Automotive News - February 8, 2010 - 45

FEBRUARY 8, 2010 • 45 T H E T R A U M A AT T O Y O TA QUALITY Campaign renewed, but no timetable yet continued from cover Toyota expects profit despite $2 billion recall Hans Greimel hgreimel@crain.com Toyota raises forecast Despite big recall costs, Toyota improved its financial outlook for the fiscal year, which ends March 31. Figures are in millions. FY 2010 NEW FORECAST FY 2010 PREV. FORECAST FY 2009 ACTUAL proving quality around the world by establishing a global quality special task force that will conduct regional quality improvement activities.” The strategy sounds familiar. In 2005, then President Katsuaki Watanabe rolled out the Customer First program after the company was buffeted by a surge of quality problems and recalls. Watanabe chaired a committee of top brass that met regularly to drum the Toyota Way back into a company gone astray. Over time Toyota grew into the world’s No. 1 automaker, executives grew satisfied that quality control had become part of the company’s DNA, an everyday way of life, a Toyota executive involved with quality decisions at the time told Automotive News. By the time Toyoda took over in June, the committee had stopped meeting, he said. “We saw that the whole company and each division understood what they need to do in terms of Customer First operation,” the Toyota insider recalls. “It became a daily activity rather than a special activity. So they didn’t need an executive to instruct them.” The meetings just faded away, the executive said. “Because Customer First is something like a philosophy,” the source said, “Customer First activities themselves are continuing. But we don’t have an official organization like a committee.” Today, “customer first” is one of Toyoda’s favorite catch phrases. At his press conference he repeatedly stressed that his company needs to get back to basics and put customers first. “Under the banner, ‘Let’s build better cars,’ we will go back to the basics of ‘customer first,’” Toyoda said, “and once more, deeply consider what ‘customer first’ really means.” Toyoda said part of the solution would be to give more autonomy to local business units. At the briefing, Executive Vice President Shinichi Sasaki, the company’s quality czar, outlined Toyota’s renewed quality campaign: Verify the cause of the recalls. Inspect every process, from design and production to sales and service. Beef up customer research offices to collect more comprehensive feedback from the field. Set up regional Automotive Centers of Quality Excellence. Seek evaluation and help from outside experts on how to improve quality. Toyoda didn’t give a timetable for implementing these changes. But he said they are key to getting Toyota back on track. His appearance in Nagoya last week was highly symbolic. The 53year-old scion of the company’s founding family now heads a company — and represents a family — that still commands enormous respect in Japan. But his promise of “customer first” will need a lot of proving, even in Japan. c TOKYO — Toyota Motor Corp., faced with a record 8.1 million vehicle global recall, is bracing for a $2 billion hit from its safety lapses — but still expects a profit this fiscal year. The world’s biggest automaker also raised its outlook for North America, expecting sales of 2.05 million vehicles in the fiscal year ending March 31. That compares with an earlier forecast of 1.97 million just three months ago, before Toyota was engulfed in its recall crisis. The carmaker’s assessment came Thursday, Feb. 4, as it announced third-quarter earnings amid a deepening scandal over its recall crisis. Yet earnings for the three months ended Dec. 31 were markedly upbeat. Toyota’s troubled North American Operating profit Net income –$216.8 $867.4 –$3,794.9 –$2,168.5 –$4,998.4 –$4,738.2 Note: Results translated at an exchange rate of $1 = ¥92.23, the rate on Dec. 31, the last day of the fiscal period. Source: Toyota Motor Corp. business booked a ¥69.7 billion ($755.7 million) operating profit, reversing a $2.16 billion operating loss the year before. The black ink in the third quarter follows a second-quarter operating profit that ended four straight quarters of red ink in North America, once Toyota’s most profitable market. North American sales climbed 23 percent to 642,000 vehicles in the quarter, from 521,000 a year earlier. Senior Managing Director Takahiko Ijichi credited aggressive cost cutting and a gradual market recovery for the improvement. Regarding the recalls, Ijichi said Toyota expected to book nearly $2 billion in special costs. It will spend about $1.1 billion to cover direct re- call costs, such as fixing the affected vehicles. In addition, the company is expecting another $867.4 million in lost sales, he said. Toyota factored those costs into a revised full-year outlook, but it is still raising its forecast. It now expects net income of $867.4 million, after tumbling to its first net loss in decades a year earlier. Just three months ago, Toyota still was predicting a $2.17 