TOYOTA AFTER THE SUDDEN ACCELERATION CRISIS: INVESTIGATION, CLEARED BY THE U.S. GOVERNMENT AND IMPROVEMENTS

FALL OUT OF THE SUDDEN ACCELERATION PROBLEM

Toyota fell to 360th place from 3rd place the previous year in the Forbes ranking of the world’s leading companies in 2010. Around the same time Moody downgraded Toyota over uncertainty of “product quality.” In 2010, Toyota lost its rank as a top 10 global brand. In the Interbrand ranking it fell to 11th place, which was still highest among carmakers, just ahead of Daimler AG in 12th place.

In a June 2010 J.D. Powers survey on car safety, Toyota fell to 21st place, it lowest ranking since the survey was started in the mid 1980s.

NHTSA has received about 3,000 reports of sudden acceleration incidents involving Toyota vehicles during the past decade, including allegations of 93 deaths. NHTSA has confirmed five of them.

Toyota’s problems not only affected the car company they cast a shadow over the entire Japanese automobile industry and Japan as a whole. "Auto-making is perhaps Japan's premier industry, and the perception here is that one of our national champions has embarrassed us," Christopher Richter, senior research analyst in Tokyo for Calyon Capital Markets Asia, a Hong Kong brokerage house, told the Los Angeles Times. [Source: John M. Glionna and Coco Masters, Los Angeles Times, January 31, 2010]

AP reported: “The recalls came just as GM, Ford, Hyundai, and others introduced more competitive cars and trucks. With a bunch of nice alternatives and doubts about quality, customers who once dutifully returned to Toyota started considering other brands. Many Toyota models look old and need upgrades. Despite rebates and low-interest financing, Toyota was the only major automaker with lower U.S. sales last year.

Shares of Toyota’s Asian rivals, including South Korean automakers Hyundai and Kia Motors, gained on speculation that they are poised to benefit from Toyota's massive recall and its tainted image. Toyota's U.S.-traded shares have plunged 15 percent since mid-January, losing $2.10 Thursday to $77.67.

Investigation of Sudden Acceleration

In August 2010, a preliminary report by U.S. government investigators from NASA and NHTSA investigating the sudden acceleration problem could find no new safety defects other than those already mentioned?floor mat entrapment and striking accelerator pedals. There was no evidence of an electronics problems.

Moreover of the 58 cars with event data recorders (vehicle black boxes) that were studied, 35 of them showed the brakes had been applied in the crashes. In about half of those 35 cases the accelerator pedal was depressed right before the crash suggesting that drivers were stepping on the accelerators rather than hitting the brakes. Fourteen cases showed partial braking. One cases showed pedal entrapment and another showed that both the brake and the accelerator pedal were depressed. Other cases were inconclusive.

In July 2010, based on its studies, Toyota said that “virtually all” of cases of sudden acceleration were caused by drivers pressing down on the accelerator rather than the brake. The car maker reviewed about 2,000 reports of unintended accelerations many of them in cars with event data recorders. Mike Michels, a Toyota spokesman told Bloomberg, “There are a variety of causes---pedal entrapment, sticky pedal, other foreign objects in the car and pedal misapplication.” When he was asked how many were caused by applying the accelerator instead the brake he said “virtually all.” There was no evidence of any electronic malfunction.

The U.S. government had said unintended acceleration of Toyota vehicles was involved in the death of 89 people. In May 2010, Toyota agreed to pay the record $16.4 million fine. In December 2010, it agreed to pay $32.4 million in new fines to settle an investigation into its handling if the floor mat steering rod recalls, bringing the total of fines that Toyota paid to $48.8 million. The fines were paid without admitting to violating any U.S. laws.

In October 2010, Toyota said it had not found a single case in which its vehicle’s electronic throttle control system would lead to unintended acceleration and that sudden acceleration complaints had shrunk by 80 percent compared with April. The same month Toyota announced it would equip all 2011 cars in the United States with smart-stop brakes, an advanced safety feature, as part of its efforts to regain the trust of American consumers. The system automatically reduces engine power when a vehicle’s brake and accelerator pedal are applied simultaneously.

In May 2010, U.S. transportation safety officials said they were going to investigate a 2005 Toyota recall to find out whether the company failed to promptly report a steering problem with its vehicles. In 2004, Toyota recalled Hilux pick up trucks, saying a weakness in steering relay system could cause steering problems. In 2005 some U.S. trucks were recalled with the same problems. Investigators suspect that Toyota may have known about the problem with the U.S. trucks before it said it did. Also in May 2010 U.S. Transportation Secretary LaHood met with Toyota President Toyoda and said that he was pleased with Toyota’s progress but the company faced more fines if it didn’t produce significant results in improving its safety.

