Apologetic Toyota looking to outside quality input

NAGOYA/DETROIT Fri Feb 5, 2010 6:25pm EST

1 of 11. Toyota Motor Corp President Akio Toyoda bows at the start of a news conference in Nagoya, central Japan February 5, 2010.

Credit: Reuters/Kim Kyung-Hoon

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NAGOYA/DETROIT (Reuters) - Toyota Motor Corp's 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 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 January 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 readied a solution for braking problems on two of its hybrid models, the hybrid Fusion and Mercury Milan.

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.

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.

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.

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)

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Comments (10)
nel04 wrote:
Is it me or does it seam the American Government are making far too much of this and scaremongering people. Who has the most to gain from the Toyota name being tarnished.. Oh yes the American Government, they do own most of GM and Chrysler.
Car manufactures have safety recalls all the time and there is plenty going on at the minute from different manufactures have we heard as much about them..
Seams the American Government just wants this to keep running we must ask ourselves why.
Hasn’t the same problem happen to a Ford truck in Australia?
Have we heard about that?
Didn’t America do the same with Audi in the late 80s when they where starting in the states.
This all seams like point scoring, you can bet this will be bought up at the next elections look what we did for the people and look how strong GM is now.
But make no mistake Toyota is a big American company and the government are going to force them to take most of the supplier base back to Japan at the cost of American jobs.

Feb 05, 2010 3:02am EST  --  Report as abuse
Dash496 wrote:
Toyota is only sorry to get caught.
If the defect affects the bottom line then Toyota should have fixed it sooner.
I don’t accept an apology that is too little to late.
If they took the cars off the sales lot then that could be a hint.
Don’t say this is an innocent issue when it is not.
Regards
Dash

Feb 05, 2010 11:38am EST  --  Report as abuse
Potatoe1 wrote:
Toyota lost it’s brake manufacturer when they had a fire at the plant, so they decided to get multiple suppliers. That lead to these problems. They are well known for supporting their parts manufacturers. I’m sure they will get back to their original business model of supporting their suppliers and getting quality parts.

Feb 05, 2010 12:39pm EST  --  Report as abuse
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