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.
[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.
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.
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.