TOYOTA PROBLEMS

2010 Avalon RECALLED In the mid 2000s Toyota began suffering from a number of problemsmost notably recalls whose sources could traced to design, development, production, suppliers and maintenanceand the departure of a number of talented executivesnotably James Press. In 2007, Consumer Reports stopped automatically giving a recommended rating to all of Toyotas cars. As Toyota has become very large questions have been raised about its ability to maintain high standards of quality. Several large recalls have raised serious doubts. In March 2008, Toyota President Katsuaki Watanabe admitted that rapid growthnamely time pressures and a shortage of experts had been at least partly to blame for problems Toyota had been having. Toyota has been slow off the mark in China, India and Brazil, emerging markets expected to provide much of the growth in automobile industry in the coming years. Its timing has been off in China. It got off to a late start and was not as ready as its rivals when the market really began to take off there in the late 2000s. In early 2009 it sales were down 17 percent while those of GM, Volkswagen and others were booming. Toyotas advantage in hybrids and electric cars is expected to be reduced as other car makers introduce their hybrids and electric cars. Other car makers have caught up in other ways and are often just as reliable, leaving Toyota with cars that are regarded as dull. Toyotas aggregate market value fell 54 percent to about $100 billion in 2008. Some analysts say that Toyota has way too much production capacity in the United States and Japan and it hasnt really made much money on its small vehicles. Management is considered arrogant. Some say to a degree that makes it vulnerable to same kind of mistake that brought GM down. 2010 Camry RECALLED Toyota had aimed to sell 10 million vehicles a year by 2010 but suffered a severe set back when it t was stung hard by the global financial crisis in 2008 and 2009. Toyota sold 7.56 million units in fiscal 2008-2009enough to outperform GM and make Toyota worlds largest automaker but 1.34 million less than the previous year. Toyota had originally forecast sales of 9.85 million in 2008 and 10.4 million in 2009. It sold 7.81 vehicles in 2009, down 13 percent from the previous year. Toyota posted a $4.61 billion loss in fiscal 2008, the first time in 71 years it posted a loss. The previous year it made a profit of $22.7 billion. The loss was a particularly nasty considering it made a huge profit in the first six months of 2008. In the first three months of 2009 it lost more money than GM. In the 2nd quarter f 2009 Toyota lost $1.8 billion. The losses and sales drops were the biggest crises that Toyota faced since the company was founded. Vehicle production for the company in Japan in February 2009 was only 141,127 units, the lowest output figure on record. Several of Toyotas key suppliers and contractors teetered on the edge of bankruptcy as their orders were reduced to near zero. The influence of Toyotas sudden decline of production on workers, suppliers and other business that rely on a strong, healthy Toyota was called Toyota shock. The term was also used it describe the fact that even Toyota was not going to escape big time problems associated with the global economic crisis. Bad news from Toyota was enough to send the whole Japanese stock market tumbling. Toyotas losses were attributed to shrinking auto sales associated with the global financial crisis, depreciation of the yen and rising material costs. Many blamed the scale

of Toyotas losses on rapidly expanding in problematic areasnamely gas-guzzling SUVs and pick upsat an inopportune time. The global economic crisis left it with surplus production capable producing 10 million cars when only 7.5 million were sold. Things could have been worse. Reasonable sales in China, elsewhere in Asia and Russia offset slow sales in Japan, the United States and Europe. By August 2009, things had picked up enough that Toyota began making plans to restart weekend production at plants that produced the Prius and other cars. By September it had resumed hiring temporary workers. Toyota returned to profit in the third quarter of 2009. The company reported a 2.1 billion profit after losses in the previous three quarters. Toyota cars were the top sellers in the Cash for Clunkers program in the United States. In October sales climbed five percent for the first time in 15 months.

Toyotas Response to the Economic Crisis in 2008

2010 Corolla RECALLED Toyota responded to the crisis by shutting down production of its large vehicles for several months, switching a factory that made SUVs into one that made Priuses, and scaling back production in India and other countries. Toyota President Katsuaki Watanabe said, We are facing unprecedented emergency circumstances. With demand of automobiles low, Toyota reconstructed its production operations by setting up hybrid cars as the core of its manufacturing. Toyota downgraded it sales forecasts for 2009 from 10.4 million to 9.7 million to less than 8.5 million to 6.3 million and took out loans from the government. Previous efforts to cut cost by $3 billion a year no longer seem sufficient. Despite the set backs Toyota insists it will not scrimp on research and development, especially in getting new hybrids, electric vehicles and fuel-cell cars to market. Toyota eliminated its entire temporary work force of around 10,500 on fixed-term contacts that worked as its 12 domestic plants. Some full-time regular workers took extended leaves of absence or worked part time. The company also cut pay for factory executives and eliminated bonuses for all salaried workers. In Britain, Toyota made a deal with unions there to reduce wages and working hours by 10 percent in exchange for job security. In North America, it froze wages and offered voluntary lay offs. In February and April 2009 Toyota halved domestic output and suspended operations at 11 factories. In Mississippi it paid debt service costs to state and local borrowers after delaying a plant opening. In September 2009, Toyota said that it would sell its brokerage unit to concentrate on selling cars. In November it announced it was going to close 300 of its 4,900 dealerships in Japan over the next three years In August 2009, Toyota and GM announced they going to end production at their joint venture at their Freemont-California-based NUMMI plant, which employed 4,000 people. The venture was launched in 1984. Toyota won concessions from the United Auto Workers to lower labor cost at the plant and raised he possibility of producing vehicles independently at the facility. NUMMI was finally closed in April 2010.

