/ 24 February 2010

Toyota faces grilling in Congress, probe in Japan

Toyota’s president braced for tough questions from a US congressional panel on Wednesday after the Japanese carmaker conceded it had let safety standards slip and could still not explain most incidents of unintended acceleration.

The pressure was set to increase after Japan’s transport regulator said it would look into 38 reports of unintended acceleration with Toyota cars over three years, the first official probe into the issue in its home market.

“The number of complaints about Toyota cars is not out of proportion to its share of the overall number of vehicles registered,” Transport Minister Seiji Maehara said. “But given the ongoing issue, we would like to investigate Toyota cars.”

The probe will also look at other carmakers for same complaint.

President Akio Toyoda again apologised for safety issues that have led to the recall of more than 8,5-million vehicles, been blamed for at least five deaths and set off fierce criticism of both the world’s largest carmaker and US regulators.

Toyoda’s congressional hearing and the carmaker’s deepening woes are also front page news in Japan, where politicians are publicly expressing worries over the potential impact on economic growth, exports and the country’s overall image.

It has also dented the attractiveness of the stock market, according to a Reuters poll of retail investors.

“We pursued growth over the speed at which we were able to develop our people and our organisation, and we should sincerely be mindful of that,” Toyoda said in written testimony ahead of his appearance on Wednesday.

‘Shame on you Toyota’
On the first day of congressional hearings, Rhonda Smith, driver of a Toyota Lexus in a 2006 incident where her car reached 160km/h, said she felt Toyota and the National Highway Traffic Safety Administration (NHTSA) had dismissed her belief that the vehicle’s electronics were to blame.

“Shame on you, Toyota, for being so greedy. And shame on you, NHTSA, for not doing your job,” a tearful Smith told a panel of the House Energy and Commerce Committee.

Tuesday’s hearing was mostly measured in tone.

Toyoda, grandson of Toyota’s founder, may not fare as well before the often more vocal House Oversight and Government Reform Committee on Wednesday. That hearing is due to begin at 4pm GMT.

The tough stance taken by US politicians has triggered mixed feelings among many Japanese.

“Toyota had some problems in its response. At first it didn’t pay respect to the American standard where a lot is based on rules, and lawsuits are common. It also relied too much on its number one position,” said Susumu Saito, a retired man in his 60s who lives in Tokyo.

“But at the same time I think the US is doing too much now, and that is because they are having the election later this year and the lawmakers need to boost their image.”

‘We lost sight of the customer’
Toyoda had already pledged to focus more on quality and less on growth when he took over the reins last June, aiming to reduce the number of models sold worldwide and “get back to basics”.

“I think we outgrew our engineering resource,” Toyota’s top-ranking US executive, Jim Lentz, told the hearing. “And the most important thing is that we lost sight of the customer.”

Lentz agreed that 70% of complaints about unintended acceleration remained unexplained. “That is probably fair to say,” he said. “There are many factors that lead to it.”

Aizawa Securities analyst Toshiro Yoshinaga said slowing down car development and product launches to focus more on safety and quality would not necessarily dent Toyota’s competitiveness, as it would be in line with the industry trend.

“The replacement cycle for automobiles is getting longer globally. It is quite natural if the development cycle gets a little longer as well,” he said.

Following the congressional hearing on Wednesday, Toyoda plans to hold a briefing in Washington at 10pm GMT.

Electronics questioned
Toyota’s recent recalls have focused on loose floor mats that can pin down the accelerator, sticky accelerators and a braking glitch affecting its Prius and other hybrid models.

But many lawmakers, some Toyota owners and safety experts, fear Toyota’s electronic throttle control system can be subject to electromagnetic interference.

“It’s a matter of safety and quality, so it is important for them to gain the understanding of the American people and work to rebuild trust,” Japanese government spokesperson Hirofumi Hirano told a news conference. “The fact that there was a fault in quality must be accepted gravely.”

While Toyota’s problems have damaged its once gold-plated reputation for quality, car industry recalls are commonplace.

South Korea’s Hyundai stopped US sales of its 2011 Sonata sedan due to potential faults in the front door latches, and said it would recall 47 300 cars, nearly all in the South Korea.

India’s top carmaker Maruti Suzuki India, 54%-owned by Japan’s Suzuki, is recalling 100 000 of its A-Star hatchbacks to fix a possible fuel leak.

UBS Securities car analyst Tatsuo Yoshida said Toyota’s plan to localise decision-making on recalls — one of the key action points of its new strategy — would raise standards for the industry, forcing other makers to follow suit.

“As Toyota is best-positioned to adopt this system, the plan would eventually help enhance its relative competitiveness. On the other hand, it will create a high hurdle for smaller players, those without local bases.”

Shares in Toyota fell 1,5% in Tokyo, having lost about a fifth of their value since January 21, when it expanded its recall to deal with sticking accelerators. Hyundai lost 2,6% in Seoul, while Maruti shares rose 2,4%. – Reuters