Toyota's Pedal-Gate: "A Fiasco With Unfortunate Consequences"

Toyota’s decision to suspend production and sales in North America of eight recalled models is sending shock waves through seismically sensitized Japan . Tokyo’s Nikkei [sub], usually not prone to sensationalist reporting and strong language, says today that “the fiasco is likely to have unfortunate consequences for the automaker’s image and earnings.”

According to the Nikkei, the eight models recalled for sticking accelerator pedals accounted for about 60 percent of Toyota’s North American sales last year. The production freeze will affect five North American plants. “A prolonged halt would inevitably influence Toyota’s bottom line,” warned an analyst at one major securities firm.

According to the Nikkei, “it is rare for an automaker to suspend production and sales because of a recall.” A Toyota spokesperson pointed out that this is not the first time for the company to make such a move. However, they acknowledged that the scale this time is unusually large.

Replacing a failed part in some 4m cars ( U.S. and Europe combined) is a nightmare. First, you must have the part. 4m of them. Due to just in time manufacturing, neither Toyota nor the suppliers will have warehouses full of gas pedal assemblies – which is good, because they could ship them to the scrap yard. Under tight supervision, so that they don’t somehow get back in the replacement market and cause further grief. A new part must be developed, tested, certified, and produced in huge quantities. Supplier capacities are tuned to the steady demand of production, not to a huge demand peak. If it just comes down to some washers, as some say, it will be less of a problem. If the pedal assembly has to go, it’s a huge problem. In any case, replacement procedures have to be developed, mechanics need to be trained. Dealers need to be reimbursed for parts and labor. My friends who were in charge of recall programs at a major European automaker had gray hair at an early age.

Stopping the sale and production of the affected cars is absolutely the right move. Continuing production and sale before the problem is under control could open the company, and even individual managers, to charges of criminal negligence. Reports of stopped production lines come in from the U.S.A. and Canada.

With stopped production, another battle front opens: Who will get the parts, after the correct ones have been made? Will they go to production or into the channel?

Sandy Di Felice, Toyota Canada spokeswoman, said that the plants in NA will stop producing vehicles for the week of Feb. 1 while Toyota uses the parts from those facilities to repair the vehicles affected by the recall. Don’t believe it. The plants are waiting for the right parts just as eagerly as the dealers.

In a battle for parts, production usually wins. Expect a triage program, where customer cars are being checked for a danger of seizure. The urgent cases get fixed. The not so urgent cases will be recalled another time, to be fixed when the parts are available in quantity.

And now, customer satisfaction takes a hit. Nothing kills customer satisfaction faster and more thoroughly than repeated workshop visits. One workshop visit will be shrugged off, customer satisfaction can even go up if the visit is handled professionally. After the second visit, people get annoyed. After the third visit, people start regretting that they bought the car and will change the brand in subsequent purchases. With the floor mats last year, and the massive gas pedal recall this year, Toyota buyers will make a lot of trips to the shop.