Toyota Recalls in the Mid 2000s

In January 2007, Toyota recalled a half million pick-ups and SUVs to correct a suspension problem that could make the vehicles difficult to steer. The company knew of 11 Accidents related to the defect that caused six injuries before taking action. A similar recall in May 2005, affected 750,000 trucks and SUVs. In December 2007, Toyota announced the recall of 470,000 vehicles for engine, steering and motor problems. In 2008, 90,000 Highlander SUVs were recalled in the United States for adjustments to their third-row seat seatbelts.

In 2006, Toyota recalled 1,2 million vehicles, prompting the Transport Ministry in Japan to demand the company improve quality control. In July 2006, Toyota was forced to recall 420,000 cars over a faulty engine part. The part could cause oil leaks that could cause the engine to stop. In October 2005, Toyota recalled 160,00 Priuses due to a software problem that could make the gasoline engine stall. Still Toyotas quality remained high. In the J.D Powers survey of quality in 2006 it ranked 2nd behind Hyundai for non-luxury brands. Lexus finished 2nd behind Porsche for luxury brands Twenty one of the 47 highest ranked cars in a Consumers Report survey of quality cars in 2006 were Toyotas.

Toyota Recalls in 2010 and 2011

Between November 2009 and December 2010, Toyota recalled 14 million vehicles worldwide, including 11 million in the United States. In March 2011, Toyota recalled 145,000 Brazilian-made Corollas to fix flaws in the fuel tank and other systems. In April 2010, Toyota announced a recall of 50,000 Sequoia SUVs to adjust stability control systems in the vehicles which drivers said was too aggressive in the United States. The same month it recalled 100,00 Corollas in Brazil over acceleration problems. Officials in one of Brazils largest state Minas Gerias ordered a halt in sales of Corollas over safety concerns. In July 2010, Toyota recalled 428,000 vehicles due to defects in the steering wheel column. The same month Toyota recalled 270,00 Lexuses to have their engines checked for a possible defect in the endive valve springs that could cause engine failure. In August Toyota recalled 1.3 million Corollas, Matrixes in North America because their engines might fail. In September it recalled 116,500 four wheel drive vehicles in Australia due to concerns over fault support brackets. In October Toyota recalled 1.5 million cars worldwideincluding 700,000 cars in the United States and 600,000 in Japan to fix a brake fluid leak problem. The models affected included Avalons and Highlanders and several Lexus models. In November 2010, Toyota recalled 65,000 Passo and IQ vehicles in Japan because of potential problems with computer programming of the power steering, defective coolant pumps, In December it recalled 110,000 Siena vans in North America due to concerns that drivers could damage the brake system as they used the parking brake. Also in December, Toyota recalled 650,000 Priuses worldwide, including 378,000 cars from model year 2004 through 2007 in the United States, to replace potentially defective coolant pumps that could cause the car to lose power. In January 2011, Toyota recalled 1.2 million vehicles, including Noahs, RAV4s and others, in Japan due to a possible fuel leakage. In February 2011, Toyota recalled 2.4 million vehicles, including 2.17 million in the United States, saying accelerator pedals could be interfered with by floor mats. Among the models affected were the 2007 Lexus GS, the 2004 through 2006 Highlander and 2006 though 2010 RAV4. In April 2011, Toyota recalled 350,000 cars in North Americaincluding some 2007 and 2008 Highlanders and RAV-4 SUVsbecause of problems with their roll-detection devises. It also recalled 54,000 Tundras in the United States and Canada due to a faulty drive shaft.

In June 2011, Toyota recalled 110,000 hybrids in Japan, United States and Europe over faulty transistors in electricity power control boards. Also in June Toyota recalled 106,000 Priuses globally over concerns over faulty steering caused by a nut that may come loose.

