Toyota Motor Corp. reportedly may have found a fix to a problem with sticking accelerator pedals, but it won't be easy to find a way to mend the crack in its hitherto unassailable quality rep.
Quality and durability have been Toyota's primary driver for purchase consideration for years, a reputation built on its lean manufacturing process, and jidoka (hands-on) and "just-in-time" production philosophy. But that may not matter now when -- after a year or more of an assortment of recalls, the company has slammed into its first real quality disaster -- following the death of a highway patrol officer and his family in a Lexus whose accelerator jammed.
Dave Sargent, industry analyst at J.D. Power and Associates, says it could not have been worse. "Safety-related issues are the worst, and this is right in the middle of that," he says. "Safety is the worst; major mechanical problems such as engine issues are next. And this guy was someone who drives professionally, which makes it that much worse because the assumption is that the driver was highly competent."
Research suggests American consumers are starting to doubt that Toyota's quality is as bullet-proof as it used to be. According to marketing firm BrandIndex's daily consumer perception research service, YouGov, with every recall Toyota does, perception has slipped further. The firm says the current product snafu puts it well below Honda. The index, whose score can range from +100 to -100, is compiled by subtracting negative feedback from positive based on interviews of 5,000 people each weekday. A zero score means equal positive and negative feedback.
The study shows that over the past several months, as Toyota has announced recalls, the brand has seen dips but has bounced back -- but that with each new recall, the dips get a little deeper and the recovery a little slower. Since August, Toyota's score has dropped from around 32 to around 14 on the scale.
"Some consumers will still consider Toyota the flagship of reliability with good reason," says Sargent. "But others -- Honda, Ford, Chevy or Hyundai, for example -- have caught up with, and in some instances, overtaken in terms of actual quality, and particularly initial quality." He says that while in the longer-term durability Toyota holds a slight and narrowing lead, "what Toyota has maintained its gap in is perceived quality, which is what's getting hit right now."
Indeed, Lexus led in last year's J.D. Power & Associates Initial Quality Study, and Toyota Motor Corp. captured the most segment awards. But the biggest improvements were in the domestics, as well as Hyundai and Suzuki.
"First, we are seeing that while quality remains a price of entry, virtually all makers are paying that price and even the worst makers now have quality scores in most surveys that match what Toyotas were doing less than a decade ago," says Paul Eisenstein, industry analyst and publisher of TheDetroitBureau.com, an online automotive magazine. "We are seeing a number of makers pull surprising levels of quality and getting endorsements from all of the right folks."
Eisenstein says that while Toyota's handling of the problem will make a big difference to how owners and prospects feel about the brand, there are two major problems for the Torrance, Calif.-based company. "There's no question that there are loyal customers who simply want their friend, as many view Toyota, to stand behind them and are willing to give the automaker the benefit of the doubt, but there is a sizeable number of others who may be less blindly loyal or who may be the loyalists who feel betrayed."
The second issue, per Eisenstein, is an emerging group of buyers who are just starting to get into the market and who are less likely to have any loyalties. They may be as skeptical of Toyota by gut instinct as boomers were of domestic brands their parents bought. "While Toyota hoped to win their loyalty with Scion, the latest crop of scion products have proven not up to the original concept," he says.
It doesn't help Toyota that the industry is not stopping the race to let Toyota get off its bike and fix the flat. General Motors is aggressively going after Toyota with its new round of incentives and a campaign offering Toyota owners a spiff if they trade in on a GM vehicle. "Ford is also doing it carefully," says Eisenstein.
Also, he says, if Toyota loses that sense of being the reliable appliance, there might be others ready to step in. "Toyota does have extraordinarily broad range of products, but it may have to start playing games on terms it has refused to play in the past," he says. "It may have to start cutting prices and adding more content to vehicles, an area it seems to have cut back in years; it may have to get truly aggressive in an incentive battle."