Can Toyota recover from recall woes?

published 12 February 2010

It's been a lousy week for corporate Japan's reputation. Koito Industries admitted faking safety reports on plane seats it had made for 32 airlines. Meanwhile, Honda announced a recall of over 400,000cars with faulty airbags.

And the crisis at Toyota deepened as it announced a global recall of 473,000 petrol-electric hybrid vehicles, including its flagship Prius, to fix brake problems. This followed a recall of more than eight million conventional cars over potentially defective accelerator pedals. There have also been complaints to US safety authorities about steering trouble with the popular Corolla model, raising fears of yet another safety scare.

It's "dreadful" news for Toyota that the Prius, the world's best-selling hybrid car, "has been dragged into the mire", said Economist.com. With competitors rushing to launch their versions, it will be all the more difficult for Toyota to maintain its lead in this fast-growing market. Toyota's estimate of a one-off $2bn dent insales from the fiasco is "fast fading into the rear-view mirror", said Antony Currie on Breakingviews. Mizuho Securities now expects a hit of $6.6bn over thenext two years.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

And the damage to the Toyota brand is incalculable, especially since "crisis management does not get anymore woeful than this", as Jeff Kinston put it in The Wall Street Journal. It took two weeks for the group's president Akio Toyoda to issue a public apology. Toyota has appeared "less than forthcoming" about the problems. It used to have "an edge", thanks to the quality of its cars, but "surely that's been irrevocably shattered now", said Juergen Pieper of Bankhaus Metzler. "I don't think Toyota will recover from this."

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.