Detroit has been in so much trouble for the last two years that its problems have seemed insoluble. Labor and benefit costs could not be cut fast enough and North American market share kept plunging.
But, sometimes the best luck is hanging on. At least until help comes.
Toyota had yet another recall. A big one. It will total 533,000 SUVs and pick-ups. Eleven accidents have been reported due to the defect. Sound like Detroit in the old days.
According to Reuters, Toyota recalled over one million cars in Japan and 760,000 in the US. The big Japanese auto maker’s CEO said that a return to high-quality production is one of his primary goals, even if it means delaying certain model launches.
One analyst thinks that Toyota has bought itself some time after years of putting out nearly defect-free cars. "Toyota has a lot of goodwill built up," said Christopher Richter, an auto analyst at CLSA Asia-Pacific Markets (Reuters).
But, good will only goes so far. Ford is already running ads making favorable comparisons between its cars and Toyota’s. Recalls may just give the argument some bite.
To add some more glee to the gloomy Detroit winters, gas prices have fallen to $2 a gallon in some parts of the US following the plunge in oil prices.
Detroit has been furiously trying to replace gas guzzling SUVs and pick-ups with smaller crossover vehicles and sedans, but the Big Three still make more money on vehicles like the Ford flagship F-150 than they do on little four cylinder light cars. The drop in gas prices may well allow them to increase sales of the less fuel efficient but more profitable models while they change over production to more Japan-like models.
Who would have thought that Toyota (TM) and Exxon (XOM) would ride to Ford’s (F) rescue.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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