Are Toyota’s problems with sticking throttles symptomatic of deeper problems within the world’s largest automaker? Mark Bursa reports
In its successful scramble to the top of the global automotive ladder, Toyota seems to have left something behind: the ability to make solid, reliable, safe cars that people around the world had no qualms about buying.
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The massive recall over sticking throttle pedals is the most obvious symptom, and it has clear echoes to earlier problems experienced by GM, Mercedes-Benz and Volkswagen, among others, whose purchasing departments, in their zeal to drive down components costs, have been hit with product recalls resulting from faulty parts. Because when you force cost targets on to suppliers, they cut their own costs too.
And Toyota has been forcing down parts prices for some time – many of its long-standing suppliers are disgruntled as a result. Toyota purchasing told them just before Christmas that they would be expected to cut a further 30% off their prices by 2013. Echoes of Ignacio Lopez’s ‘reine preisdiktat’ policy, perhaps? Price as the only objective.
‘Throttlegate’ threatens to wreck Toyota’s carefully constructed market play. Never the exciting choice, Toyota has built is appeal around being the safe bet. It built a position in Europe and North America not by pushing the boundaries – rather by filling gaps in the middle market. Conservatively-styled, reliable vehicles such as Camry, Yaris and Avensis are commodity products, not cars for the enthusiast.
While other manufacturers chase younger buyers with whizzy designs, Toyota has courted the elderly – Coolbear’s neighbours, for example, a retired couple who run two Toyotas, a Prius and a Yaris. Before that they had a Corolla.
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By GlobalDataCorolla, of course, was a world car before the concept became currency. As long ago as the early 1980s, Toyota was building a basically similar Corolla on almost every continent of the planet, thus leveraging global scale economies that the likes of Fiat and Renault have had to work extra hard to emulate. And the car had a reputation for reliability that made it saleable, despite less than sparking performance or styling.
But as the separation between market demands in Europe, North America and the Emerging Markets grew wider, Corolla struggled to cope. In Europe, Corolla was replaced by Auris, supposedly benchmarked against European lower-medium leaders such as VW Golf and Ford Focus, yet woefully short in performance, finish and all-round desirability; even Korean Johnny-Kim-Latelys such as the Kia Ceed and Hyundai i30 are closer to the European ideal.
Auris is one of the many different models to be recalled under Throttlegate. The sheer scale of the recall is staggering – just about the entire European range, from iQ and Aygo through Yaris, Auris, Corolla, Verso, Avensis and RAV4, variously built from 2005 to the start of 2010, appear to be afflicted with basically the same problem. So, it seems, are a lot of US Toyotas, including Matrix, Avalon, Camry, Highlander, Tundra Sequoia.
Commonality across model ranges on parts is fine if all’s well…
It could be that Toyota is being hyper-cautious, but the commonality of the problem implies these diverse vehicles have been fitted with basically the same parts. That’s some economy of scale, and you can only imagine the minuscule price paid to CTS Automotive Products, the supplier at the centre of the recall, for each accelerator pedal.
CTS last week said the problem was a result of Toyota’s designs, not electronic sensors that are part of the accelerator assembly. Toyota has also said it does not believe the electronics are at fault. But the problem does highlight the risk of single sourcing and massive design commonality. If something goes wrong, it goes wrong everywhere. And there’s no plan B. Toyota has simply had to stop production until a fix has been engineered.
Fast action may nip the problem in the bud – and used correctly, a product recall is a great opportunity to present a franchise in a good light, providing the dealers with a genuine opportunity to contact and reassure its entire customer base.
Tricks missed
But Toyota has other problems that run deeper than Throttlegate. Tricks have been missed all over the place. One example – Lexus doesn’t offer diesels on its bigger European models. So while the likes of BMW, Audi, Mercedes and Jaguar all have 40mpg-plus 3-litre diesel luxury models, Lexus has instead hung its hat on gasoline-electric hybrids.
But for all the eco-sheen that surrounds the h-word, on bigger engines, petrol-based hybrids have higher CO2 and inferior fuel economy to the latest big diesels. And they tend to have a higher purchase price thanks to extra complexity. Even Infiniti, Nissan’s Lexusalike sub-brand, is planning diesel versions of its big M-series sedan.
