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Toyota’s woes far from over: Analysts

autos Updated: Feb 26, 2010 09:18 IST

Toyota’s woes are far from over despite a contrite appearance by its president before US lawmakers as the Japanese giant now has to battle to repair its global image, analysts said on Thursday.

Akio Toyoda’s assurances that the company his grandfather founded will return to its roots and renew its focus on safety and quality “will make people feel that they’re going to do the right thing,” said Rebecca Lindland, an auto analyst at IHS Global Insight.

But the key to winning back spooked customers and reassuring skeptical lawmakers will be making sure those defects are fully resolved, and Lindland argued the current fixes do not appear to be sufficient.

“I’m not convinced the problems have been solved,” Lindland said in a telephone interview.

Eliminating the risks of sudden, unintended acceleration is an “extremely difficult” and complex task, said David Cole, chairman of Michigan’s Center on Automotive Research.

Investigators were unable to replicate many of the complaints in order to determine what was happening and how to fix it. And given how much press attention the problem has received people are going to be blaming their cars instead of their poor driving skills, he said.

Fixing the cars is now just part of Toyota’s problem, he added.

“The long-term impact here clearly is that the perception generally of Japanese car quality superiority over Koreans and Americans is gone,” Cole told AFP. “What people do now is open up their shopping lists.”

Toyota has a host of legal troubles to deal with as well.

Three US congressional panels have launched investigations into incidents of sudden unintended acceleration blamed for over 30 US deaths and tied to the recall of some eight million Toyota vehicles worldwide.

Critics have attacked Toyota for its sluggish response to complaints and accused it of covering up the defects and incorrectly blaming accidents on floor mats that jam accelerators or on sticky pedals while ignoring possible electronic problems.

The world’s largest automaker has also been subpoenaed by a US federal grand jury investigating whether there is sufficient evidence for criminal charges, is being investigated by US securities regulators and faces a host of civil lawsuits that could cost it billions of dollars.

Toyoda on Thursday had a “cordial and open discussion” with US Transportation Secretary Ray LaHood and vowed to put customers first, improve communications and work more closely with the US Transprtation Department, the Japanese company said in a statement.

“Mr Toyoda promised to take the initiative to advance safety to the next level,” it added.

While Toyota could see its sales and profits take a near-term hit, it “will recover from its current quality and public relations tribulations,” said Efraim Levy, an analyst with Standard and Poor’s Equity Research.

“The key for Toyota, in our view, is to get past the current negative news flow,” Levy wrote in a research note.

Toyota has a solid balance sheet with plenty of cash available to spend on winning back consumers with warranty guarantees and incentives. It also has a strong brand reputation that will draw current customers back once they are assured that the problems are fixed, he said.

Luring new customers could be more difficult, but with industry volumes rebounding Levy said Toyota should still see sales growth this year despite some market share loss.

“The real challenge, in our view, is if Toyota says the current problems are fixed and then announces a new problem,” Levy cautioned. “That’s when real reputational damage could take effect.”

While Toyota has lost some customers as a result of the mass recalls, it is “not as bad as you might think,” said Michelle Krebs, an analyst with automotive website Edmunds.com.

Toyota sales are currently trending down about 10 percent compared with February of 2009 and Edmunds forecasts that its market share is expected to fall to 12.6 percent - the lowest level since July 2005.

But the sales remain relatively healthy and should pickup next month if Toyota launches major incentives as expected, she said.

“There are certainly Toyota loyalists who believe this is overblown,” Krebbs told AFP.