Toyota could delay new models: Recalls and quality issues

[kaisen]

Toyota could delay new models
Report: Recalls and quality issues may slow rollout by as much as six months.

http://money.cnn.com/2006/08/25/news/international/bc.autos.japan.toyota.reut/index.htm

August 25 2006: 9:17 AM EDT

TOKYO (Reuters) -- Toyota Motor Corp., Japan's biggest automaker, is considering delaying the introduction of some new models by as much as half a year amid a series of recalls and quality problems, TheWall Street Journal said Friday, citing people familiar with the matter.

Toyota (Charts), which has built its reputation on offering safe and reliable cars at reasonable prices, is plagued with a rise in vehicle recalls and faces a legal probe into its past recall practice.

"I have given an order to pay more attention on safety issues, but we as a company are not stalling," Toyota President Katsuaki Watanabe told reporters on the sidelines of a safety technology briefing in Shizuoka prefecture, west of Tokyo.

"We always work flexibly on each model though," he added.

On the same day, China's quality watchdog said Toyota would recall more than 20,000 locally made cars in the country due to a faulty rubber seal used to fix the windscreen, although no accidents or injuries had yet been linked to the defect.

The paper said Toyota is considering adding as much as three to six months to development lead time, which is usually two to three years, to improve quality, affecting a relatively wide range of projects.

The next Sienna minivan, Solara sports coupe and Avalon sedan are among models that could be affected, it said.

Toyota spokeswoman Shiori Hashimoto said the company would not comment on its strategy and the timing of product introductions.

So far this year, Toyota has recalled more than one million vehicles in Japan and 627,000 units in the United States, its single biggest market.

It is also being investigated by prosecutors in Kumamoto, in southern Japan, over whether its quality-control managers wrongly delayed a recall filing that could have prevented a road accident in 2004 that injured a couple and their three young children.

Mitsubishi UFJ Securities analyst Shotaro Noguchi said financial impact from the quality issues would likely be limited for Toyota.

"We are not expecting any surprise in earnings from all this," he said. "It is a fact that Toyota has been busy in investments, so it is good to take time to check."

Toyota has forecast group-based global sales of 8.85 million units and production of 9.06 million units for 2006 - figures that could soon see it overtake General Motors Corp. as the world's biggest automaker.

Vehicle recalls have been on the rise at most automakers as they use common components across more models to save costs and pile on advanced features requiring more electronics parts to add value to their products. Shares in Toyota fell 1 percent to close at ¥ 6,250, underperforming a 0.1 percent decrease in the Nikkei average.

[kaisen]

Toyota Recalls Near 800,000 for July
By Joe Benton
ConsumerAffairs.Com

http://www.consumeraffairs.com/news04/2006/07/toyota_recalls.html

July 19, 2006

Toyota has now recalled almost 800,000 vehicles in July, including 8,500 Prius hybrids as well as some Lexus hybrids sold in the U.S. The Japanese automaker is recalling 418,570 vehicles globally, including 150,000 cars sold in the U.S. and Canada because of a faulty crankshaft sensor.

The recall includes 8,500 Prius vehicles and 26,200 Echos in the U.S.

Last week Toyota recalled 367,594 SUVs, including hybrids, in the U.S because of loose clips in the floor carpet cover that might cause the accelerator pedal to stick.

The vehicles involved in that recall are the Lexus RX 330 and Toyota Highlander SUVs from 2004 to 2005 model years, and the Lexus RX 400h hybrid and Highlander hybrid SUVs from the 2006 model year.

Earlier in July, Toyota recalled 24,200 vans in Japan.

The three July recalls are the latest in a string of problems at Toyota raising doubts over whether the automaker can maintain quality standards amid booming sales.

The Prius recall for a faulty cranshaft sensor does not involve any hybrid components and Toyota will replace, free of charge, the crankshaft position sensor on recalled vehicles.

Toyota warned owners that the connector for the crankshaft position sensor may become disconnected causing the vehicle to stall. The automaker initiated the recall along with NHTSA.

Toyota said there have been no reported cases of accidents or injuries related to the recalled vehicles.

Toyota reports that because of "improper molding of the resin body of the crankshaft position sensor, engine oil may penetrate the seal and enter the connector" in the recalled vehicles.

"In addition, the shape of the locking tab to secure the sensor's wire- harness connector may be improper. In this condition, the oil may expand due to heat from the engine and deform the connector, as well as create pressure on the locking tab, causing the crankshaft position sensor to become disconnected."