U.S. Clears Toyota of Flaws in Electronics

In February 2011, the U.S. government said that electronic flaws weren't to blame for the reports of sudden, unintended acceleration that led to the recall of thousands of Toyota vehicles. In some cases, investigators suggested, drivers simply hit the gas when they meant to press the brake. "We feel that Toyota vehicles are safe to drive," declared Transportation Secretary Ray LaHood.[Source: Ken Thomas, Associated Press, February 10, 2011]

Ken Thomas of Associated Press wrote: “The investigation bolstered Toyota's contentions that electronic gremlins were not to blame and its series of recalls---involving more than 12 million vehicles globally since fall 2009---had directly addressed the safety concerns. Transportation officials, assisted by engineers with NASA, said the 10-month study of Toyota vehicles concluded there was no electronic cause of unintended high-speed acceleration. The study, launched at the request of Congress, responded to consumer complaints that flawed electronics could be the culprit behind complaints that led to Toyota's spate of recalls.” [Ibid]

“Toyota said the report should "further reinforce confidence in the safety of Toyota and Lexus vehicles" and "put to rest unsupported speculation" about the company's electronic throttle control systems, which are "well-designed and well-tested to ensure that a real world, un-commanded acceleration of the vehicle cannot occur." Financial results and the government report boosted shares of the automaker on Wall Street by more than 4 percent, to close at $88.57.” [Ibid]

Analysts said the report would help Toyota's reputation but the company would still need to work hard to regain its bulletproof image of reliability. Toyota was the only major automaker to see a U.S. sales decline last year at 0.4 percent. "This is really something that is going to take years and years to recover," said Rebecca Lindland, director of automotive research with consulting firm IHS Automotive. [Ibid]

A Washington Post editorial read: “No abnormalities were found in more than 280,000 lines of software code that were analyzed. Radiation above and beyond industry standards aimed at the cars didn't cause them to suddenly accelerate. And the final report confirmed preliminary findings released last September. Data recorders - or black boxes - in the cars of those who complained of sudden acceleration found no evidence of mechanical error. What they did show was that the "most likely cause" was "pedal misapplication."

Investigation of Electronics in Toyota Cars

Ken Thomas of Associated Press wrote: “Federal officials said they thoroughly examined the acceleration reports and could not find evidence of an electronic problem. Instead, investigators with the National Highway Traffic Safety Administration said the evidence showed that cases in which owners complained about ineffective brakes were most likely caused by "pedal misapplication," in which the driver stepped on the accelerator instead of the brakes. [Source: Ken Thomas, Associated Press, February 10, 2011]

Many of the complaints involved cases in which the vehicle accelerated after it was stationary or at very low speed. LaHood said NASA engineers "rigorously examined" nine Toyotas driven by consumers who complained of unintended acceleration. NASA reviewed 280,000 lines of software code to look for flaws that could cause the acceleration. Investigators tested mechanical components in Toyotas that could lead to the problem and bombarded vehicles with electro-magnetic radiation to see whether that could make the electronics cause the cars to speed up. [Ibid]

Electronic problems can include buggy software, circuitry influenced by electrical interference and electrical shorts. The problems are often difficult to spot and can surface when combined with environmental factors like a blast from a heater vent or moisture from the road. A preliminary part of the study, released last August, failed to find any electronic flaws based on a review of event data recorders, or vehicle black boxes. [Ibid]

Not everyone was convinced. Rhonda Smith, of Sevierville, Tenn., who last year testified before a congressional committee that her Lexus raced up to 100 miles per hour without her control, said Tuesday there had to be a cause other than floor mats or sticky gas pedals because she said neither happened in her case. "There is a defect in that car whether they want to believe it or not," Smith said. "They need to keep searching." NHTSA administrator David Strickland, however, told reporters that the agency conducted extensive tests on Smith's vehicle and found "no other vulnerabilities" beyond trapped floor mats. [Ibid]

Consumer advocates and safety groups have raised concerns that flawed electronics could be causing unwanted acceleration in the Toyotas. They have questioned the reliability of the event data recorders studied by the government, saying they could be faulty or fail to tell the whole story of the individual crashes. [Ibid]

To promote safety, LaHood said NHTSA was considering new regulations. They include requiring brake override systems on all vehicles, standardizing keyless ignition systems and requiring event data recorders, or vehicle black boxes, on all new vehicles. Congress considered sweeping safety legislation last year that would have required brake override systems, raised penalties on auto companies that evade safety recalls and given the government the power to quickly recall vehicles. But the bills failed to win enough support. Since the recalls, Toyota has installed brake override systems on new vehicles. The systems automatically cut the throttle when the brake and gas pedals are applied at the same time. [Ibid]