Toyota After the 2011 Earthquake and Tsunami

After the earthquake and tsunami in March 2011 Toyota had to suspend operation at some of its plants both because of earthquake damage and shortages of parts. It was forced to reduce production by about 140,000 vehicles in the two weeks after the disaster. The company also had to suspend operations at overseas plants because of parts shortages. Production in terms of domestic output fell by 63 percent in March 2011, when the earthquake and tsunami occurred. In the United States dealers ran out of some models. Shortages of the Prius were reported a few weeks after the disaster. In January 2011 Toyota opened a new plant to make compact cars in Ohira, Miyagi Prefectureits first new Japanese plant in 18 years only to have it shut down a few weeks later by the earthquake and tsunami in 2011. Miyagi Prefecture was hit hard by the disaster. Within six weeks after the disaster Toyota had resumed domestic output at all 17 of its domestic plants. 18. But things were far from normal. The plants were closed for a long 12-day Golden Week holiday break in late April and early May and there were concerns the plants would close again or run at half capacity in June because of an inability to secure electronics parts. Sales of Toyota vehicles fell behind GM and Ford after the earthquake and tsunami in 2011 in the United States as parts shortages and Toyota production cuts hurt sales. There was a big shortage of Priuses. Because most of them are made in Japan getting supplies to the cars to the United States after the earthquake and tsunami in 2011 was a problem. It wasnt until later summer 2011 that supplies were able to meet up with demand. In May 2011, the whole Tokyo Stock Market was lifted on the news that Toyota production was recover sooner than expected. By that time the disaster had cost Toyota the production of 550,000 vehicles in Japan and 350,000 overseas. Production reached 90 percent of pre-disaster levels in June and 100 percent in July. Initially Toyota was missing 150 kinds of parts. By May that number had been reduced to 30. In June 2011, Around the same time Moody downgraded Toyotas long-term rtaing from Aa3 to Aa2 over concerns that it will take some time for Toyota to return to string profitability due to various setbacks and increased competition in the auto market. In September 2011, Tesla said it was ready to make electric vehicles at the NUMMI plant. In August, Toyota Motor Corp. and Ford Motor Co. reached a preliminary agreement to jointly develop a hybrid system for sport-utility vehicles and light trucks. In September 2011, Toyota resumed full output in North America, ending the period in which production was slowed by a shortage of parts related to the earthquake and tsunami in March 2011. Around the same time the company said it would transfer production of the new Camry from Japan to the United States because of the high value of the yen.

Toyota said its hopes to raise global output to record 8.9 million in 2012. In August 2011, Toyotas domestic output was up for the first time in a year. Exports also rebounded for the first time in six months.

Toyota to Merge Auto Units in Japan as Yen Strengthens

In July 2011, Bloomberg reported: Toyota Motor Corp., grappling with a profitsapping yen, said it will combine its car-making units in northern Japan to boost efficiency. Japans biggest automaker and subsidiaries Toyota Auto Body Co. and Kanto Auto Works Ltd. have agreed to convert the two units to wholly owned subsidiaries through share exchanges in January 2012, the automaker said in a statement. [Source: Makiko Kitamura and Masatsugu Horie, Bloomberg, July 13, 2011] Toyota is pushing the merger to help maintain 3 million units of output in Japan. The carmaker said no jobs will be affected by the merging of its car-making units. The automaker will eventually scrap some antiquated factory lines, though the timing or how many will be shut is unclear at this point, a company representative said. The merger is a necessary move, said Satoru Takada, an analyst at TIW Inc. in Tokyo. The yen is trading below 80 yen, yet Toyota has kept its domestic output ratio high compared to its Japanese competitors. Toyota is aiming to be profitable at an exchange rate of 80 yen to the dollar and prefers the 85 yen level as a manageable break-even point. When yen climbed to the upper 70s yen per dollar, Toyota President Akio Toyoda said, The manufacturing situation is difficult in Japan. We are clenching our teeth in trying to protect manufacturing in Japan. Around the same time Toyota said it would build an engine plant in tsunami-stricken Miyagi Prefecture beginning at the end of 2011.

Toyota, Nissan Pursuing Different Post-Tsunami Business Paths

August 2011, Kyodo reported: As Japanese automakers recover from the devastation caused by the March earthquake and tsunami, two major players Nissan and Toyota have adopted starkly contrasting post-disaster business strategies. Nissan aims to expand in emerging markets, while Toyota (TM) will focus on enhancing customer satisfaction with its products and services rather than setting any sales targets. [Source: Kyodo, August 17, 2011] Toyota's motto now is to offer quality goods at low prices to make its customers feel Toyota's products are good bargains, a senior official said. "This sounds modest but Toyota has already built a global business network so it is more important for the company to hold on to its existing customers rather than initiating an aggressive marketing offensive," one industry analyst says. "That's the way to preserve the clout of the leading company." The company vows to produce "even better cars that will exceed customers' expectations," as President Akio Toyoda puts it. Superior fuel efficiency and a touch of class will likely be the salient characteristics of its new cars, industry watchers say. Observers say Toyota is trailing behind Nissan and Suzuki Motor Corp. in emerging markets, but company executives are giving little heed to such views as they prioritize

the training of factory hands and sales personnel over the expansion of production or sales networks. Executive Vice President Yukitoshi Funo, who is in charge of overseas operations, is cautious about doing business in emerging markets on the grounds that they cannot expect to grow indefinitely. There could be "steep ups and downs" in those countries, he said. The company will also go ahead with the restructuring of its group in hopes of beefing up its management prowess. Two subsidiaries -- Kanagawa Prefecture-based Kanto Auto Works Ltd., which builds small cars, and Toyota Auto Body Co., an Aichi Prefecture-based van producer -- are to be turned into wholly owned units in January.The company expects all these efforts will help boost its worldwide sales including those of its group firms Daihatsu Motor Co. and Hino Motors Ltd. to 10 million vehicles in 2015.