Toyota to Recall 223,000 Hybrid Vehicles in Japan, Suspends Exports of Two Models

Toyota has announced a third recall, this time over an unintended braking issue affecting some of its popular models in global markets. Just under 500,000 vehicles are being recalled in total. This latest recall is in response to ongoing complaints that its new Prius sedan experiences a loss of braking ability when transitioning from regen to hydraulic brakes on bumpy or slippery surfaces; the delay does not indicate a brake failure. The company says that the problem can be fixed in 40 minutes with new software that oversees the controls of the anti-lock brakes. The fault has led to 124 complaints and four crashes in the United States alone; no figures have been made available for other markets. In total, the Japanese automaker is recalling 437,000 units of its 2010 Prius, Sai, Prius plug-in hybrid (PHV), and Lexus HS250h hybrid models (see table below).

After mounting customer and media concern that the company was continuing to sell vehicles that it knew featured potentially defective parts, the automaker has stopped the sale and production of two models affected by this latest recall. Production of the automaker's Sai and Lexus HS250h hybrid models at its Kyushu plant in Japan will be halted as the company does not have the updated software for those models yet. Toyota has halted production of these models starting from today, and although it has been labelled a temporary shutdown, media reports have indicated that an email sent to company employees suggests that the company does not know when production will resume. Toyota has also revealed that it had already fixed a software glitch affecting the anti-lock brake system (ABS) on the Prius model at the end of last month, and those cars being produced now will not be subject to any recall.

While announcing the recall and stop-sale of these models, Toyota president Akio Toyoda said in a statement that, "I apologise for causing trouble and worries for many customers over the quality and safety of Toyota…We sincerely acknowledge safety concerns from our customers." He further promised that the Japanese automaker will "redouble its commitment to quality" and that it will consider every possible measure to regain consumer confidence as soon as it can.

Outlook and Implications

Toyota is in a very uncomfortable position at the moment. Its products have long been known for their rock-solid reliability and excellent resale values. However, following the announcement of the two biggest recalls in its history (see United States: 1 October 2009: Toyota to Recall 3.8 mil. Vehicles in U.S. After Fatal Accident and United States: 25 January 2010: Second Major Recall Hits Toyota, 2.3 mil. Vehicles Affected), several safety regulation agencies and governments are launching a spate of investigations into the company. Toyota could have continued to sell the vehicles affected by this latest recall, but questions were increasingly being raised by a media that is beginning to ask when exactly Toyota first became aware that there was a brake problem, and how long it has been investigating the issue. Media sources have suggested that several complaints have been issued against these models, starting from early 2009. It seems that instead of trying to convince the buying public that the vehicles are safe, the automaker has decided to emphasise that safety comes before profits and has shut down sales and manufacturing of the affected models. The problem is that Toyota has not yet even identified a fix for these vehicles, so no new parts are on their way to its plants or dealers that will allow production to resume or cars to be sold anytime soon.

The move could prove to be a disaster for the automaker given the impact it is likely to have on its sales volumes, at least during the current quarter. The affected models are expected to account for roughly 50,000 sales volumes per month this year in global markets. To lose those kinds of sales volumes in a market that is slowly turning around, especially when competitors are offering up vehicles that are better than they have ever been, would see Toyota run the risk of losing out on considerable revenues.

To its credit, Toyota has not been sitting idly by as its quality issues have begun to spiral into a much larger public crisis. It has responded massively with the recall campaigns, but at a cost to its shrinking coffers that it would rather not have to bear. Toyota's next real critical task will be to convince the public (and government agency investigators) that the solutions it has put forth have indeed solved the issues. With 20 fatalities reportedly related to its recalls, and Toyota admitting that there are engineering issues that need to be addressed, there is the possibility of real damage being inflicted on the company's reputation. However, efforts are under way internally at Toyota to renew the focus on quality and to ensure that all of the goodwill it has built up over the years is not lost after a decade during which expansion of business and growth usurped quality and reliability as Toyota's number-one concern.