Toyota President Will Not Attend Congress Hearing on Safety Lapses; Two U.S. Plants Idled as Demand Slides

Toyota president Akio Toyoda says that he will not attend a U.S. Congressional hearing on the automaker's safety lapses. In a public statement made at Toyota's Tokyo (Japan) headquarters, Toyoda said that the company's U.S. executives will answer questions at the hearing on 24 February. Toyoda declared that he wants to focus on strengthening quality controls in the company's production operations. He also added that Toyota is working on fitting a brake-override system in all future models worldwide that will override the accelerator in the event that both pedals are pressed at the same time.

In Japan, Toyota has taken out full-page advertisements in all the major newspapers publicly apologising for the lapses as dealers begin fixing software glitches on hybrid models sold in the country. Toyota's advertisements focus on the recalls in Japan, which have affected the Prius hybrid, the Sai hybrid (sold in Japan only), and the Lexus HS250h, also sold in North America. The recall has encompassed some 10,820 units of the Sai and about 12,423 units of the Lexus HS250h in Japan. Production of the two hybrid models is expected to resume from next Monday (22 February), Toyota said in a statement. The automaker had initially planned to offer repairs from early March, but it accelerated efforts to complete the software to remove the risk of drivers encountering brake problems, it added.

Meanwhile, Toyota has announced that it will idle two of its U.S. plants in the coming weeks in the face of slowing sales of its popular models in the wake of the ongoing recall and safety story (see United States - Japan: 16 February 2010: Toyota Cuts 2010 Global Production Forecast; U.S. NHTSA to Investigate Fault Reports Dating Back to 2000). The company's plants in Georgetown, Kentucky and San Antonio, Texas will be idled for up to 14 working days, according to the company. The Georgetown plant will stop producing the Toyota Camry on 26 February and again in March, while the San Antonio facility will stop making full-size trucks from 15 to 19 March and 12 to 16 April. "This is to keep inventory in line", Toyota spokesperson Mike Goss said. The stoppage will affect nearly 8,600 workers at the two plants in total, and it is also likely to affect engine plants in Kentucky and Alabama as well. The stoppage is not likely to affect employment, however, as all employees are being ordered to continue to report to work, where they will be assigned to plant-improvement tasks and undergo additional training.

Outlook and Implications

The decision by Toyoda to send his U.S. executives to the Congressional hearing is unfortunate to say the least and plays directly into the hands of the media in North America, which have already whipped up something of a storm over the controversy. U.S. citizens like their leaders to "front up" when required and Toyoda's decision to miss the hearings will send a negative message to all concerned. Given Japan's unparalleled tradition of honour, Toyoda's decision is hard to fathom. Whether it is deliberate of naive, Toyota cannot afford any more PR gaffes along these lines. It enjoys tremendous loyalty from existing customers and its dealer group, but it really needs to handle the situation with greater transparency and humility, particularly in the United States, where the saga is clearly being used as a stick with which to beat Toyota and attack its reputation.

Toyota is undoubtedly feeling the pain of ongoing public uncertainty about its products, and this has started to manifest itself in the company's sales in North America. Toyota announced yesterday that it was revising downwards its global production target for 2010 from 7.5 to 7.4 million units, and the first sign of this is the decision to idle its U.S. plants. Toyota maintains its production levels in line with sales to avoid inventory build-up, a trap that the domestic U.S. automakers have fallen into in years past; thus as sales slow, Toyota is being forced to slow production too. The latest stoppage follows a week of idled production at the beginning of this month when Toyota decided to halt output in order to rush a pedal fix to its plants, so as to avoid having an excess of vehicles sitting around that need fixes. That previous production stoppage encompassed five of Toyota's North American plants, with eight vehicles affected; the new production stoppage is more limited in scope, thus far. However, if Toyota continues to see sales decline as prospective clients avoid the company's products in the United States, additional plant stoppages could follow.