WRAPUP 7-Apologetic Toyota looking to outside quality input

Fri Feb 5, 2010 6:20pm EST

 For more on Toyota's safety recall, click [ID:nN27231388]
* Toyota's president Akio Toyoda apologizes
* Toyoda says he will head quality task force
* Bringing in outside quality experts
* Toyota shares close 4.1 pct higher on NYSE
* Ford to fix software on hybrids to address brake issue
 (Recasts first sentence, adds closing share price, analyst
comments)
 By Chang-Ran Kim and Kevin Krolicki
 NAGOYA/DETROIT, Feb 5 (Reuters) - Toyota Motor Corp's
(7203.T) president apologized on Friday for safety problems and
said the automaker would bring in outside experts to review
quality controls, a highly unusual action for a company that
has epitomized world-beating industrial standards.
 "I would like to take this opportunity to apologize from
the bottom of my heart for causing many of our customers
concern after the recalls across several models in several
regions," Akio Toyoda, the grandson of Toyota's founder, told a
news conference in Nagoya, Japan.
 Toyoda's comments were his most extensive since the latest
recall began in January. Toyota has issued two recalls since
last November.
 Investors were relieved that Toyota (TM.N) finally
announced concrete steps to deal with the quality crisis. The
company's shares, which have taken a beating recently, ended
4.1 percent higher at $74.71 on the New York Stock Exchange on
Friday. Since Jan. 21, Toyota has lost $30 billion or a fifth
of its market value.
 But in a sign the carmaker still faces serious problems,
credit ratings agency Standard & Poor's put Toyota and some of
its suppliers on watch for a possible downgrade. S&P cited
"increased concern over the potential negative impact on
Toyota's business profile of unfolding developments related to
recent quality issues."
 Toyoda apologized for safety problems that have left the
Japanese carmaker "in crisis".
 He said Toyota would strengthen its inspection process,
respond faster to customer complaints and seek input from
outside experts.
 Toyoda also pledged to set up and oversee a quality
improvement task force involving external experts monitoring
quality management. It was not clear how the global quality
management committee would function.
 Turning to independent experts is "about as good as you can
expect," said UBS analyst Philippe Houchois.
 "I've seen a lot of recalls, but I don't remember seeing
that step of getting an outside expert. That's quite an
innovative or aggressive approach to try to solve the problem,"
he said.
 Toyota, the world's largest automaker, has recalled more
than 8 million vehicles around the world for problems with
accelerators. Episodes of unintended acceleration in Toyota
vehicles have been linked to up to 19 crash deaths in the
United States over the past decade.
 Toyota is also mulling a recall of Prius, its top-selling
hybrid, for a braking problem.
 The company has estimated that lost production, lost sales,
parts to fix problems, staff training and repairs to recalled
vehicles will cost Toyota $2 billion from January to the end of
March.
 The news conference came after U.S. competitor Ford Motor
Co (F.N) readied a solution for braking problems on two of its
hybrid models, the hybrid Fusion and Mercury Milan.
[ID:nN0497845]
 CARMAKER IN CRISIS
 Until recently, the 77-year-old Toyota was considered the
paragon of lean production, quality control and continuous
improvement. But the crisis generated by the recalls and the
way the company has handled itself publicly have led to
widespread criticism. [ID:nTOE612039]
 Toyoda, 53, bowed in apology after addressing the news
conference and answered other questions, some in English, after
an official tried to end the late-night session.
 Toyoda became the company's president last year, promising
to steer it out of its worst downturn in history and bring
greater transparency to its corporate culture. [ID:nTOE60S0A7]
 The current crisis, surrounding accelerators produced by an
American supplier, highlights a possible flaw in the company's
vaunted lean production system, analysts have said.
 By reducing complexity from their products -- for instance
by cutting the number of suppliers and using common parts
across different products -- manufacturers who have followed
the Toyota Way have cut costs and increased profitability --
but left themselves terribly exposed to the unexpected.
 "One of the ways Toyota has reduced costs in their lean
program was commonality of parts," said Alex Blanton, an
analyst at Ingalls & Snyder.
 "Well, if that part has a problem, then it affects many
more models. If they'd been using a lot of different gas pedals
for these models and they had problems with one, they wouldn't
have to shut down the company."
 In January, Toyota temporarily suspended U.S. sales of
eight models and halted production of the vehicles at five
facilities in the United States and Canada.
 NOW PRIUS
 Safety regulators in the United States and Japan are
investigating a braking problem with Toyota's latest version of
the Prius, Japan's top-selling car last year and an icon of
green design that has lifted the public image of the whole
company.
 Japan's transport minister said he had heard from ministry
officials that Toyota would recall or voluntarily fix the
automobiles affected, including those shipped overseas.
 "Toyota's response came up short from the perspective of
its customers," Transport Minister Seiji Maehara said.
 Since its launch last May, Toyota has sold more than
300,000 of the newest version of the Prius worldwide, including
around 200,000 in Japan, 103,200 in the United States and
29,000 in Europe.
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 To read a Breaking Views column on Toyota, click on
 [ID:nN04171554]
 To view a Reuters Insider Breaking Views, see:
 Breakingviews: Fine Mess for Toyota
 link.reuters.com/jym57h
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 Toyota's and Ford's hybrids capture the energy from braking
to recharge an on-board battery to boost mileage from its
gasoline engine.
 Toyota Prius owners have complained that on bumpy roads and
on ice, the regenerative brakes of the vehicle appear to slip
and it lurches forward before the traditional brakes engage.
 The U.S. National Highway Traffic Safety Administration
said it has received 124 complaints from drivers of the
third-generation Prius. The agency said that motorists have
blamed four crashes on this problem.
 Toyota and Ford have said that they have come up with
software fixes for the problems.
  (Reporting by Chang-Ran Kim in Tokyo and Kevin Krolicki in
Detroit; additional reporting by Yumiko Nishitani, Taiga
Uranaka, Elaine Lies, Fang Yan in Japan, James Kelleher in
Chicago; John Crawley in Washington, D.C. and Helen
Massy-Beresford in Paris; writing by Matthew Lewis; editing by
Toni Reinhold and Andre Grenon)