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What price a reputation? That's what Toyota will be learning in the months and years ahead as it struggles to recover from the safety scandal that has enveloped the company since it announced the first recall for unintended acceleration in October 2009.

There wasn't a single Toyota model that didn't land on the recall list at least once last year.
Going into the recession, certainly no company seemed better suited to weather the perfect storm than the Japanese giant, which had positioned itself as the leader in quality, reliability and dependability, or QRD in industry speak, as well as the benchmark for green mobility. Having ousted General Motors as the global king-of-the-hill, the Asian automaker seemed unstoppable.

Yet nearly seven years ago, I wrote a column suggesting Toyota might become the next GM if it weren't careful, and even as the company's sales continued growing, there were subtle signs of trouble in the offing – most notably in its slippage on the quality charts.

But few would have anticipated the sudden acceleration crisis, or the series of additional recalls that followed, month after month. In 2010, there wasn't a single Toyota model that didn't land on the recall list at least once – some repeatedly.

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Paul EisensteinPaul A. Eisenstein is Publisher of TheDetroitBureau.com, and a 30-year veteran of the automotive beat. His editorials bring his unique perspective and deep understanding of the auto world to Autoblog readers on a regular basis.

[Image: Justin Sullivan/Getty]

The fear that some mysterious electronic gremlin was quietly at work could have been the coup de grace. Even a company that had, in the words of former Ford Vice Chairman Allan Gilmour, "more money than God," might have been hard-pressed to handle the potential repair bill, never mind the litigation.

Toyota could still face billions of dollars in legal costs from the various lawsuits erupting out of the unintended acceleration scandal. But there's no question the maker got a big boost from the U.S. government earlier this month with Transportation Secretary Ray LaHood declaring, "There is no electronic-based cause for unintended high-speed acceleration in Toyotas." It was a stunning reversal. At a breakfast meeting a year before, LaHood told reporters he'd consider parking his Toyota if he owned one.

Bob Carter, head of the Toyota brand, has a spring in his step.
No wonder Bob Carter, the head of the Toyota brand, told me, "There's a spring in my step," when we discussed the results of the study, conducted by space agency NASA for the National Highway Traffic Safety Administration. "We're exceptionally well-positioned going into a growing market," as the U.S. economy recovers, Carter continued.

The sales numbers to be released at the beginning of the month will be a telling indicator of whether he's right. Carter readily acknowledges 2010 was "not a year we were satisfied with." Despite some of the biggest incentives in Toyota history – and from a company that used to deride Detroit rivals for needing to bribe customers – sales took a sharp plunge during the last quarter of 2010. A pure coincidence considering the maker kept adding to its recall list, ultimately reaching a total of 11 million vehicles? Probably not.

The sales numbers did rebound in January, but everyone was up. After years of steady gains, Toyota has now slipped behind Ford to the third spot in the U.S. automotive market. And the Detroit maker is suddenly earning the mantle of quality leader and the brand to beat.

But there's a lot working in Toyota's favor. Like the new line of Prius-badged hybrids that will attempt to multiply the power of the world's best-selling hybrid-electric vehicle.

And there's the NHTSA study – but has it truly brought redemption? Toyota will likely continue announcing recalls more readily than in the past. After paying record fines totaling $48.8 million last year for stonewalling on safety issues, the maker needs a proactive stance in a toughened regulatory environment. "If we're ever even slightly on the edge" when it comes to deciding how to respond to a possible problem, "we'll announce a recall," asserts Carter. The maker can only hope its competitors will be driven to take a similar approach.

There is a mix of studies you can pick and choose from to tell whichever story line you'd like about what comes next. Toyota, not surprisingly, insists its data show both owners and potential buyers regaining their trust in the brand and ready to forgive it the sins of the past year. But other studies, from the likes of CNW Marketing, raise caution flags, chief researcher Art Spinella suggesting Toyota will struggle to fully rebuild its now-tarnished reputation.

