The impact of Toyota’s sales halt

John Dimsdale Jan 27, 2010

The impact of Toyota’s sales halt

John Dimsdale Jan 27, 2010


Kai Ryssdal: Right about the time all that AIG stuff was happening there was a slightly smaller shakeup in the global automobile industry. Toyota was becoming the biggest carmaker in the world. And the second largest in the U.S. market. They did it with an enviable reputation for safety and quality.

That was then. In the year-and-a-half since, Toyota has recalled more than six million cars for what seemed to be a fairly innocuous problem: floormats interfering with the gas pedal. And then yesterday afternoon the company said it’ is going to temporarily stop selling and also stop making eight different models, including the most popular car sold that is hold in this country — the Camry. Marketplace’s John Dimsdale has more.

JOHN DIMSDALE: Next week’s production shut down will affect nearly 60 percent of Toyota’s products including Corollas, Tundras and Highlanders.

Auto consultant John Casesa calls the response extraordinary and expensive.

JOHN CASESA: It will be in the billions when this is all over. The lost production, the lost profits at dealers. And the costs in advertising when production is restarted to get customers to come back.

Casesa says the Transportation Department asked Toyota to halt production and sales, which he says reflects more aggressive regulatory enforcement by the government.

John Wokonowicz with IHS Global Insight says eight people may have died as a result of the faulty accelerators.

JOHN WOKONOWICZ: They’ve known about this problem since at least 2008. They’ve been working to try to manage it since then, but at this point the lid blew off it, and it simply got too serious.

Wokonowicz says the same accelerators are found in eight different models because Toyota, like all carmakers, is trying to standardize parts.

Eric Dezenhall, author of “Damage Control,” a book about corporate crisis management, says by stopping production Toyota may hold on to its customers.

ERIC DEZENHALL: Good companies historically do bounce back after they do the right thing. And there’s no question that this is a costly move in the short term, but can you imagine what the cost would be if they didn’t conduct such a recall?

Dezenhall says Toyota should be able to weather the factory shutdowns, assuming a fix can be found soon.

In Washington, I’m John Dimsdale for Marketplace.

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