In May 2011, U.S. Federal safety officials say problems with the steering in Toyota Corollas were not caused by parts failures. The National Highway Traffic Safety Administration began looking into 2009 and 2010 model Corollas in February after getting about 80 complaints. Many said the cars felt as if they were drifting off course. But safety officials say the problems were because drivers preferred a different feel to the steering wheel. The agency says Toyota has come up with a repair for customers who aren't satisfied with the electronic power steering. [Source: AP]

Lawsuits Against Toyota Over Sudden Acceleration

In September 2010. Toyota urged judges to throw out the sudden acceleration suits saying they were based in on anecdotes and they had failed to identify any specific defect in the vehicles.

In September 2010 Toyota said it had settled the law suit involving the fatal car crash in San Diego---in which four people were killed in a runaway Lexus--- that drew so much attention to the sudden acceleration problem but didn’t reveal the terms of the settlement. Later it was revealed that Toyota paid the family $10 million without admitting or denying liability. Investigators determined that a wrong-size floor mat trapped the accelerator and caused the crash. In April 2011, a jury found Toyota not responsible for a 2005 crash involving a Scion blamed on a problem with the floor mat or electric throttle. In that case a driver in Long Island, New York blamed sudden acceleration for causing him to crash into a tree.

In October 2010, the insurance company Allstate sued Toyota demanding $3 million in compensation for the $3 million it had pay to settle sudden acceleration claims involving Toyota vehicles.

In November 2010, a Los Angeles judge ruled that he would leave intact the bulk of a consumer class-action suit against Toyota seeking damages for economic losses---in the form of lost resale value’stemming from complaints about cars sudden acceleration. Approximately 40 million individuals are participating in the class action suit. According to the terms of the suit they do not need to prove anything is wrong with their cars.

As of January 2011, seven insurers had sued Toyota in an attempt to recover money they paid to cover crashes blamed on sudden acceleration. The insurers cited data that blames 725 crashes that lawyers claim could have been prevented if the automaker had taken prompt action.

Changes Made at Toyota After the Sudden Acceleration Crisis

Steve St. Angelo, a longtime executive at Toyota in the United States, and several other longtime American executives told the New York Times a new era has arrived at Toyota and its face is Akio Toyoda, the President of Toyota since 2009. They say Toyoda has come to appreciate how closely Toyota flirted with disaster in the United States---and is prepared to shake things up because of it. [Source: Micheline Maynard, New York Times, June 2, 2010]

Micheline Maynard wrote in the New York Times, “Interviews with current and former executives at Toyota, government regulators and others who deal regularly with the company suggest that Mr. Toyoda has, in the least, begun to bridge the gap between the company’s Japanese corporate culture and its biggest and most important market, the United States.” [Ibid]

“I don’t think, being in Japan, that he or many people had a sense of just how stirred up things were in the U.S., from a regulatory standpoint, from an administration standpoint, from a customer standpoint, from a dealership standpoint,” said James E. Lentz, the president of Toyota Motor Sales U.S.A. [Ibid]

“Since Mr. Toyoda traveled to Washington to appear before a House committee, the company has been awash in efforts to prove it is on top of its quality crisis,” Maynard wrote. “It has named executives like Mr. St. Angelo in each of its six regions to watch over quality; formed an outside advisory panel led by Rodney Slater, the former secretary of transportation, to give an independent look at future steps to take; and sped up the pace in which it decides to recall cars.” [Ibid]

“Instead of Japanese engineers telling Toyota’s American executives only the information they felt was necessary for them to know, the engineers are now seeking the Americans out for suggestions on how to improve, they say. Toyota American President Lentz He said the company was also learning valuable lessons. The recall uproar has taught him that Toyota’s practice of exhaustively studying options before making decisions was causing unnecessary delays.” “We may not be able to wait for 99 percent of the information Toyota needs, Mr. Lentz said. “Maybe 75 percent is enough. There are advantages to being a company of action.” [Ibid]

New, More Aggressive Strategy for Toyota

Mr. Toyoda told the New York Times he was determined to prove Toyota could transform itself into an innovative, fast-moving company. “These are the things we at Toyota had lost along the way,” he said. “We will get some of that spirit back again.”