If the crankshaft position sensor becomes disconnected while the vehicle is being driven, the engine will stall and will be unable to restart, according to Toyota.

Toyota will notify owners of the involved vehicles of the recall later this month. Owners are requested to contact their local Toyota dealer for diagnosis and repair upon receiving notification.

Last year, Toyota's recalls in the U.S. more than doubled as the number of recalls industry-wide registered a slight decline.

Toyota says it is working to maintain vehicle quality, even as it increases production to meet worldwide demand for its vehicles.

[john70t]

http://consumeraffairs.com/recalls04/gm_pickups.html tailgate cables
http://trucks.about.com/cs/truckrecalls/a/gmtruckrecall.htm windsheild wipers
http://trucks.about.com/cs/truckrecalls/a/8_02_recall.htm airbags
http://www.msnbc.msn.com/id/9130169 brakes
http://www.findarticles.com/p/articles/mi_m3102/is_4_123/ai_n6001265 steering columns staying locked
http://money.cnn.com/2005/04/25/Autos/gm_recall everything.

This is all recent as well. Shall we continue with Ford?.........

[kaisen]

You could continue, but I think we understand that all manufacturers have recalls. The interesting point (and why I posted) is that while statistical industry rates have slightly declined, Toyota's have significantly increased. And it should be of interest when they are currently being investigated (criminally) for delaying information that led to recalls (and deaths).

E

[nostatic]

rates as in raw numbers or as a percentage sold?

[kaisen]

Both

Last year in the U.S., Toyota recalled more autos than it sold (2.38 million vs. 2.26 million)

[kaisen]

Toyota: [Falling] Quality is Job One

http://www.thetruthaboutcars.com/?p=2043
By Frank Williams
August 18th, 2006

Play word association with the average American consumer. Say the words “quality cars.” Chances are they’ll respond with “Toyota.” For decades, the Japanese automaker has carefully nurtured and perpetuated a reputation for producing well-built/reliable cars and trucks. As a result, the company’s US sales have grown like kudzu. As of last month, Toyota now sells more cars in the Americas than Ford. If you discount fleet sales (so to speak), Toyota’s totals are within shouting distance of GM’s, both nationally and worldwide. Despite this startling, seemingly unstoppable success, or perhaps because of it, the company’s supposedly impenetrable façade has begun to show a few cracks.

Toyota’s first foray into US manufacturing began with a 25% federal tariff on foreign pickups. Toyota reacted to the punitive tax by importing bare chassis and attaching the truck beds in an American facility. When The Big Three (who were about to introduce their first domestic small trucks) pressured Congress into widening the tariff to include imported chassis, Toyota built an American plant to assemble complete trucks. Once the Japanese manufacturer realized they could build competitive vehicles stateside, they began expanding their American operations.

To avoid the United Auto Workers (UAW), Toyota situated their new factories in “right to work” states. As many industry analysts have concluded, Toyota’s clean sheet factories (eventually aided by state-funded tax breaks) and non-union workforce gave them an immediate and unassailable advantage over their “domestic” competition. While GM, Ford and Chrysler were busy appeasing their unions, draining funds which could have been used to upgrade their ageing products and antiquated production facilities, Toyota hit the ground running and never looked back.

At some point, Toyota became a victim of its own success. The company’s double quick expansion, from perennial underdog to voracious overlord, has compromised their unique selling point: product quality. Specifically, Toyota has suffered a plague of recalls around the world. In 2003, the automaker recalled 200k American vehicles. In 2004, the number increased fivefold, to a little over one million vehicles. In the following year, the number leaped again, more than doubling to 2.2 million. So far this year, Toyota has announced five recalls affecting approximately 900K vehicles.

Again, Toyota’s rapid growth is to blame. For one thing, the company’s design centers have been understaffed. The shortage of in-house talent has forced Toyota to outsource, relying on its parts suppliers to design key components. At the same time, the automaker has increased the amount of parts sharing among different models. The practice has dramatically increased the scope of a "single" failure, as witnessed by last October's recall of 1.27m Japanese vehicles. Goldman Sachs estimates that design faults (e.g. rubber parts not thick enough to withstand engine heat and joints too weak to hold together) account for 68% of Toyota’s 2004 recalls.