Toyota can only hope enough of its reputation has survived to carry it forward.
Aaron Bragman, automotive analyst with IHS Global Insight, is equally skeptical. He warns "the damage was done" to Toyota's reputation, and while "loyalists" may be quick to forgive, others will be slower to re-embrace the Japanese maker. More concerning, Toyota "still doesn't have momentum behind it while other competitors have been catching up and even passing it."

Nowhere is that more obvious than in the "green space." True, Toyota may have an assortment of new hybrids coming for the Prius brand-within-a-brand, but it won't have a pure EV to rival the Nissan Leaf until 2012, nor a plug-in to fight the Chevrolet Volt, and the Prius version will get only about a third the battery range when it does arrive, which Toyota officials admit may force them to reverse roles with GM, pushing price over technology.

One can only question the timing of Toyota President Akio Toyoda's plan to reduce by nearly 40% the number of board members, while also slashing the ranks of the rest of his senior management. It's a much-needed consolidation likely to clear out those who not only created the crisis of the last year, but those who have resisted his vision for change.

Toyota has long been the company to beat, its vaunted QRD and hyper-efficient manufacturing system copied by desperate competitors. Now, however, it's Toyota that has to re-think how it operates to avoid repeating the mistakes of the recent past. It can only hope enough of its reputation has survived to carry it forward. Otherwise, the price could be enormous.

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    • 1 Second Ago
      • 4 Years Ago
      Toyota hasn't really done much of anything to discourage me from buying another.
      We own two and I will probably replace mine with another, though I am considering Ford also.
      Fact of the matter is while Toyota didn't act as quickly as they should have, the issue was totally overblown. Lots of their other models also had recalls but I saw no shortage of recalls from the other automakers.

      Our toyotas have been flawless so I still haven't been given a reason to not buy from them.
        • 4 Years Ago
        Ya my '08 Yaris has been flawless as well, and it hasn't been recalled once.
        • 4 Years Ago
        "There wasn't a single Toyota model that didn't land on the recall list at least once last year"

        I'm not sure if they're only talking about the Toyota brand but I dont think there was a recall on the Scions
        • 4 Years Ago
        I really have to say that the recalls were often for pretty silly stuff that nobody else would have bothered recalling for. Sure, the numbers sound huge but half the time it was for ridiculous stuff like zip-tying down floor mats to idiot proof against people who don't bother hooking the floor mats down. It sounds really bad when you hear that they "recalled 10 million cars" or whatever but recalls to idiot-proof a car aren't really the same as more serious recalls-it's not like the axles are flying off the cars.
        I'm looking to buy a new car soon as well and to be honest Toyota is still at the top of the list. I've gone and looked at other cars too and maybe considered more brands than I have in the past but to be honest Toyota is still pretty much at the top of the list if only because the two we own have been pretty damned reliable. Other than your usual wear items the only thing I've ever needed to go to the dealership for was for a brake switch adjustment about a month after I first got the car since it was put on slightly loose at the factory. 8 years later and that's still the only non-wear component that's ever needed anything done to it. Toyota didn't get to number 1 building unreliable garbage even if that's the fantasy of the haters.
        And frankly the reason why they're at the top of the list for my next car is because I'm pretty sure that Toyota's going to seriously up their game because of all this bad publicity. The new Camry that's coming, the FT-86, etc.-they're probably going to turn things up a notch to get back the few customers that did leave, and that's gonna be interesting stuff to see. Sales might have dropped but their top seller Camry is also 5 years old now. The competition might have caught up but the fact that a 5 year old car is still the top seller is evidence of just how far ahead of the competition Toyota has been.
      • 4 Years Ago
      I Agree !!!!
        • 4 Years Ago
        +1 Toyota should study GM history and not repeat it, like they are doing right now.

        I`m just glad that after a little shake up at Toyota people are taking off the blinders and seeing Toyota didn`t have a monopoly on quality.
        The winfall they enjoyed in the press swayed a lot of people.
        Toyota quality is as good as it ever was. Others have stepped up their game as well but their quality wasn`t as bad as portrayed in the press.
        Ford improved their aready decent quality and made it better. Peoples perception of quality is 10X more either way than it actually is.
        Good news for Ford, fine by me the domestic car fan.
      • 4 Years Ago
      They will likely bounce back quickly.
      • 4 Years Ago

      Nobody has such major mechanical problems as Toyota.Honda has had blowing up transmissions from new,bad timingbelts/waterpumps but Toyota has had those plus a major issue with....