In March 2011, Toyota announced a new “global vision” strategy with the target of making profits of ¥1 trillion (about $15 billion) that emphasized focusing on emerging markets such those in China, India and Brazil and launching more hybrid models. There is also a movement to: 1) decentralize power away from Japan giving, for example, management in Europe more decision-making power over its region; 2) give engineers more say in non-engineering matters; 3) rely less on in-advance planning and more on correcting problems as they arise; and 4) make Toyota more nimble by quickening the pace in which decision are made and new technologies exploited.

Among the first examples of the new “outside the box” thinking were aggressive moves in India with both compact and higher-end vehicles and the quick development of the electric SUV with Tesla motors, using an engine with no rare earths. Just for Toyota to use Tesla technology in its vehicle was a big step for them.

Things Improve for Toyota

By March 2009 sales were beginning to pick up significantly. Toyota almost doubled production for the month. In June 2010, President Toyoda said the time had come for Toyota to turn itself around. Construction was restarted in the Mississippi plant.

Even with the recalls, a decline in sales and other problems Toyota made a profit of ¥147.52 billion (more than $1.5 billion) in fiscal 2009-2010, a turnabout from a ¥461.01 billion loss in fiscal 2008, when sales were hurt by the Lehman shock recession. Toyota’s ability to make a profit was attributed to cost cutting efforts.

Toyota reported a profit of ¥289.16 billion for April to September 2010, compared to a loss of ¥55.99 billion the same period a year before.

Toyota made a group net profit of about $5.7 billion and a group operating profit of about $6.5 billion in fiscal 2010-2011 on about $210 billion in sales. It marked up these numbers even though sales dropped and profits dived 77 percent in forth (January to March) quarter because of a drop in domestic sales and production problems associated with the March 11 earthquake and tsunami. Toyota, including Daihatsu and Hino, sold 7.31 million vehicles globally up from 7.24 million the previous year and sold 5.07 million vehicles overseas up from 5.07 million the previous year.

Toyota sold 8.42 million vehicles globally in 2010, enabling it retain its ranking as the world’s top automaker for the third straight year. No.2 GM sold 8.39 million vehicles.

AP reported: “Toyota still has a loyal customer base that believes the cars are safe and will last forever. Many Toyotas run for hundreds of thousands of miles with little more than routine maintenance. It also has a reputation for fuel efficiency, led by the Prius.”

Toyota Rankings in 2010 and 2011

Honda, Subaru and Toyota were ranked the best all-around automakers by Consumer Reports for the third year in a row in 2011. Volvo was forth, followed by Ford and Hyundai. Chrysler, GM, BMW and Mercedes Benz were near the bottom. In 2010, Honda and Subaru tied for first with an overall score of 77 out of 100. They were followed by Toyota and Hyundai with Nissan and Volkswagen tied for forth.

In December 2010, the U.S. Insurance Institute for Highway Safety gave eight Toyota vehicles its top award. The leaders were Hundai and Volkswagen, each with nine. Toyota did the best of any Japanese automaker. A total of 66 awards were given. Toyota did not receive any awards the year before.

In a 2011 Consumer Report survey Toyota just edged out Ford as the top automaker in the United States in terms of brand perception. Ford ranked ahead of Toyota in most categories but Toyota’s strong showing in the green car category was enough to give it a slim edge over Ford. Honda and Chevrolet were third and forth respectively.

Consumer Report quality survey published in October 2010 based on fewest complaints by owners: 1) Toyota’s Scion; 2) Porsche; 3) Honda’s Acura; 4) Honda; 5) Nissan’s Infiniti; 6) Toyota; 7) Subaru; 8) Volvo; 9)

In May 2011, Toyota was ranked No.1 among automakers and 27th overall as the world’s most valuable brand by research firm Millward Brown.

In June 2011, Bloomberg reported, “Toyota’s luxury Lexus line retook the top spot among all auto brands in J.D. Power & Associates’ Initial Quality Study, advancing from fourth the previous year, the market-research company. The Toyota brand ranked seventh, up from 21st a year ago. The performance matched Toyota’s results in J.D. Power’s 2009 survey, before the first recall of its vehicles for floor mats at risk of jamming accelerator pedals. Toyota’s decline in the 2010 survey “was largely driven by consumers being concerned that they might have a problem on their vehicle and it was unique to the 2010 model year,” David Sargent, J.D. Power’s vice president for global vehicle research, said. The survey measures consumer complaints in the first 90 days of vehicle ownership. [Source: Bloomberg, June 27, 2011]

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Yomiuri Shimbun, Daily Yomiuri, Japan Times, Mainichi Shimbun, The Guardian, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

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© 2008 Jeffrey Hays

Last updated August 2011

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