Andrew Phillips of Nikko Citigroup stated "Toyota's resources have been stretched quite a bit by the big increases in volume." Shinsei Securities analyst Yasuhiro Matsumoto lays the blame for Toyota’s declining quality squarely on Katsuaki Watanabe’s shoulders. He claims the CEO’s constant focus on cost cutting has created devastating production glitches. The resulting quality issues have become so alarming that Watanabe recently admitted, "I take this seriously and see it as a crisis." It’s just as well; Goldman Sachs analyst Kunihiko Shiohara estimates that it may take Toyota four years or more to achieve "a fundamental turnaround in quality levels.”

Toyota also seems to be off their game in predicting market shifts. True, the company displayed impeccable timing by importing the Yaris just as American demand for smaller, higher mileage cars kicked into high gear. But Toyota’s also about to begin production on a larger, heavier and more powerful full-size Tundra, assembled in a brand new $800m Texas plant. While Toyota sells the high mileage cars tree huggers love to hug, they also have the thirstiest truck fleet on the market. And now that large truck sales seem to be tanking, they’re gearing-up to produce them in record numbers. Only time will tell if they’ve made a smart move (i.e. if sales recover or GM goes bankrupt), but at this point their timing could hardly be worse.

Earlier this year, Toyota announced they were delaying the introduction of the new Corolla for a year to focus on the launch of the new Camry. This will leave the current generation Corolla in service for a Big Three-like six years. While the move could reflect a redoubling of Toyota’s commitment to quality, it gives the model’s competitors some much-needed breathing room. Is this a minor setback in Toyota’s relentless march on American market share or warning signs of a more fundamental, less easily solved problem? It’s too early to tell. But stay tuned. We’re on it.

[BGCarrera32]

"On the same day, China's quality watchdog..."

OXYMORON

[kaisen]

http://japan.seekingalpha.com/article/13929

July 20th, 2006
Steven Towns submits:

Yesterday the Jiji Press (Japanese language source) reported some disturbing figures on Toyota Motor Corp's (TM) recalls. Toyota's growth story may no longer be strong enough to suppress concerns about quality since during the five year period ending in December 2005 the number of recalls it issued increased by 42 times. In fact Jiji reported that last year Toyota issued 36% of the recalls in the Japanese domestic auto market.


On a parent-only basis Toyota controls approximately 35% of the domestic market share. However, given its emphasis on quality it is surprising to see that it has an even higher percentage share of recalls. We'll have to wait and see how '06 turns out but Toyota is definitely on pace to shatter its mark for most recalls ever issued.

It would be nice to have time to see the increase in autos produced and sold over the five year period. Additionally, it would be helpful to analyze the types and severity of recalls and the amount of financial loss incurred. Lastly, a survey of its recalls issued overseas might shed some light on the point of whether this is primarily a domestic concern or affecting it globally.

For Toyota investors the good news is that Toyota seems to be taking the situation very seriously. That being said I think internal investigations and reviews will result in better quality assurance and a decline in recalls in future years even as Toyota further increases production. I think I would look at adding to a position if Toyota shares were to be punished as a direct result of its recall problems. Having the answers to my questions in the prior paragraph might do a lot to assuage any concerns.

[sammyg2]

I just got a recall notice last month for my tundra, seems they installed the front ball joints with an impact wrench that was improperly set and was too tight, causing some premature failures if the ball joints.
That's what happens when you move your production to the united states.
Toyota should do what general motors and ford did, move most of their production and assembly plants to canada and mexico.

[nostatic]

when there's not much good to say about your own product, tear down the competition...

And sadly, it would appear that one of the major issues is in fact US-based production. And you can't blame the unions even!

I guess I'll stick with Japanese-built or German-built...

[gaijindabe]

Yeah, any new Toyota is good for 15 years and 300,000 miles if treated half-way decent...

[DaveE]

Yes, let the Canadian Auto Workers Union build them instead.

[sammyg2]

Besides the recall for the ball joints, I had to get my tundra transmission replaced at 35,000 miles with a brand new one.
They covered it under warranty but charged me for replacing the tranny fluid!

[kaisen]

Originally posted by nostatic
when there's not much good to say about your own product, tear down the competition...

And sadly, it would appear that one of the major issues is in fact US-based production. And you can't blame the unions even!

I guess I'll stick with Japanese-built or German-built...

I do not represent GM, Todd. I have only quoted others here. I find it interesting, as it breaks down long-held opinions. If you recall, I even suggested the new Toyota RAV4 to you.

"......Goldman Sachs estimates that design faults (e.g. rubber parts not thick enough to withstand engine heat and joints too weak to hold together) account for 68% of Toyota’s 2004 recalls."

