Toyota Announces Prius Recall, and the Company's Prospects Worsen
The shoe dropped, and Toyota Motor Corp. has announced its 2010 Prius braking problem recall: 437,000 cars worldwide. The recall could end costing the company $2 billion.
It's not just Priuses, either. Starting Feb. 10, Toyota in the U.S. will conduct a voluntary safety recall to update braking software on 133,000 2010 Priuses, as well as 14,500 2010 Lexus 250h hybrids.
Meanwhile, the financial picture is looking increasingly gloomy for Toyota, which as my colleague Jim Henry reports faces withering fire from congressional investigators in a hearing planned for Feb. 10 (but then postponed until Feb. 24 because of snow). Yesterday Moody's said it is reviewing Toyota's credit rating for a likely downgrade, saying that the once-invincible juggernaut (Japan's largest company by sales, which amounted to $230 billion in the last fiscal year) could "significantly damage" its brand. S&P is also threatening to downgrade Toyota, having put the company on "credit watch with negative implications."
Also showing a sour face on Toyota is Kelley Blue Book, which this Friday will once again "adjust values for these vehicles downward by an additional 1.5 percent." The concern is about "the growing supply of unsold Toyotas on both dealer lots and at auctions," said Juan Flores, KBB's director of vehicle valuation. "At this point, it's clear that the market is shifting away from these Toyota products right now, allowing us to project their lowered values." KBB has dropped valuations as much as four percent, or $750 per car. This is Toyota we're talking about here!
I don't want to pile on here, but I'm not positive that Toyota has actually figured out what is causing the "brake by wire" problems. Maybe a software upload leave everybody smiling, but it could be more complex than that. There are hundreds of complaints listed on the National Highway Traffic Safety Administration's defect website, and they make sober reading.
The reports follow a definite pattern: Drivers say they lose their braking and sometimes experience sudden acceleration surges when driving over potholes and rough terrain. Treasury Secretary Ray LaHood told reporters that people should "stop driving" their affected cars, but he retracted that. Jake Fisher, a senior automotive engineer at Consumer Reports, says owners should keep driving but will want to be especially careful about driving in cities, with close traffic and rutted roads.
"Twice when traveling over a pothole with my foot applied to the brake and once when braking over a speed bump on a side street, the car felt like it accelerated and that I wasn't in control of the vehicle," said one account reported to NHTSA. And that was a vehicle purchased just two weeks ago, long after the company had supposedly addressed the problem on the line with a running fix.
"The braking system fails when I hit a pothole while applying the brakes," another driver, who bought the car in September, said. "It happens in the same place every time: I am headed downhill toward a stop sign; I hit the pothole and for a second my car feels as though it were hydroplaning--I have absolutely no control."
Despite, TV ads, newspaper full pages and the public apology from President Akio Toyoda, it still doesn't feel like the company is fully coming clean with all it knows about this problem. If it will take more than software to fix the Prius' brakes, the company needs to admit that now.