By Hans Greimel and Mark Rechtin
Published: January 21, 2011


TOYOTA CITY, Japan (AdAge.com) -- Late last spring, as Toyota rushed to put the finishing touches on its redesigned Yaris subcompact, engineers on the project received a jolt.

A special team of Toyota inspectors had just finished examining the car as part of new "devil's advocate" evaluations instituted after a spate of product recalls and a crisis of confidence for the brand that had spun out of control.

The inspectors, who had not been part of the car's development, found a seemingly minor problem with an innocuous part. When pulling the windshield wiper off the glass, they found that fingers could get pinched in a loop-shaped bracket.

In years past that would have been considered a mere annoyance too trivial to fix. But in 2010 -- Toyota's annus horribilis -- it was enough to send engineers back to the drawing board and put the project behind schedule.

Toyota and the supplier switched to crisis mode. They designed a new pinchless wiper and the Yaris still made the scheduled start of production in November.

"We really had to push hard," recalled Katsutoshi Sakata, Toyota Motor Corp.'s lead executive for quality research and development. "But there's a new mindset here that we will address even the smallest of issues."

A year ago this week, Toyota suspended U.S. sales of eight models linked to runaway acceleration -- and spiraled into a humiliating global safety crisis. The company has recalled more than 16 million vehicles globally since the fall of 2009 for a variety of problems.

Now the company says it is making good on the reforms it promised.

"A recall issue like what happened last year will never happen again at Toyota," Takeshi Uchiyamada, Toyota's top engineer and board member in charge of global research and development, vowed in an interview at Toyota's headquarters outside Nagoya, Japan.

But will the changes stick? Indeed, has Toyota even found the problems?

Toyota says there's no evidence faulty electronics led to the complaints that triggered the recall crisis. But critics refuse to dismiss that possibility.

"We're still having sudden-acceleration incidents, and Toyota is still telling customers, 'We can't find anything wrong. It must be you,'" said Clarence Ditlow, executive director of the Washington-based Center for Auto Safety.

Still, Toyota has checked off many items from the emergency to-do list it announced in the first half of 2010. Larger inspection teams are in place and weeding out glitches. Brake override systems and accident data recorders are used in vehicles. New training centers have taught hundreds of manufacturing and supplier managers. U.S. operations have a new, stronger line of communication to the executive suites in Japan.

The "devil's advocate" approach to vehicle design is a key element of the new Toyota. Under the plan, the company gives engineers four extra weeks to tear down and evaluate new vehicles. The goal is to use the car in ways the owner's manual doesn't even consider.

That's because Toyota found out the hard way last year that customers use cars in unpredictable ways. It traced some unintended acceleration cases to gas pedals being jammed by stacked floor mats -- an ill-advised practice for which Toyota engineers didn't plan.

Local control
Toyota also is putting new emphasis on local control. After the recalls, Toyota installed more North American executives at its North American plants. Today, all but one such plant is led by a local manager.

"Three or four years ago, that was a dream," said Steve St. Angelo, Toyota's chief quality officer for North America. "It's still a consensus decision-making company, but I have a heck of a lot more authority."

Another change: The U.S. side now calls the shots on when to recall vehicles. Last year's sales halt of the Lexus GX 460 and recalls of the Sienna stop-latch switch bracket and the Avalon steering lock were all pushed by the North American office, Mr. St. Angelo said. "Recall is not a four-letter word," he said. "If it's suspicious, I'm going to do the recall."

Toyota also is combining all chatter about vehicle quality from internal and external sources into a single database. The information will be compiled to speed trend and root-cause analysis, said Dino Triantafyllos, VP-quality for Toyota Motor Engineering & Manufacturing North America.

Those results are passed along to the North American product quality committee and to Toyota's worldwide quality board in Japan.

'Same-old, same-old'
But not everyone agrees Toyota has solved the problems that led to last year's crisis. One skeptic is Mr. Ditlow of the Center for Auto Safety. He said Toyota's new approach to dealing with complaints of quality glitches such as unintended acceleration still is "pretty much the same-old, same-old."

Sean Kane, president of Safety Research & Strategies of Rehoboth, Mass., and a consultant used by plaintiff lawyers in suits against Toyota, describes Toyota's approach as an "attack" mentality to blame the victim.

"You can find incidents related to driver error, but there also are the credible complaints where Toyota dealers have experienced unintended acceleration, or engines racing, that can't be explained," he said. "I don't expect Toyota to come clean. They are biding their time."

Meanwhile, two Toyota-commissioned independent investigations into quality control and unintended acceleration are expected to release findings this year. And the first of hundreds of unintended acceleration lawsuits filed against Toyota will likely go to trial in 2013.

Toyota's reforms aim to turn the page and ensure that last year's quality crisis never happens again. But memory of the problems won't fade easily.

LOS ANGELES -- A year ago this week, Toyota suspended sales of eight models linked to potentially deadly unintended acceleration and spiraled into a crisis that led thousands of car buyers to cross the brand off their shopping lists. A year later, where does the brand stand with the American car buyer? Much better, for sure. But Toyota is not the powerhouse it was before the 2010 quality crisis -- and may not be for years to come.

At the peak of the crisis, in February and March, BrandIndex, which tracks the public perception of brands, said Toyota's standing among automakers had dropped from No. 1 to third-from-last. Now Toyota ranks 16th of 28 brands among in-market car shoppers in terms of perception of quality, value, reputation, impression, satisfaction and recommendation.

"Toyota has convinced a lot of existing customers that the crisis is behind them and they can be trusted," said Ted Marzilli, BrandIndex global managing director. "But there still is some doubt about purchasing a Toyota among the general population."

Market research firm Compete Automotive says Toyota dealers' ability to close sales with customers fell sharply in January and February of last year. But after Toyota cranked up incentives in March, and kept them high the rest of the year, closure rates recovered to traditional levels.

"Toyota is still way off pace," said Lincoln Merrihew, Compete's managing director. "Their ray of hope is the upward tick in shopper volume and better conversion rates in December. There's a wisp of recovery evident for Toyota, but there's a long, long way to go."

Toyota executives say the level of conquest sales has returned to pre-recall levels. Toyota typically sells about 45% of its vehicles to people trading in a Toyota, with 55% of buyers won over from other brands. Immediately after the crisis erupted in January, conquests dropped to below 50% of the total. But by summer the percentages had returned to normal levels, Toyota said.

And the 2011 Toyota FJ Cruiser and Sienna, and Lexus IS, GX and RX vehicles recently were named the top residual-value performers in their segments by Kelley Blue Book. The report projects residual values for current-year vehicles five years from now.

Overall, Toyota finished second to Subaru among brandwide residual values. Paradoxically, alleged lower resale values are at the crux of the class-action lawsuit against Toyota.

With Toyota Division sales down 1% in 2010, its market share plunged from 14.3% to 12.8%. Executives say their 2010 sales swoon could be attributed in part to an aging product lineup.

After a paucity of fresh offerings in 2010, Toyota plans to launch 10 new or redesigned products in 2011, including the Camry, Yaris, Prius V wagon, Scion iQ minicar and the Lexus CT 200h entry-luxury hybrid.

"We will grow faster than the industry," said Bob Carter, Toyota Division general manager. "What drives this is new product. We are planning to be aggressive marketers, but we're still underspending the competition."

Jim Lentz, president of Toyota Motor Sales U.S.A., says the worst of the crisis is over.

"Toyota's image is coming back," he says. "We want to close the door on what happened, but not on why it happened."
-- Mark Rechtin, Automotive News