Toyota U.S. sales reel from crisis

 @ibtimes
on February 03 2010 2:24 AM

Toyota Motor Corp suffered a sharp drop in U.S. sales last month as its massive recall and unprecedented sales halt allowed rivals to grab market share from the world's largest automaker.

Honda Motor Co was not the biggest beneficiary of Toyota's woes in January, but raised its forecast for the year to March after reporting its strongest quarterly profit in a year-and-a-half led by motorcycle sales.

In the latest blow to its once gold-plated quality image, Toyota said on Wednesday dealers in both the United States and Japan had reported complaints from buyers over the brakes in its new model Prius hybrid.

Toyota pulled eight of its most popular models including the Camry, Corolla and Rav4 from U.S. showrooms in the last week of January following complaints over sticking accelerator pedals.

Toyota's monthly sales fell 16 percent and its U.S. market share fell to its lowest level since January 2006 as rivals Ford Motor Co and General Motors Corp surged past. Its monthly U.S. sales dropped below 100,000 vehicles for the first time in more than a decade.

Auto sales and market share is kind of like a high-speed road race and if you get caught up in the gravel on the shoulder you can get passed really fast, and essentially that is what happened to Toyota, Autoconomy analyst Erich Merkle said.

Right now we have to find out how long it is going to take them to get back on pavement again, Merkle said.

As Toyota sales fell, Ford and Hyundai Motor Co emerged as the big winners, each posting 24 percent sales gains.

MORE SCRUTINY

Toyota's weak sales report came as U.S. Transportation Secretary Ray LaHood took a harder line with the automaker for what he said was a slow response to safety complaints.

We're not finished with Toyota, LaHood said in an emailed statement to Reuters.

U.S. government officials said Toyota could face both an unusual civil penalty because of the recall and an expanded probe that would focus on electric controls. Either development could further damage the Japanese automaker's once-unassailable reputation for quality.

On top of a separate recall for slipping floormats also linked to unintended acceleration, some 8.1 million Toyota vehicles are now being recalled, more than its total group sales last year.

Regarding the Prius, a Toyota spokeswoman said the company was investigating several dozen complaints since December over what drivers characterized as insufficient braking when driving over bumpy or frozen roads.

CRISIS MANAGEMENT

The problems have raised questions about the handling of the crisis by Toyota executives, led by president and founding family member Akio Toyoda, and cast a shadow over Toyota's third-quarter results, due on Thursday.

In moments of a business crisis, people want to see a company take full responsibility, be empathic to the victims and their families and be in control by outlining the problem and how they intend to solve it. They also expect the CEO doing all this, said Ong Hock Chuan, technical adviser of Jakarta-based PR consultancy Maverick who specializes in crisis management.

Toyota seems to have failed in all counts. It's admission of the problem has been half hearted and almost reluctant, it has failed to apologize unequivocally to victims and their families, and its failed to articulate and communicate what it intends to do to regain control of the situation.

Honda, the first Japanese automaker to post third-quarter earnings, raised its full-year operating profit forecast to 320 billion yen, above consensus forecasts of 237 billion yen, after its 177 billion third-quarter came in more than double expectations.

Shares in Honda ended 2.3 percent higher on Wednesday ahead of the results, while Toyota closed down 5.7 percent on turnover three times its daily average. The stock has fallen in eight of the past nine sessions and lost more than $25 billion in value since its initial U.S. accelerator pedal recall on January 21.

Toyota detailed its plans on Monday to fix the faulty pedals on at least 4.2 million vehicles in North America and Europe with a small metal shim, or spacer, to prevent sticking.

Toyota will restart production of the eight models on February 8 after an unprecedented one-week shutdown at six plants in the United States and Canada.

(Additional reporting by Kevin Krolicki, Soyoung Kim and Bernie Woodall in DETROIT, Taiga Uranaka in TOKYO and Saeed Azhar in SINGAPORE; Writing by Lincoln Feast; Editing by Jean Yoon)

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