products, platforms and parts around the world.

But is there something unique about Toyota that has made the latest recalls so particularly disastrous?

Toyota was making some foolish bets with its future.
For the last five years, I have been hearing trusted outsiders – and the occasional insider – tell me that Toyota was beginning to look like the GM of old, the arrogant, self-impressed giant that ultimately spiraled into the ground. Whether the lawyers were winning out or the nearly all-powerful Chief Engineers, it was becoming harder and harder to find anyone at Toyota willing to acknowledge a problem, indeed accept the idea that everything the company did wasn't darned close to manna from heaven.

I had that conversation with a number of senior executives, including Don Esmond, the second-highest-ranking American at Toyota Motor Sales USA, a year ago. "Arrogant? Where?" he asked, sounding a bit like Captain Renault in Casablanca. But, indeed, there was gambling going on, and Toyota was making some foolish bets with its future.

"It's up to us," Toyota's top-ranked American, TMS President Jim Lentz, said Monday, when asked about the importance of getting the ongoing recalls right. The reputation for QRD – and safety – that Lentz called Toyota's cornerstone, is rapidly eroding. Key competitors aren't waiting to see what happens, and are unloading both barrels, with competitive ads and hefty incentives specifically targeting Toyota owners.

The problem for Toyota, warns J.D. Power's chief of Automotive Research, Dave Sargent, is that plenty of makers are now catching and even exceeding Toyota quality. Even Buick beat the formidable Lexus in their Power Vehicle Dependability Survey last year.

Don't rule Toyota out. Even though the company is now likely to post another weak earnings report for the current fiscal year, which ends March 31, it still has plenty of money. And resources. And drive. But it isn't the same omnipotent giant with the pre-ordained future that many observers believed just a year ago.
Paul A. Eisenstein is Publisher of TheDetroitBureau.com, and a 30-year veteran of the automotive beat. His editorials will bring his unique perspective and deep understanding of the auto world to Autoblog readers on a regular basis.


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  • 29 Comments
      • 4 Years Ago
      And to think Toyota's reputation will return in....how many years has it been since Audi's "unintended acceleration" days?
        • 4 Years Ago
        I'd guess a decade.
      • 4 Years Ago
      Is this guy a replacement for McElroy or will both these guys be writing for Autoblog now?
      • 4 Years Ago
      Everyone wants to be a GM. When GM was on top, does anyone remember how many recalls they had. This is a fact when you place volume over quality you will always create a questionable product. Toyota should pay more attention to quality instead quanity else they too will become a GM.
      • 4 Years Ago
      there are several variations of this from Euripides to Milton but... Whom the gods would destroy, they first raise up.
      BIGSKY
      • 4 Years Ago
      This has to be the biggest political pushed recall in history. Toyota has had an excellent track record to this point.CNN has made fools of themselves with there poor reporting of this whole scenario. Yes, there is a problem and yes ,Toyota will correct this. GM with the Gov't behind them will only have limited success. Buick Cad and some of Chevy will survive but only limited. Wait for the Koreans to be the next big 3 killer. All the big 3 will never be able to compete against them. Then another auto bailout??
        • 4 Years Ago
        @BIGSKY
        The 'excellent track record' only exists because they used every arrogant big corporation practive to bury the complaints that have been filed over the last three years. They had to do everything possible to reach the endgame of No 1 in volume If some people died along the way, what the hell.
      • 4 Years Ago
      Toyota is an evil corporation interested only in endangering the life of others.
        • 4 Years Ago
        No, Toyota is simply a corporation whose executives are wholly consumed with making more and more profit. This so the executives could get massive bonuses and afford high priced call girls for secretaries.

        Toyota's management sacrificed their workers (remember the one who died on the job due to their neglect and abuse), the quality, the reliability, of their cars; as well as low-volume sporty cars like the Supra and MR2 at the altar of lining their pockets and getting laid by some diseased whores.
      • 4 Years Ago
      One fact you (and to be fair) many other journalists are ignoring is where was the government when all these defects were happening?

      Since the Ford-Firestone scandal of nearly a decade ago, many defect reporting requirements were enacted via the TREAD act. The government gets defect reports quarterly and should have detected these problems long ago, even if Toyota was unwilling or unable to see it themselves.

      The failure of Toyota is only half of the problem. When will someone start asking NHTSA why they failed to take any action when the defect data has been dropped on their doorstep for years? TREAD has clearly failed to fulfill it's purpose.
        • 4 Years Ago
        Safety defects are reported to the manufacture by the dealers and from the manufacturer to NHTSA. If the manufacturer does'nt report the NHTSA knows nothing.
        Or, if the manufacturer does report the the NHTSA and has someone on the pads, well, you get what you pay for.
        Brian Ross ABC's report claims an NHTSA agent working on Toyota sudden acceleration cases was hired by Toyota and the claims mysteriously vanished. Toyoto's former claims and liability lawyer, now whistleblower, claims of coverups and a deliberate conspiracy in hiding rollover crash results in Toyota's suv's.

        Any Toyophiles defending this company should be deported.
      • 4 Years Ago
      When does the new Tacoma come out? I want a new Taco.
      • 4 Years Ago
      Toyota Manufacturing System? Really? It's called the Toyota Production System. Some expert you are...
      • 4 Years Ago
      Imagine that - somebody from detroit greatly exaggerating the demise of toyota.
      hahahahahahaha.

      Perhaps the author could point out the list of car companies that would absolutely not trade places with toyota right now - all laurels and baggage included.
      Some would be on that list but not a single company associated with Detroit would be anywhere near it I think.

      I see the toyota problems right now as a sign I might be able to make a good deal on a toyota and if not that - then it is certainly a good time to buy some toyota stock.
      • 4 Years Ago
      I have been reading auto blogs on the internet about the Toyota fiasco for about one week. What strikes me as odd is that all the Toyota sympathizers seem to have the same contempt for human life (they admitted a few have died but so what, life goes on), same contempt for the Detroit 3 and same contempt for facts or reality. This kind of arrogance smacks of Toyota corporate culture and Toyota dealership personnel behavior. Most probably work for Toyota, or Toyota dealerships. They must feel that the end is near!!!
      Toyota must be nailed to the cross not because of the recalls, not because it is a Japanese company and not because they are number 1, but because they lied, cheated, bought out the silence of customers with safety related incidents and because they continued to produce vehicles that they knew were dangerous. Now it seems that NHTSA is being investigated for its cozy relationship with Toyota. Apparently some ex NHTSA employees went to work for Toyota.......... They should be made an example so in the future a company would think twice in knowingly endangering people's lives.

      • 4 Years Ago
      Of all the mistakes Toyota has made in managing this train wreck, their worst mistake was their timing. They couldn't have picked a worse time to go through this.

      -They have been hiding the truth from the public just as the public has become aware of Climategate and the truth about Man-Made Global Warming. The public no longer believes the green liars about AGW nor Toyota about safety and quality.

      -The public no longer trusts what they read and see in the Main Stream Media just as Toyota takes out full page adds to say they care.

      -Toyota accused the public of not knowing what they are doing when driving their cars just as the public is waking up and retaking control of their lives.

      -If Toyota had this happen 3 or 4 years ago, their reputation for quality and safety could have fallen several steps before dropping down to the level Ford was at. Today Ford is on the same level as Toyota so any fall puts them below Ford.

      I definitely would not bet on Toyota pulling out of this mess anytime soon. Their world has changed under them almost as much as their reputation has changed over the last few months, and Tokyo probably doesn't get it.
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