The plan seems to be to reinvent Lexus around smaller, more affordable cars, such as the LF-Ch concept. But after more than 20 years of brand-building, the original plan of matching Mercedes quality with Toyota reliability seems to have faded. And 20 years is the sort of planning horizon on which Toyota operates. You can bet that in terms of sales, the Lexus brand in 2010 isn’t quite where Toyota expected it would be back in 1990.
Toyota’s Logan-fighter a long time in gestation
Another, stranger problem has surrounded Toyota’s answer to the Renault Logan. Toyota has struggled even to get a specialised emerging markets car to market – something it used to do naturally in the past. We finally saw the much-delayed Etios at January’s New Delhi show – and considering the hoo-ha over the preceding three years surrounding the car, the end product is somewhat underwhelming – a basic little three-box sedan with a smiley grille. It looks like the sort of thing an up-and-coming Chinese manufacturer might turn out.
Now we know that many Emerging Markets car buyers favour the three-box sedan, and purchasing decisions are not nearly so fashion-focused as in the West – or indeed in Japan. But it’s taken Toyota a long time to bring Etios to the market, and it’s been a difficult birth.
Toyota Motor President Katsuaki Watanabe ordered substantial re-engineering work after driving prototypes in March 2007, saying at the time: “When I drove the first prototype, I found the level of the new car not bad. But I asked for more in terms of cost reduction.” Watanabe also said he felt “there was still room for quality improvement”.
This put the project back by around 12 months, which at least has allowed a prettier hatchback version, aimed at Mercosur markets, to be launched at the same time. But it’s hardly a world car.
Compare the troubled launch of Etios with Renault’s Logan – thrown together from the parts bin at first, with entire modules such as suspension and powertrain, lifter from existing models. More bodystyles, such as the Sandero hatch, were then added progressively – to serve different markets, and to reflect changing demands. Would Etios really have been that much better, or different if Watanabe-san hadn’t ordered a rework?
Nevertheless, Etios is likely to become a major car for Asian markets. It’s likely to feature as a mainstream product from India to China, and all Pacific Rim points in between. Toyota is looking at exporting small cars from India to ASEAN nations as it bids to make India a small car hub. A recently signed ASEAN-India Free Trade Agreement will enable Indian firms to import auto parts at zero duty – previously duty rates were 7-10%. This will allow Toyota to bring parts from Thailand, also earmarked to build Etios, to India and export complete cars elsewhere in ASEAN.
Toyota talks of European export versions, with diesel engines, and certainly using India as a source point for Europe makes sense – as Hyundai will testify. But does Toyota really need another small car in Europe? Wouldn’t Etios simply confuse customers, and cannibalise sales of the existing small Euro-Toyotas: iQ, Yaris and Aygo?
In becoming the world’s number one automaker, Toyota has, it seems, not fully adjusted to its growing pains. Catering for the needs of different global markets has resulted in vast model proliferation in place of the one-size-fits-all solutions of the past, as embodied by Corolla. It’s also interesting to note that Ford’s star is in the ascendant at the same time as Toyota is hitting the buffers – and reducing model numbers is a key element of Alan Mulally’s ‘One Ford’ concept.
The ‘number one automaker’ tag is becoming a poisoned chalice – look at what has happened to the previous incumbent, GM, since it was toppled by Toyota. And you can make the case that Toyota’s problems are not dissimilar to GM’s. Not in terms of brand proliferation, but there’s as much of a disconnect between, say, European and US product development in Toyota as there is in GM. And there doesn’t even seem to be a GM-Daewoo equivalent in Toyota churning out global Chevrolets.
Ultimately, Toyota is fundamentally big and tough enough to ride out Throttlegate. But it will take time to rebuild the reputation of the brand, especially as a safety-related problem is likely to drive away traditional habitual buyers – like Coolbear’s neighbours, who are probably on the way to the Nissan showroom as I write.
Meanwhile, perhaps a reboot, or at least a tune-up, of Toyota’s strategic management approach may be worth considering. Getting to number one is one thing – staying there is another.
Mark ‘Coolbear’ Bursa
NEW DELHI SHOW: Toyota reveals its emerging markets car
