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Toyota’s troubles keep growing

August 31, 2009


Toyota’s troubles keep growing




Is it just me, or do the troubles of Japanese automaker Toyota Motor Corp. seem more American every day?

Sales are down 34% this year. The automaker lost $4.8 billion in its last fiscal year. The company says it might not be profitable again until 2011. Toyota is now cost-cutting and confronting a list of problems that always seem to catch up with global companies that have been around for a while.

Aside from some troublesome brand problems with Lexus,outlined Sunday by Free Press auto critic Mark Phelan, the automaker is also facing a lawsuit that could be a public relations nightmare for the automaker.

What’s more, CBS this weekend reported that a former Toyota attorney is accusing the automaker of illegally withholding evidence in hundreds of rollover death and injury cases, in a "ruthless conspiracy" to hide evidence of "its vehicles’ structural shortcomings."

Toyota calls the accusations "inaccurate" and accuses the attorney of violating "his ethical and professional obligations."

But regardless of the truth, it’s pesky stories like these that nibble away at a company’s image over the long haul.

Plant closure won’t help Toyota

Toyota still has a lot of cash to fix its problems, and it was the No. 1 beneficiary of the cash-for-clunkers program. But the automaker’s decision last week to close its assembly plant in California is probably not going to help its image matters.

Toyota said it would close its New United Motor Manufacturing Inc. plant in Fremont, Calif, in 2010, after General Motors decided to pull out of the 25-year-old joint venture as part of its broad reorganization plan. The so-called NUMMI plant employs 4,500 UAW-represented autoworkers and an estimated 35,000 supplier and other spin-off jobs are expected to be indirectly impacted.

Check out the Detroit-like images emerging out of California in this Reuters report about Toyota’s decision.

Images like this, combined with news stories accusing Toyota of bad conduct, might give many consumers, even Toyota loyalists, cause to shop around.

West Coast opportunities

All in all, I’d say Toyota’s slippage translates into a grand opportunity for Detroit’s automakers in California.

California is the top auto-buying state in the country, largely because of its size and population. So if the Detroit Three are ever going to truly recover in the United States, picking up market share in The Golden State will be critical.

But Detroit’s automakers have struggled mightily there for decades.

In many ways, that’s the Detroit Three’s own fault. They resisted regulatory changes there and too long lagged Japanese automakers in quality and fuel-efficiency.

While the facts have supported a positive shift in the Detroit Three’s favor for some time, however, it’s been more difficult to make consumers believe.

Given Toyota’s stumbles, though, there seems to be an opportunity for the Detroit Three to take back some of the California pie.

Because,as Business Week recently mentioned in its automotive blog, Toyota’s "growth days appear to be in the rearview mirror."

Other must-see news stories

Meanwhile, here are my other top auto stories headed into the first week of September.

On the heels of the Free Press’ report on GM’s growing successes in China, GM on Sunday said it had formed a 50-50 joint venture with China FAW Group Corp. to make light trucks and vans.

Blame the stock market, supplier bankruptcies or the fact that life is sometimes not fair. But Automotive News today reports that retired senior automotive executives, many of the highly compensated variety, are scaling back after losing much of their wealth these past few years.

Finally,Bloomberg today reports that Cerberus Capital Management — that smart-as-a-whip New York investment firm that was going to save Chrysler before ushering it into bankruptcy and the arms of Italy’s Fiat — is raising money to buy more distressed companies after losing on its investments such as Chrysler and GMAC.

The highlight of the report is a letter Stephen Feinberg wrote to clients: "We are embarrassed and disappointed by our 2008 performance, and we feel a huge obligation to you to turn this around."

Yeah, everybody makes mistakes. Even the likes of Toyota and Cerberus.


NUMMI workers and supporters hold signs during a rally at the United Auto Workers union hall across the street from the NUMMI plant in Fremont, Calif., on  Aug. 20.   (Associated Press)

NUMMI workers and supporters hold signs during a rally at the United Auto Workers union hall across the street from the NUMMI plant in Fremont, Calif., on Aug. 20. (Associated Press)


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