Toyota To Halt Sales Of Eight Models, Reputation In Tatters

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Toyota (TM) recently said it expected a 6% increase in global sales this year which would make it the No.1 car company in the world for the second year in a row. The forecast should be insured by the rapid rise in shipments of the Toyota industry-leading hybrid, the Prius.

What a difference a day makes. Toyota announced that it will halt production of eight models which have been the subject of earlier recalls for problems with accelerator pedals. The Wall Street Journal lists these as the RAV4, Corolla, Matrix, Avalon, Camry, Highlander, Tundra, and Sequoia. These models have already been the subject of two recalls, one of 2.3 million vehicles and another of 4.2 million. The Camry is Toyota’s top selling car in North America. According to some reports, the cars with problems were built in Toyota’s US plants.

Toyota will completely stop production of some of the models at the beginning of February.  It is not clear when they will be restarted.

The news is a blow to the Japanese company that had every reason to believe that it could pick up market share in the US this year. Its perennial competitor GM has suffered poor sales as it recovers from a Chapter 11 filing. The same holds true for Chrysler. Ford (F) is doing unusually well now.  Many industry experts believe that there is a chance that Ford and Toyota could sell more vehicles each per month in the US market than GM does before the end of 2010.

Car dealers and the marketers at Toyota’s large competitors are almost certain to take advantage of such a significant safety issue. Audi suffered a tremendous drop in sales in 1986 when news show “60 Minutes” did a segment on the accelerator problems with some of its cars. It took the German car company years to recover is US market share.

It will not be clear for a few days how much trouble the sales suspension of the eight models will hurt Toyota. The accelerator problem could become a product liability issue or could trigger an National Highway Safety Bureau inquiry.  That kind of bad news could damage a product quality image that it has taken Toyota decades to establish.

Douglas A. McIntyre