Additional Recalls Continue to Tarnish Toyota's Reputation, Despite Record Global Sales in 2012

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Researched by Industrial Info Resources (Sugar Land, Texas)--For decades, Toyota Motor Corporation (NYSE:TM) (Tokyo) had been synonymous with both quality and dependability in the global automotive market. Toyota used that reputation to overtake General Motors Company (NYSE:GM) (Detroit, Michigan) and become No. 1 in global sales just a few years ago. However, safety and quality concerns, as well as a couple of run-ins with Mother Nature, caused the automaker to lose that title. Toyota surged back in 2012, reclaiming the global sales lead and selling a record 9.75 million vehicles. But yet another massive recall has many doubting that the automaker has sufficiently addressed quality concerns.

Toyota has announced a 1 million-vehicle recall this week that will affect the Corolla, Corolla Matrix and Lexus IS models worldwide. With the Corolla, there is the potential for short-circuiting in a control module that could cause the airbags and the front-seat pensioners to deploy. With the Lexus IS, the recall involves wiper arms that may not be tight enough and could fail.

Recalls have become almost frequent for Toyota over the last couple of years. Just a few months ago, in October 2012, Toyota was forced to recall 7.4 million vehicles worldwide due to potentially faulty power window switches; less than a month later, the automaker issued another recall of an additional 2.8 million vehicles thanks to potential problems with steering systems. Throughout 2012, Toyota was forced to recall more than 5.3 million vehicles in the U.S. alone, which has given the automaker some image problems. Other automakers have attempted to capitalize on this through restructured advertising campaigns.

While those attempts did not stop Toyota from regaining the No. 1 spot in worldwide sales in 2012, the frequency and size of the recalls in recent years is causing some problems. Recently, Toyota paid out $1 billion to settle lawsuits in the U.S. from vehicle owners who were affected by the much-publicized sudden-acceleration issues in 2009 and 2010. While the automaker has not admitted wrongdoing in these cases, it is attempting to right the ship and get things back on track.

Thus far, these massive recalls have not adversely affected Toyota's sales, as evidenced by the company's record year in 2012. However, if the recalls continue to grow, 2013 could be a totally different year for the automaker. While Toyota rather easily outpaced GM in sales in 2012, with 9.75 million to 9.29 million, they also outpaced all other automakers when it comes to recalls. The award for second-highest number of recalls in the U.S. in 2012 went to Honda Motor Company (NYSE:HMC) (Tokyo) which was forced to recall 3.9 million vehicles, while third place went to GM at 1.5 million vehicles.

Record fines have been levied against the automaker over the last several years and, combined with recent payouts to settle lawsuits, Toyota is paying a lot of extra money each year because of quality issues. If Toyota wants to maintain its position as the No. 1 seller in the world, it has to address these quality issues as soon as possible and find out where disruptions are occurring at its factories. Billions are at stake with these recalls, and the potential damage to future sales is unclear at this time. While upper management has apologized repeatedly for the quality control problems, it will take a stronger effort to put a stop to them once and for all.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.