Toyota Pays More Recall-Related Fines, But the Damage Runs Deeper
The damage is already done to the legendary Toyota (TM) reputation for quality, but a reminder surfaced this week, as Toyota agreed to pay additional fines to the U.S. Department of Transportation for being slow to report safety defects that led Toyota to recall millions of cars earlier this year.
The latest fines were for a total of $32.4 million, on top of about $16.4 million Toyota paid last April, according to a statement by U.S. Transportation Secretary Ray LaHood.
The narrow issues in three separate fines involved so-called unintended acceleration; a separate case of a steering defect; and whether Toyota in either instance met its obligation to notify government regulators in a timely manner of a possible defect. According to the government, the answer to that last one was a clear, "No."
The broader issues are potentially more serious. The unintended acceleration disaster generated a ton of bad publicity. The story grew legs for three reasons:
- One was that the Toyota brand image was built around bullet-proof quality. The notion that "the quality brand" had a quality problem made it newsworthy. High product quality was all the more important to the brand, because it made up for otherwise charisma-challenged cars, and for below-average dealer treatment in many cases for the Toyota brand.
- The second was Toyota's faulty damage control. Toyota seemed to change its mind about what was causing the problem, and how serious it was. The company said accelerator pedals got trapped under floormats; that accelerator pedals were "sticky"; that accelerator pedals needed to be recalled and replaced with a new design. In all, Toyota ultimately recalled nearly 5 million Toyota and Lexus vehicles.
- Third, there were hair-raising accounts, and even video, of supposedly runaway, out-of-control cars. Every new incident and the resulting lawsuits kept the pot boiling. The videos and 911 calls took on a life of their own on You Tube and other social media.
The jury is still out whether the millions of dollars in fines and the recalls hurt the Toyota brand permanently. Toyotas sold like hotcakes when Toyota put zero-percent financing on them earlier this year. That makes you think people aren't too turned off.
On the other hand, Toyota sales are pretty much flat this year, while the other top-selling brands have all gained. That's a pretty clear sign Toyota is out of favor, but there could be a lot of reasons for that.
Toyota lost U.S. market share this year, but so did Honda (HMC), one of Toyota's closest rivals. It's also fair to point out that Chrysler, Ford (F) and General Motors (GM) have all come up with higher-quality cars with attractive new styling, so that could be a factor, too. Besides, Toyota brand loyalty had already started to erode even before the recalls.
One thing for sure is that the latest Toyota fines aren't generating anywhere near the heat that the earlier ones did. I wrote one day in February that the term "Toyota recall" generated 22.6 million entries on Google. This morning, Dec. 21, it was 660,000. That's a lot, but nothing like the earlier flap.
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