Toyota’s (NYSE:TM) problems get worse with the passing of each day. The company recalled about eight million vehicles worldwide from problems with accelerators. Toyota then shut down production for most of the models which had the defect. Newspapers around the world showed burning wrecks of Toyota and Lexus cars. “Four People Die In Auto Inferno.”
Toyota’s sales in the US were down almost 16% in January compared with the same month last year. That drop is expected to be worse this month. Toyota competitors are telling customers that it is better to ride safely in their vehicles that be cremated in a Toyota. Potential new problems with brakes on Toyota’s hybrid Prius will do even more to undermine the Japanese car company’s reputation for building high-quality vehicles, a reputation that took thirty years to create.
Congress and the Japanese government have said they will begin investigations into what went wrong with the cars just as Toyota is sending new gas pedals to dealers to repaid the recalled vehicles. Some analysts believe that the defect may extend to the electronic systems on the cars which would probably make complete repairs more complex and expensive.
The Wall Street Journal reports that “U.S. regulators accused the company of dragging its feet on fixing defective gas pedals and threatened civil penalties and further reviews of Toyota products.” Those investigations will almost certainly cause Congress and trial lawyers to begin actions against Toyota which will involve deposing the company’s management, engineers, and dealers with the goal of discovering a “cover up.” Toyota must have known about the problems for months and must have hoped it could fix a small number of vehicles before that problem spread.
These conspiracy theories are not new in the car industry and sometimes it turns out that the suspicions about management knowledge are correct. The Pinto fire problems in 1978 were probably known to Ford before its recalls of hundreds of thousands of the models. Jeep rollover dangers did not simply emerge in a few days without any of the engineers at the company being aware of the problem.
Ralph Nader became Ralph Nader because of the Chevy Corvair’s problems in 1965. “Unsafe At Any Speed.”
Toyota’s trouble is just beginning.
Top Gaining Stocks
Top Losing Stocks