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Toyota Adds To Industry Embarrassment With Massive Recall

But Significance Pales Before GM Problems.
Toyota Trying To Get On Top Of Recalls By Being A Bit Proactive.

Toyota also had its feathers ruffled by announcing an embarrassing recall, but although it was a massive 6.5 million vehicles, the impact was not likely to be as dangerous for its future as the GM experience.

According to Professor David Bailey from the Aston Business School, Toyota is now trying to make sure it responds quickly to the need for product recalls.

“Having been badly scarred by not being see to respond fast enough to problems in 2009-10, Toyota has worked hard to turn things around. The firm has gone back to its core strategy of quality first, leaving growth to look after itself. The firm retrenched some production lines and has said it won’t expand nearly as quickly,” Bailey said.

Since early 2013, Toyota has recalled around 20 million vehicles. It was criticised in 2009-2010 when it was slow to recall cars over “sudden unintended acceleration”. It eventually had to recall over 10 million cars to fix the problem and admitted that from 2002 to 2009 it had put growth ahead of quality.

Investment rating agency Moody’s said the latest recall, related to faulty airbags, seating, and windshield wipers, weren’t positive for the company’s reputation, but wouldn’t have much of a financial impact, not least because no fatal accidents had been linked to the problems.

“Although the number of this recall is significant, the cost will remain manageable because typically recalls do not come in one lump but spread over a period of time depending on when the customers bring their cars in for fixing,” Moody’s said in a report.

“Moreover, Toyota’s substantial recovery of profitability, helped by the weak yen and cost reduction, will limit the impact of the expenses related to the product warranties to its earnings. Such strength is visible in the company’s ability to absorb a recent fine of $1.2 billion to the U.S. attorney’s office (in New York) related to the company’s 2009-10 recalls as it will represent only about five per cent of the company’s full year profit for the year ended March 2014,” Moody’s said.

Quicker response
Moody’s agreed with Aston’s Bailey about Toyota’s quicker response to problems.

“We believe these recalls are also the result of Toyota becoming better in reporting and taking actions more quickly in response to consumers’ safety when problems are discovered,” Moody’s said.

Bailey said Toyota has bounced back well in recent years from its setbacks and forecast profit for the financial year ended in March close to pre-crash records.

Toyota has forecast net profit for the financial year just ended of close to $17.5 billion, just below its record set in 2008.

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