The week of mega recalls

Friday, January 29, 2010 | www.theautoindustrieblog.com

I was away for a week, snorkeling in islands off the Indian Ocean, unplugged from everything, and came back to find my RSS feeds filled with Toyota recall related news.

First Toyota assured owners that there was nothing wrong with the cars despite many angry online postings by disgruntled Toyota owners, and remained adamant that sudden accelerations were caused by "driver error." Then a family of 4 were killed in runaway Lexus ES and that's when shit has hit ceiling and caught the Toyota's runaway cars media's attention. Toyota then issued a press release that the company traced the problem to use incorrect / improperly fitted floor mats, and that only North American market Lexus and Toyota models are affected. Then Consumer Report revealed that Toyota and Lexus models lacked a crucial "brake over-ride" feature that is common amongst most equivalent German models, a feature that could have pre-empted many crashes caused by malfunctioning drive-by-wire controller / accelerator pedal.

Consumers remained dissatisfied with Toyota's answer that the floor mat is the cause. It's hard to believe that the gas pedal can get stuck under a floor mat under normal circumstances. Drivers who have experienced sudden acceleration were adamant that the floor mat played no role as the accelerations happened during partial-pedal / low speed conditions.

This week, Toyota issued another press release, stating that the company will halt production of 8 models (sold in USA) and shutdown 5 plants in USA until the problem is rectified. For every single day sales are halted, Toyota dealers, the principal and plants are bleeding cash. The financial repercussions is very serious and share prices of Toyota have lost 16.7% in just 5 days of trading. The news in USA was quickly followed by news that Toyota has finally admitted that Toyota cars sold in Europe and China were affected as well. It was revealed that Toyota Motor Europe has received reports of faulty accelerators since 2008. This of course goes against Toyota's earlier statements that the problems are limited to American domestic market models. In USA, 2.3 million cars have been recalled. Reuters report that Toyota Motor Europe will be recalling 1.8 million vehicles while another 75,000 will be recalled by Toyota's China offices. UMW-Toyota have assured local owners that the recall does not affect our local models, but didn't Toyota said the same for its European and Chinese market models months earlier? Readers will remember that Toyota have earlier ran into some troubles with the Chinese consumer safety regulators from ASQIQ.

Just when you thought that with the recent woes at Toyota, that Honda should be the new bastion of Japanese quality, we hear about Honda recalling 646,000 units of Jazz / Fit and City in Europe, North America, South America, South Africa and Asia for a faulty power window switch that in a worst case scenario, could cause a fire. Oddly the recall does not include Japanese domestic market models. The City, sold in Japan as the Fit Aria is exported from Thailand. Last year a South African baby girl was killed when the Jazz she was sitting in caught fire. Her mother was unloading grocery bags to their house while she remained seated in the car. Her mum was preparing a birthday party for her. Her mother had reported a faulty power window switch to a Honda dealer but technicians could not repair the fault immediately. Honda Malaysia would not comment on the recall. (Update : Honda Malaysia have just announced that the City and Jazz will be recalled). But this is to be expected as the company is very concerned about any PR repercussions from any public announcement. None of the ASEAN car market have a very strong consumer safety legislation in place to force car companies to admit product defects. Plus, the Asian mentality does not view very positively of admitting a mistake and thus, local consumers could be even more distressed with a public announcement, rather than reacting positively to it and be aware that no manufactured goods can ever be 100% defect free. This forms a vicious cycle where product defects are often covered up by companies. How many are aware that early models of Perodua Myvis have problem of fuel vapors entering the cabin? As you might be aware, petrol fumes are not only flammable but toxic substance.

Back in the States, competitors to Toyota have been very quick to capitalise on the wounded Big T. Many have called Toyota the new General Motors in terms of experiencing quality glitches, over-expansion and the proliferation of new product models. While Ford Fusion and Chevy's new Malibu have been raking up many awards and thumbs up for value and quality. GM launched the first strike by offering $1,000 or zero-percent financing for up to five years for Toyota owners who traded in for a GM vehicle. You can't help but be wowed by the pace of their decision making. Hyundai and Ford are offering $1000 incentives for Toyota trade-ins while Volkswagen is said to be "observing" the situation very closely but rather than engaging in a price war, VW is looking at rapidly increasing their ad spending to target Toyota owners / purchase intenders. A very wise move I think as competing on price and incentives will only hurt your brand value in the long term.

Toyota is rumoured to target to resume production of the 8 affected models by the third week of February. If you are looking for quality, this blogger's advice is to look towards one of those Japanese / German underdogs, i.e. Mazda, Suzuki, Audi. The tension between chasing after sales volume and maintaining quality will always remain the paradox of the manufacturing industry. When you have too many models, made by too many plants spread all over the world, with an ever decreasing model life cycle, something has to give. And it is always the engineer's time in road validation, parts stress testing and manufacturing process improvements that always gets squeezed. But the typical top management will assume that if you whip the workers hard enough, somehow, magically, via some mythical industrial gods, the sales and production numbers will be up and quality will actually be improved.