News about Toyota’s recalls has been swirling for nearly a month. Six-million-recalled-vehicles later, the Japanese manufacturer has been subpoenaed by a U.S. federal grand jury and the Securities and Exchange Commission. Congress is supposed to start hearings tomorrow regarding Toyota’s handling of safety problems.
Here’s the question: So far, resale values for Toyota vehicles — recalled or not — are holding their own. But how much longer will they retain their strength? In other words, is there some breaking point at which consumers will start to question the OEM’s history of quality products and shy away from purchasing its vehicles?
What is now coming out is that emails have surfaced stating Toyota knew about the real problem and tried to hide it by saying it was the floor mates. If this is found to be true it could be the nail in their coffin. I hope this is not the case because my family owns two Toyota’s, and want our resale value to hold.
I’m wondering how long it will take for some enterprising reporter, or politician, to connect these current issues with the 2007 class action settlement for engine sludge in Camry, Solara, Avalon. Ceclica, Highlander, Lexus ES and Lexus RX and the braking system problems in the 2001 and 2002 Sequoia. In all of these instances, the new issues and the older issues, Toyota has aggressively fought to quash liability for fixing the issues.
For example, in the 2001 Sequoia cases, after conistent complaints about the breaking system not stopping the Sequoia in a safe distance, Toyota finally issued a TSB (Technical Service Bulletin) to their dealers about the problem but never advertised it to their customers. The TSB was only to be applied if the customer continued to complain after three visits to the dealership. At that point, part of the front braking system was to be replaced. The entire front braking system was only to be replaced if the customer continued to complain. In many cases, Toyota dealers would only replace the braking system if the customer paid for it. Those customers were subsequently reimbursed only if they found out about the TSB and demanded a refund. The issue turned out to be caused by Toyota using a Tundra braking system in the much heavier Sequoia, resulting in an inabilbity for the system to handle the heavier vehicle, particularlly under heavy braking. Very little about this made it into the media at the time.
There was a little more media coverage about the engine sludge problem becuase it resulted in a settlement of a class action lawsuit. Again, years of customer complaints about excessive oil consumption, smoking and complete engine failure. Again, Toyota attempted to put the liability back on the customer, saying the customers clearly hadn’t changed oil as required, used sub-standard oil and filters, etc. However, it came out in the lawsuit that a plug was not being removed after the engine casting process, preventing the free flow of oil throughout the engine.
Now to your question — one big investigative report showing a decade of quality problems combined with an aggressive corporate ‘blame it on the customer’ campaign, and I think Toyota’s vaunted reputation for quality could be mortally wounded — and along with that, its resale values and new vehicle sales.
You’ve hit on the $64k question. They find themselves in a big hole and all the news to date has not been good. Lentz is apparently going to testify before Congress today that the accelerator problems are not electronic.
All of us in the business who rely on strong resale values had better hope this is not more subterfuge.
When you find yourself in a hole, it is best to quit digging. Let’s hope Toyota execs don’t come to Capitol Hill with shovels in hand!