      The new Lexus engines that failed from the get go
      Rusting truck frames
      3.4 million sludged V-6 engines from the late 1990's even !!!
      Corolla loss of steering on highway
      Tundra and Tacoma tailgates crack in half,due to bad welds
      Sienna sludge engines,bad transmissions,bad door welds,front doors popped open,rusty bodies
      Corolla side glass shattered when new
      5.7 L engine blows up camshafts
      Trucks blow out the drive shafts
      Sticky excellerator pedals..yes the pedals stick causing random excelleration !

      And much,much more Who could even buy a Toyota and be confident in its reliability ?
      I know Toyota mechanics (work in new Toyota dealerships)and they dont drive or own a Toyota product !
      • 4 Years Ago
      My quick opinion?

      No, it isn't.
        • 4 Years Ago
        the difference being that Audi didn't deserve it.
        • 4 Years Ago
        Denis - Nope, wrong again. look through my comments and decide. Although it seems you are one of the xenophobic idiots. half your comments are bashing "h/k/t" as you like to put it.
        • 4 Years Ago
        Exactly. Audi never should have been scapegoated like the were. Completely shameful.
        • 4 Years Ago
        Wow, no matter what anyone says they are getting down voted! So how about a joke to cheer everyone up!

        A traffic cop pulled alongside a speeding car on the highway. Glancing into the car, he was astounded to see that the young lady, who was driving, was knitting.

        Realising that she was oblivious to his flashing lights and siren, the policeman wound down his window, turned on his loudspeaker and yelled, 'PULL OVER!'

        'NO', the young lady yelled back, 'IT's A SCARF!'
        • 4 Years Ago
        ST -- you are simply a slobbering toyota adoring idiot.
        • 4 Years Ago
        Subaru doesn't need Toyota - Toyota owns a very small portion, that others would gladly buy if Toyota sold their stock on the open market.
        • 4 Years Ago
        Not even close.

        Audi had absolutely nothing wrong with their cars, and was nearly destroyed.

        Toyota may not have an overt defect per se, but it certainly suffers from flaws of omission and design. They deserve no less than what Audi received.
      • 4 Years Ago
      This article is innacurate, i think you will find that the Toyota 4RUNNER, did not land on the recall list. Even though toyota had a lot of recalls, the quality of their vehicles, is still better than any General Motors, or Ford, or Chrysler cars. I understand appreciate that their is a need for american manufacturers, and joint ventures with american auto workers at plants, but that is what has led to this dark period of time for toyota. All if not mist of the defective parts that toyota has had to recall, can be led back to american and canadian manufacturers. At least they don't blow up when they are involved in accident cough cough FORD... Everyone seems to forget that there have been numerous recalls last year for all manufacturers, and no one remembers that toyota took a large hit when GM failed and left toyota on the hook for the Nummi joint venture.
      Paul Eisenstein
      • 4 Years Ago
      For Michelle30 and those that would like to readily dismiss my comments by finding some "agenda" in what I wrote here:

      First, about the name of my business...I have run The Detroit Bureau for 32 years as a freelance news service and launched TheDetroitBureau.com in 2009 after selling another magazine I founded and ran for a decade. The name was originally created because I served as a freelance Detroit bureau for dozens of media outlets (of a wide political and economic spectrum) from Investors Business Daily to the Economist to NPR. It reflects where I am based, not a bias.

      If anything, my reputation, among Detroit makers, was as anything but a domestic supporter because I didn't let them fudge their numbers or snow me with their "Buy American" campaigns disguising quality problems with weak products. A good search of my work online will show that I still have a record of being fair, balanced and in no one's pocket.

      To that point, you will find strongly positive, as well as negative, writings about imports, whether Toyota, Honda, BMW or Hyundai. And I challenge anyone with access to senior management anywhere in the industry to come up with comments from those executives that would not reflect my reputation for balance and independence, even those who might be taking heat at any particular moment. I would bet my media colleagues would and will echo this.