Based on this statement from an industry analyst, U.S.-based production isn't "one of the major factors".

We are all free to vote with our checkbooks. Buy what you like.

E

[kaisen]

Originally posted by gaijindabe
Yeah, any new Toyota is good for 15 years and 300,000 miles if treated half-way decent...

Yes, agree. I just sold my 1992 Toyota Camry LE with 212,000 miles on it. Great car.

[nostatic]

I'm not saying you per se, but the articles you linked to felt like they had an axe to grind (ie schadenfreude). But maybe they just hate everyone

My guess is a combination of engineering talent stretched too thin and us-based production. Large growth in a manufacturing company is often a receipie for disaster...

[kaisen]

Originally posted by nostatic
when there's not much good to say about your own product, tear down the competition...

I'm not saying you per se, but the articles you linked to felt like they had an axe to grind (ie schadenfreude). But maybe they just hate everyone

So that comment wasn't aimed at me, per se, but CNN, Reuters, industry analysts, and consumeraffairs.com?

What 'product' does CNN have that competes with Toyota?

Meanwhile, I'll try to find an unbiased article that *applauds* Toyota for breaking their record for recalls and pacing to do it again this year.

[kaisen]

Took me awhile, but I found one. Trying to balance the bias for Todd:

Quality comes first for Toyota, as it should

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B7833CB64%2D2315%2D42BE%2D8F1C%2 D4885BEE2FB81%7D&dist=rss&siteid=mktw&rss=1

Short-term pain will be long-term gain for company riddled with recalls

By Shawn Langlois, MarketWatch
Aug 27, 2006

SAN FRANCISCO (MarketWatch) -- Tapping the brakes on new-model launches may slow Toyota's pursuit of the coveted "world's biggest automaker" title, but some things are more important, especially for a company that has staked its reputation on quality.

Besides, few doubt that Toyota will inevitably vanquish General Motors as top auto dog, regardless of the measures it takes to remedy recent glitches.

With its mantra of kaizen, translated as continuous improvement, stained in the past year by a rash of recalls, Toyota is reportedly about to compromise its ferocious growth to make sure its new products live up to the company's sturdy reputation.

Toyota has recalled 628,000 vehicles in the U.S. this year and may soon recall another 500,000, the Wall Street Journal reported. This comes on top of more than two million recalls in 2005. In fact, only Ford had more recalls last year per vehicle on the road than Toyota.

Not even the red-hot Prius hybrid has been spared.

But they keep selling ... and selling. Just like most Toyota and Lexus models. And that's because it'll take a more than a rocky year to undo what Toyota has accomplished in the court of public opinion over the past few decades.

Of course, the notion of slowing growth never resonates well in the trading pits of New York, where Toyota's U.S.-listed shares sank 2% to close the week at $106.12 on the report.

Number crunchers fear the impact the potential delays could have on the bottom line in the coming quarters, and maybe they're concerned that this is just the tip of the iceberg.

Also, the stock is clearly priced for perfection, with Toyota's market capitalization equaling that of all five of the other top automakers combined.

It's not like domestic manufacturers are immune to delays and production cuts. Earlier this week, Ford slashed its fourth-quarter production plans by a surprising 21%. But no bit of bad news coming from the Big Three would be considered shocking these days.

That's not the case with Toyota, which has emerged with a mostly bulletproof image.

And the company is apparently prepared to preserve that image at all cost, even if it has to endure some short-term market pain. So far, the bruises are already fading as the company has performed as usual in closely-watched consumer studies.

Just this month, J.D. Power named the Lexus brand as the most dependable for the 12th consecutive year. Toyota cars and trucks were fifth. Broken down by segment, the two brands together dominated the results with four first-place nods apiece.

"Perceptions about dependability can have a tremendous impact on an owner's satisfaction with their vehicle, which is no small matter for manufacturers," said analyst Neil Oddes. "In terms of retained value, recommendation and repurchase intent, and component replacement, vehicle dependability can have a direct impact on a manufacturer's bottom line."

And nobody plays the perception game better than Toyota.

While any sort of production delays may dent near-term growth prospects and give its beleaguered rivals cause for hope, Toyota loyalists are more likely to see a company devoted to setting the gold standard in reliability.

Shawn Langlois is a reporter for MarketWatch, and the editor of its community message boards.

[tabascobobcat]

All these recalls yet the big "T" is still (on average) #1 in JD Powers. Hmmmm. Makes you wonder how much worse the others are.