Quality comes first for Toyota, as it should
Short-term pain will be long-term gain for company riddled with recalls
SAN FRANCISCO (MarketWatch) -- Tapping the brakes on new-model launches may slow Toyota's pursuit of the coveted "world's biggest automaker" title, but some things are more important, especially for a company that has staked its reputation on quality.
Besides, few doubt that Toyota will inevitably vanquish General Motors Corporation as top auto dog, regardless of the measures it takes to remedy recent glitches.
With its mantra of kaizen, translated as continuous improvement, stained in the past year by a rash of recalls, Toyota is reportedly about to compromise its ferocious growth to make sure its new products live up to the company's sturdy reputation.
Toyota has recalled 628,000 vehicles in the U.S. this year and may soon recall another 500,000, the Wall Street Journal reported. This comes on top of more than two million recalls in 2005. In fact, only Ford had more recalls last year per vehicle on the road than Toyota.
Not even the red-hot Prius hybrid has been spared.
But they keep selling ... and selling. Just like most Toyota and Lexus models. And that's because it'll take a more than a rocky year to undo what Toyota has accomplished in the court of public opinion over the past few decades.
Of course, the notion of slowing growth never resonates well in the trading pits of New York, where Toyota's U.S.-listed shares sank 2% to close the week at $106.12 on the report.
Number crunchers fear the impact the potential delays could have on the bottom line in the coming quarters, and maybe they're concerned that this is just the tip of the iceberg.
Also, the stock is clearly priced for perfection, with Toyota's market capitalization equaling that of all five of the other top automakers combined.
It's not like domestic manufacturers are immune to delays and production cuts. Earlier this week, Ford Motor Company slashed its fourth-quarter production plans by a surprising 21%. But no bit of bad news coming from the Big Three would be considered shocking these days.
That's not the case with Toyota, which has emerged with a mostly bulletproof image.
And the company is apparently prepared to preserve that image at all cost, even if it has to endure some short-term market pain. So far, the bruises are already fading as the company has performed as usual in closely-watched consumer studies.
Just this month, J.D. Power named the Lexus brand as the most dependable for the 12th consecutive year. Toyota cars and trucks were fifth. Broken down by segment, the two brands together dominated the results with four first-place nods apiece.
"Perceptions about dependability can have a tremendous impact on an owner's satisfaction with their vehicle, which is no small matter for manufacturers," said analyst Neil Oddes. "In terms of retained value, recommendation and repurchase intent, and component replacement, vehicle dependability can have a direct impact on a manufacturer's bottom line."
And nobody plays the perception game better than Toyota.
While any sort of production delays may dent near-term growth prospects and give its beleaguered rivals cause for hope, Toyota loyalists are more likely to see a company devoted to setting the gold standard in reliability. End of Story