      Thus, the fact that I have been addressing problems with Toyota over the last 16 or so months (and wrote a critical piece on Honda, here recently) is not due to some "agenda" but to the fact that there are serious issues that need to be raised. In Toyota's case, there are many issues of concern. Even senior managers, including Don Esmond and Bob Carter, have openly acknowledged many of the matters I have raised. So has Akio Toyoda, on more than a few occasions, starting with his appointment in 2009, when he said there were serious issues that addressed Toyota's long-term viability. (His point, not mine, BTW.)

      Toyota, I will re-emphasize, has tremendous resources, though the issues of the last year have threatened to squander one of the most precious of them, good will. It remains to be seen if that can be fully recovered.

      As to a reader who commented here about my leaving out some points...my column (as often happens) already stretches the space limits that my editors here kindly grant me. There are plenty of points that could be added, both pro and con, so if anyone's desire is to have me do the truly exhaustive piece on Toyota, please assist me in lining up an 8,000-word assignment from the New Yorker. I'll even give you an agent's commission.

      Paul A. Eisenstein
      Publisher, TheDetroitBureau.com

      PS: Michelle30...I know you're not a fan, but it is spelled DETROIT.
        • 4 Years Ago
        @Paul Eisenstein
        PS: Michelle30...I know you're not a fan, but it is spelled DETROIT.

        And it has several pronunciations.

        Mafia playground
        pawn testing field for Democratic entitlement programs
        embarrassment to the USA
        • 4 Years Ago
        @Paul Eisenstein
        att : Paul Eisenstein - Thankyou for your reply. I appreciate it !!

        I have never denied Toyota has some current issues that require corrective attention and as i have stated previously, i hope those responsible for the ill-decisions are held accountable because they have tarnished the reputation of one of the most respected and influential car manufactuers. Recent announcment of Toyota downsizing management is probably part-driven because of 'lesser' performing management and if that is the case then i wholly support the decison.

        While i reserve no hesitation to admit Toyota has lapsed in quality control over the past couple of years, there is no denying Toyota continues to manufactuer amoung the highest quality and most reliable cars on the market despite the recent spate of embarrassing recalls. It will also be fair to say that many car makers continue to use Toyota standards as a benchmark.

        Where to from here for the Big T ... i believe the recent debacle surrounding Toyota will renew the companys focus towards quality control and customer satisfaction, improve communication 'within' and 'external' of the company, invest a greater level of energy in developing more desirable cars and strive to restore it's sterling reputation.

        Furthermore, judging by my understanding of Akio Toyodo - he appears to be the right man to have at the helm and no-doubt will prove to be invaluable for the company.
        • 4 Years Ago
        @Paul Eisenstein
        I find you somewhat sensitive to fair comment my friend.

        You best get a copy of the Toyota NHTSA-NASA Report on line and ask how the mainstream media might be able to comment on a severely redacted report.

        I suggest advertising dollars pay the bills, and folks do not want to get tossed off the automotive "gravy train".

        Ron & Lori Eves
      • 4 Years Ago
      Nope, my opinion is still the same: Toyota's are over rated, under styled, over priced perception mobiles that are no better and on the whole worse than almost every other offering in the U.S. automotive market.
      • 4 Years Ago
      Ignoring the acceleration issue, Toyota tried to hide enough serious issues like the Frames rusting out on Tundras and other horrid problems that the truth finaly has come out. They are no better then any american car company, and have just as many manufacturing problems and design issues as everyone else.

      Toyota and Honda and the other auto makers have just done a good job (untill now) denying they had issues.
      • 4 Years Ago
      I don't know hat medication you're on... but up the dosage!

      Ford is a powerhouse in europe's small car market.
      • 4 Years Ago
      my g8 is flawless. land down under baby
      • 4 Years Ago
      Seems odd...Government makes hostile takeover of GM and Chrysler, then the government controlled regulators and media work to destroy the number one competitor. Coincidence... ya and Barack Obama might fly out of my butt.
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