Financial Analysis: Toyota, Honda, and Nissan

The compact Chevrolet Cruze also had a worrying fire-related recall, which affected every single model sold. Missteps like these seem to be common for domestic automakers. (1)

As if this weren’t enough, quality problems mounted week after week. Only months later in February 2010, the NHTSA revealed that it had received claims citing another life threatening defect in the break system for the Toyota Prius. More than 400 thousand Prius recalls resulted. In April of 2010, customers reported handling issues in the Lexus brand which resulted in another recall of 9,400 Lexus cars and a “Don’t Buy: Safety Risk” rating from Consumer Reports. Also in April, the company voluntarily recalled Siennas to address a problem with corrosion on a spare tire cable. Later that month, Toyota voluntarily recalled 2003 Sequoia SUVs to improve the stability controls. 2010 Tacomas were also recalled for defective front drive shafts. Once the quality icon, Toyota had hit a really low point; so low that credit

In May of 2006, The Toyota Motor Corporation initiated a recall of nearly one million vehicles around the world to replace faulty parts that could cause drivers to lose control of the steering wheel. The recall affected vehicles across 10 models, including the popular Prius. The intermediate shafts and sliding yokes in the recalled cars lacked the necessary strength and could distort or crack under strong pressure, causing drivers to lose control of the steering wheel, according to Toyota (ConsumerAffairs.Com). Owners of these vehicles were allowed to have these defects repaired at the cost of Toyota and required approximately on hour to complete (News.com.au).

In addition to the costs, Toyota paid to fix the defective parts and loss in sales, was the fines they had to pay. Toyota was first fined $16.4 million for their “slow response” to the pedal recall (Toyota Unintended, 2010). After a four-year criminal investigation, Toyota was fined an additional $1.2 billion after reaching a deal with the Justice Department. Toyota faced this fine because the company “concealed information about defects from consumers and government officials,” which put lives at risk (Vlasic and Apuzzo, 2014). These fines were a huge hit for the

Due to Toyota’s financial greed and unethical practice, vehicles were wrongly equipped with faulty brakes, sticking pedals and poor quality door looks, which caused death of many Toyota customers and hundreds of dollars in damages. When a company like Toyota acts in an ethically questionable manner, it causes the company to lose customers and develop a negative reputation. Customer tend to lose faith in the company and have to look for better service

Upon standing trial, it was decided that Toyota mislead stakeholders when it stated that they had addressed the underlying issue (in recalling floor mats) while covering up another significant issue (sticky pedals). Likewise, the timeline presented by Toyota stated that they only discovered the sticky

 The recall crises wiped out more than $30 billion in share value and badly tarnished Toyota’s reputation. It occurred just as Toyota was beginning to pull itself up after the global financial crisis. Car sales dropped markedly in January and February 2010, with the drop in sales of Camry models particularly severe, and Toyota’s market share in the United States dropped from 18.2 percent in December 2009 to 12.8 percent in February 2010. Total sales in January was 98,796, the first time

The lead problem stems from the fact that Toyota failed to communicate with its own employees that safety was first, quality was second, and production was third according to the president of Toyota, Akio Toyoda (Mezey et al., 2012). He stated that Toyota had pursued production over the development of their people and the organization (Mezey et al., 2012). The failure to properly communicate between North American and Japanese executives caused issues, although the North American executives had a better understanding of the reality of what was happening, they had no say in the recall process (Mezey et al., 2012). That corporate structure is what prompted the U.S. Secretary of Transportation, Ray LaHood. to worry that the North American executive issues were not being communicated in Japan (Mezey et al., 2012). LaHood and the Nation Highway Traffic Safety Administration (NHTSA), meet several times with North American office, referring to

Toyota’s response in terms of public relations was slow and most Americans began to believe the company was hiding something. The company management, especially, the CEO, Toyoda waited until February 5 to make a statement regarding the recall. As a result, the American media blamed the company for a lack of action and transparency as the situation unfolded. Regardless of the blame, the CEO informed the media that action

Toyota was overwhelmed by massive product recalls and damage to its reputation after questions over the safety of its cars and allegations that the company did not act quickly enough once problems had been identified. The problem commenced when one duty police officer and his family back in August 2009 after their car, a Toyota Lexus, unexpectedly accelerated, crashed into another vehicle, tumbled over an embankment and burst into flames lead to the death of the man. Initial company reports identified that the car may have been fitted with the wrong floor mats, which could have slipped and entrapped the accelerator pedal. The problems began to increase for Toyota.

The extent to which Toyota is responsible for the crisis include its disregard of quality and safety measures , failure to implement guiding principles, make decisions and

Signs of the impending recall crisis began as early as 2006 when the National Highway Traffic Safety Administration (NHTSA) initiated an investigation into driver reports of “surging” in Toyota’s Camry models. This investigation was closed the next year declaring that there were no defects. Known in the industry for their quality and reliability, Toyota would silently recall almost nine million Toyota and Lexus models due to the sudden acceleration problems. Because of the lingering reaction in dealing with these problems, Toyota’s leadership had been highly ridiculed, so now they had a big job in identifying the solution that would make sure of the safety of their vehicles and reinstate consumer

The first incident of “unwanted acceleration” occurred in 2003. However, this was not reported to the National Highway Traffic Safety Administration (NHTSA) until five years later. And it was not until 2004 that the NHTSA actively began investigating certain Toyota models. These investigations were eventually deemed inconclusive due to the “lack of resources” (rather than actual evidence) to investigate further (Bagnara, 2014). Over the next three years a series of investigations open up, but once again have been deemed inconclusive due to lack of “administrative resources” (Bagnara, 2014). In 2007, the acceleration issues are associated with faulty floor mats getting caught beneath the pedals causing the vehicle to accelerate uncontrollable. Toyota begins issuing recalls soon after. Two years later, a fatal accident occurs involving the death of four people which was again linked to defective floor mats. However, it was quickly becoming evident that not all the fault can be blamed on floor mats. In 2010, Toyota reveals that the

Financial performance. According to Toyota’s 2014 Form 10-K, the company 's sales in U.S failed dramatically over the past five years because of a safety problem that Toyota had in 2006. However, the management division of Toyota returned the company to profitability in 2011. In 2012, the earthquake affected company production everywhere, including the United States market. Nevertheless, over the next five years, Toyota’s revenue is expected to grow from 1.8% to $17.6 billion. Toyota still has status in the market because of new competitive market in vehicle technology. The following chart shows that current

One potential threat for Volkswagen is that Toyota may respond strategically by also cutting its prices. However, given Toyota’s quality problems over the past year, they will not be able to lower prices, as this possibly would create the perception of lower quality.. First and foremost, Toyota needs to ensure it handles its quality problems to its customers’ satisfaction. The auto maker needs to ensure the public perception is that Toyota is being upfront, honest, and responsible in dealing with recalls and the