An industry observer says Toyota's return to profitability can be maintained only if it addresses consumer concerns about the safety of its vehicles.
Eight million Toyota Motor Corporation vehicles were recalled beginning in late 2009 when customers began reporting safety problems, including sudden, unexpected acceleration. Sales, which had already been in decline due to the international financial crisis, fell further as car buyers began to question the quality of Toyota’s products.
Toyota saw profits of more than a billion dollars in the first three months of 2010--not much more than the cost of the recalls. And observers say more problems are ahead for the automaker, which sustained U.S. government investigations and record fines during the recall crisis. Hundreds of government lawsuits are yet to be settled.
Jesse Toprak, Vice President of Industry Trends at the auto industry analysis firm TrueCar.com, says he is not surprised at Toyota’s return to profitability. “Toyota is a big global company," he said, "they clearly have very good presence across the globe.”
Toprak says although the recall crisis was felt worldwide, the impact was strongest in the United States. He pointed to American consumers’ relative lack of brand loyalty and recent improvements in the quality of cars made by domestic automakers as the reason Toyota was hit so hard in the U.S.
Industry observers say Toyota’s future success will depend to a large extent on whether it can rebuild its reputation.
A company representative says Toyota needs to focus on delivering high quality vehicles at reasonable prices in order to prosper in the long run.
“In order to repair damaged trust, we need to give consumers reasons--that the ‘brand’ is actually taking care of their customers,” Toprak said. He suggested that the company give its customers longer-term warrantees.
“The rest of it is really marketing--insuring that they are doing whatever it takes to ‘own’ the problems…and basically deal with it ‘head on,’” he said.
Toprak said consumers had the impression early on that Toyota was trying to cover up or downplay its safety problems.
“I think the biggest challenge with Toyota was that their corporate culture was a bit secretive,” he said.
“The reality is that Toyota is probably realizing more so than ever that they are a global company and one way to operate in one country isn’t really the way you operate in others,” Tropak said.
Tropak says Toyota will climb above its current problems, but it will take awhile. He emphasized that Toyota's difficulties are not necessarily over yet.
