Toyota recall highlights supplier issues

Rain falls of Toyota cars and trucks at the Tustin Toyota dealership in Tustin, Calif.

TEXT OF STORY

Kai Ryssdal: Boy, you have got to feel at least a little bit sorry for Toyota. Last night, it expanded its enormous recall to include another million-plus vehicles in North America. Not to mention a whole slew of them in Europe and China.

The culprit, as you have probably heard by now, is the gas pedal -- made not by Toyota, but by one of Toyotas many parts suppliers. Truth is, most of what's in your car comes from someplace other than the carmaker itself.

And Marketplace's Alisa Roth tells us, that's could turn out to be a big problem.


ALISA ROTH: We call it a supply chain. But in the case of the auto industry, it's really more like a web: car companies buy parts from thousands of suppliers. And most of those suppliers sell their parts to more than one car company.

Jim Gillette is an analyst at CSM Worldwide. It's a consulting firm. He says suppliers do much more than just make the pieces that go into your car.

JIM GILLETTE: The automakers have depended more upon suppliers to do the full design, engineering, testing, etc. of the various components.

He says that's because the R and D for complicated parts has gotten too expensive for carmakers to do themselves. But it's expensive for the suppliers, too.

GILLETTE: So you get a pedal maker, for example, that designs a pedal. They actually need to sell that pedal to several automakers.

That's why Ford said today it's stopping production on trucks in China. The pedals it uses there come from the same supplier that's being implicated in the Toyota mess. That supplier is based in the U.S. and makes the pedals in Canada.

Craig Fitzgerald is an analyst at Plante and Moran, another consulting firm. He says carmakers also try to save money by negotiating bulk discounts from suppliers.

CRAIG FITZGERALD: And Toyota is probably the best in the world at part commonization, sharing a single part among multiple vehicles that they produce.

He says the problem comes on the flip side.

FITZGERALD: When you have engineering issues and recalls, it produces astronomically large recalls.

Analysts say the Toyota recall will prompt a lot of soul-searching across the industry, as carmakers figure out how to be economical in ways that won't cost them more in the long run.

I'm Alisa Roth for Marketplace.

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