Struggling to overcome the damage done by a series of safety problems and an expanding list of recalls, Toyota is expected to try to win back skeptical consumers with a bevy of new discounts, as well as extended warranties.
While final details have yet to be determined, the maker is running a variety of ideas past its American dealers, who have been gathered in Orlando, this weekend, for the annual convention of the National Automobile Dealers Association.
Traditionally, Toyota has shied away from big rebates and other incentives, but the maker has ramped up givebacks, in recent months, hoping to counter the impact of the ongoing American recession. Now it could add$1,000 or more to its offerings, according to sources, in an effort to overcome growing concern about the safety, quality and reliability of its products.
The maker also is reportedly considering longer warranties, perhaps matching the 10-year program offered by fast-rising rival Hyundai, of South Korea. The programs would be launched by the beginning of March. And the new package could add free maintenance, as well.
“Toyota has got to be aggressive on this,” the Bloomberg news service quotes Mike Maroone, chief operating officer of AutoNation, the largest American automotive retailer. “Toyota has to put a wall around its customers.”
That won’t be easy. Sensing a rare opportunity to crack that wall, competitors like Hyundai, as well as General Motors and Chrysler, have stepped up advertising campaigns comparing the quality of their products to those of Toyota. In years past, that might have been a stretch, but the Korean maker, like the two biggest Detroit manufacturers, have all scored big improvements, in recent years – validated by influential third-party sources like J.D. Power and Associates and Consumer Reports magazine.
Even before its latest problems began, Toyota had begun to show some weaknesses. But the situation has only worsened since, last October, it announced plans to recall 3.8 million cars, trucks and crossovers dues to so-called “carpet entrapment. “ Late last month, the maker announced it would also call back millions more vehicles due to potentially sticky accelerators, temporarily halting production and sales of eight models til the problem could be corrected.
That stop-sale has been costing Toyota as many as 4,000 lost sales a day, worth more than $100 million in revenues. For the year as a whole, the maker predicts it could lose 80,000 sales. It’s so far unclear if potential customers have been willing to wait until those eight models are available again, but it’s clear Toyota is hoping to head off defections to other brands.
In recent weeks, the automaker’s CEO Akio Toyoda has apologized on several occasions, as have some of the maker’s top U.S. officials. And Toyota has placed ads in major newspapers and on televion hoping to assure buyers that it is still focused on safety and reliability.
But Bob Carter, head of the Toyota brand, in the U.S., told TheDetroitBureau.com, last week, that continuing problems could make it more difficult for Toyota to overcome its image problems.
Yet that’s precisely what is happening. Barely a week ago, the Japanese maker confirmed reports, first published by TheDetroitBureau.com in December, that there is a safety defect with the brakes on the 2010 Toyota Prius. That led to a recall of the world’s best-selling hybrid, last Tuesday. But Toyota’s Carter later confirmed that there are mounting complaints by owners of earlier Prius models. The company is now investigating the reports and could be forced to take further actions.
Meanwhile, the company announced yet another recall, on Friday, this one involve faulty driveshafts on its Tacoma pickup. It recently ordered a separate callback to address “excessive corrosion” on older versions of the full-size Tundra truck.
The spate of problems with Toyota is proving costly in a variety of ways. The automaker has said it expects the January recall for accelerator problems to cost it at least $2 billion. Meanwhile, residuals, or resale values, of Toyota products have been slipping and the decline is expected to continue, according to industry analysts.
On top of that, government officials are stepping up investigations into other potential safety problems. And a pair of Congressional hearings is scheduled in the coming weeks, which could provide further grist for Toyota’s critics.