| This article is bit old but can give you an insight of automotive business and quality issues
A dent in Toyota quality? Growing problem of recalls sullies image By Micheline Maynard and Martin Fackler Published: FRIDAY, AUGUST 4, 2006 DETROIT: The news arrives in letters that no car owner wants to receive. The power steering of their hard-to-get hybrid could fail, some learn, while others are told the tires on the small pickups could bulge and possibly burst. Still more owners find out their airbags may not inflate during a crash. These recall notices are not from an American carmaker, but from Toyota of Japan, long known as the crème de la crème when it comes to quality. Just as Toyota appears poised to pass General Motors and become the world's largest automaker, it has a growing problem with recalls that is sullying its carefully honed image. In the United States, Toyota's largest market, the number of vehicles recalled soared to 2.2 million last year. That was double the number of vehicles recalled in 2004, and more than 10 times the 200,000 cars it recalled in 2003, according to the National Highway Traffic Safety Administration. In Japan, the number of recalled vehicles has jumped 41-fold since 2001, to 1..9 million last year. And because many of the recalls are for vehicles that are more than 10 years old, analysts fear that another wave of bad quality news may be in store. The situation has alarmed Toyota's top executives and angered the Japanese government. It ordered Toyota to explain itself, which it did in a report delivered Thursday, borne by the latest in a series of apologies by Japan's biggest auto company. In it, the company promised to create a new computer database to obtain information more quickly from dealers on repairs and complaints. Inside Toyota, the spate of recalls has triggered a flurry of high-level efforts to diagnose and fix the problems, which have afflicted everything from its treasured Prius hybrid, which has become the gold standard among fuel-efficient vehicles, to the small Tacoma pickup and even cars in its Lexus luxury lineup. At Toyota's annual executive meeting in June, its outgoing chairman, Hiroshi Okuda, its new chairman, Fujio Cho, and its chief executive, Katsuaki Watanabe, all vowed to the gathered managers that the quality issue would be addressed, according to a senior Toyota executive who attended the meeting. "The quality issue is a big concern. They're embarrassed about it," said the executive, who insisted on anonymity because the meeting was private. He added, "You think about Toyota, and quality is in our DNA. We are concerned about looking like the rest of the pack. The market is forgiving because of our long reputation, but how long will they be forgiving?" Quality problems can befall any company, whether based in Detroit, Europe or elsewhere. This week, in fact, Ford expanded a big recall of its vans, SUVs and pickup trucks, because of problems that could lead to engine fires. For now, Toyota's quality issues do not seem to be dampening its operations either in Japan or the United States, where Toyota passed Ford in July to rank as the No. 2 company in terms of auto sales. Nor is it affecting Toyota's net income, which climbed 39.2 percent during the second-quarter to $3.2 billion, the company said Friday. But executives inside Toyota know they cannot let the situation fester, because it ultimately threatens Toyota's ability to grow. If Toyota is unable to get its arms around the problem, it will have to pull back on its expansion plans, which are set to include more assembly and engine plants for the United States, as well as factories elsewhere. The primary reason for the recalls is Toyota's overloaded engineering staff, company executives and industry analysts said. Despite its global expansion during the 1990s, it failed to hire enough engineers to keep up with production increases. And it kept most of its development in Japan, although it built research and development centers in places like Ann Arbor, Michigan. At the same time, a new Japanese law limited the amount of overtime worked by engineers, whose long hours on the job were the stuff of industry legend. The result, say analysts, has been a number of errors introduced during vehicle development and fewer problems on the assembly line, which has been a more common cause of recent recalls at other carmakers like Nissan. Another issue is that Toyota, like other global auto companies, has farmed out the development of crucial components to its suppliers, both companies with which it has been doing business for years, like Denso of Japan, and newer ones, like Delphi, the biggest American parts maker. The damage has been slow to emerge- in fact, most recent recalls involve cars produced in the 1990s. But that means potential problems from hectic growth years in the early 2000s have yet to appear. As a result, analysts warn, Toyota's quality woes may only become worse before they get better. "I'm more concerned about the future," said Kunihiko Shiohara, an auto analyst for Goldman Sachs in Tokyo. "A fundamental turnaround in quality levels will take at least four years." To be sure, rising recall numbers are not limited to Toyota. Still, the rapid rise in recalls at Toyota stands out in comparison with other carmakers. In Japan, where Toyota is the largest auto company with about 35 percent of the market, its recalls quadrupled over the past four years to 1.9 million in 2005. That compares with 199,000 at No. 2 Nissan and 205,000 at Honda in 2005, according to the Transportation Ministry. Seeking to staunch the flood of recalls, Toyota has increased the hiring of new engineers, bringing on 979 last year compared with 310 in 2001. A company spokesman, Paul Nolasco, said Toyota planned to hire at least another 850 this year. In a departure from corporate tradition that stressed spending a career at a single company, Toyota wants 200 of its new hires to be experienced engineers hired in mid-career from elsewhere. In June, Toyota assigned a second executive vice president to its quality control division, and created a new senior managing director spot dedicated to improving quality Martin Fackler reported from Tokyo. |
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