billion net loss. The company also narrowed its projected operating loss to $216.8 million. In November, it was expecting a $3.79 billion operating loss. Sales, too, are seen improving. Toyota now forecasts it will sell 7.18 million vehicles this fiscal year. That’s up from an earlier forecast of 7.03 million units, but still down from last year’s tally of 7.58 million. c OVERSIGHT LaHood: ‘We’re not finished with Toyota’ continued from Page 3 “ NHTSA dropped the ball. They had no data or procedures for the test to back up the conclusion that it wasn’t electronic controls. CLARENCE DITLOW Center for Auto Safety electronic control technology. The Center for Auto Safety, a Washington consumer advocacy group founded by Ralph Nader, is among those charging that NHTSA’s investigation of the electronic controls was cursory. ” Dropping the ball “NHTSA dropped the ball,” says Clarence Ditlow, the center’s executive director. “They had no data or procedures for the test to back up the conclusion that it wasn’t electronic controls.” The mounting skepticism spells more trouble for the world’s largest automaker as it struggles to stamp out complaints about unintended acceleration linked to scores of accidents, injuries and deaths in Toyota and Lexus vehicles. Since last fall, the carmaker has recalled 8.1 million vehicles to address unintended acceleration — more than it sold globally last year. Meanwhile, it has embarked on an unprecedented cessation of sales and production of some of the affected vehicles in the United States. And worse could still be around the corner. “We’re not finished with Toyota,” Transportation Secretary Ray LaHood said Tuesday, Feb. 2. That same day, the Transportation Department said it would revisit whether faulty electronic controls are linked to unwanted acceleration in Toyotas as well as other brands. NHTSA said the agency will meet with manufacturers, suppliers and independent experts to get a better understanding of vehicles’ electronic throttle controls — which are computerized gas-pedal systems. Suspicion of Toyota’s electronic control system stretches back to the first investigations of unintended acceleration in the early 2000s. Critics argue that Toyota’s proposed fixes — one addressing floor-mat interference and the other sticking pedals — fail to cover all the cases. “Neither floor mats nor sticking accelerator pedals explain many, many incidents,” the auto safety consultancy Safety Research & Strategies Inc. says on its Safety Record Blog. Toyota has embarked on two massive recalls to fix the acceleration problem. The first recall, announced last fall and expanded in January, targets floor mats in the United States and Canada that could jam the gas pedal into an open-throttle position. The second recall, announced last month, targets vehicles on five continents and aims to fix sticky accelerators. Toyota is adamant it knows what’s wrong. “We’ve studied the events of unintended acceleration, and we’re quite clear that it’s come down to two different issues,” Jim Lentz, president of Toyota Motor Sales U.S.A. Inc., told Matt Lauer last week on NBC’s “Today Show.” “Between those two things, this will be under control.” In the interview, Lentz ruled out any glitch in the electronic control systems. Yet questions persist. By Toyota’s own admission, it has not tracked the pedal problem to any accidents. And there are other acceleration crashes where the floor mats can be ruled out. The day after Christmas, for instance, a 2008 Toyota Avalon sped off the road and landed upside down in a Texas pond, killing four people. The cause of that crash is still undetermined. But police have ruled out floor mats, which were found in the trunk. During the 2007 investigation of unintended acceleration in the Lexus ES 350, NHTSA surveyed 1,986 owners of the car. Of the 600 responses received, 59 said they had experienced unwanted acceleration. But only 35 of those said they were using the all-weather floor mats that eventually were blamed for the surging cars and recalled. Hiroyuki Yokoyama, Toyota’s managing officer in charge of quality, dismisses suggestions of glitches in the electronic controls. Toyota’s system has dual sensors backstopping each other in monitoring the accelerator pedal’s position, along with two more sensors doublechecking the throttle position. Meanwhile, a control computer actuates the throttle, and a monitoring computer surveys all the computer signals in the circuit. If any abnormal signals are detected, the engine is immediately returned to idle, Yokoyama said. Furthermore, Toyota says the throttle control is reliable under extreme conditions of electromagnetic waves, temperature and vibration. NHTSA probes Indeed, NHTSA says it has repeatedly tested the electronic control system and says it can’t link the technology with runaway cars. In announcing that it would revisit the problem, NHTSA said it was aware of allegations that electromagnetic interf

Automotive News - February 8, 2010

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