Auto Dealers Expedite Repairs After Toyota Recall

Experts say setback won't have long-term effect on automaker

Bill Crowder, general manager of Signature Automotive Group, says recalled vehicles will be available within a week and that factory production will resume soon. “Advertising will begin on February 11, 2010, to let our customers know about our extended service hours to perform these recalls on their cars and get our inventory ready for sale. We will then migrate to a message thanking our customers trust in us and begin advertising special deals. Our product supplies will be corrected just in time for the spring market. Overall, I don’t think this recall will affect our sales volume for the year. However, late January & early February 2010 sales will be off considerably. Profits over-all for the year should not be affected,” Crowder says.

This product recall should not be as bad a blow to Toyota’s reputation as bankruptcies were to General Motors and Chrysler. “In the long term, we do not see this having a detrimental effect on Toyota’s image, assuming that the company doesn’t take any missteps in correcting the problem,” says Ivan Drury, an analyst at Santa Monica, California-based Edmunds.com. “For GM and Chrysler, there was more concern about being able to get vehicles serviced in the future, and the future is always an uncertain thing, even though the bankruptcies went smoothly.”

The company’s credibility, however, may be tanking because of its delay admitting accelerator problems were due to more than floor mats. “This has been a very complicated issue because there are currently two reasons a Toyota driver may feel unintended acceleration,” says Drury. “The floor mat ‘entrapment’ issue was announced first and considered to be the only problem, and then a few weeks later it was announced that defective gas pedals were sticking independent of floor mat issues. We have spoken with Toyota officials, and they have reassured us that the problem is mechanical and is not electrical. The more communicative Toyota is in dealing with these issues, the better for the brand’s image,” Drury says.

The U.S. government is investigating the entire problem. “If anything comes up negative toward Toyota in that investigation, that’s going to be very damaging, particularly with the younger people,” says Global Insight’s Wolkonowicz, who has analyzed how different generations make choices as consumers. He says Toyota has very loyal customers, mainly Baby-Boomers who’ve bought the brand for decades. Aging Boomers will give the automaker the benefit of the doubt. “The Baby Boomer generation has a need to always be right, and they are not going to back away from Toyota now,” says Wolkonowicz. So the recall will not have a huge impact — in the short term. However, Toyota has been less successful selling to Generation X and Generation Y, people born 1965 and later. “Toyota’s performance with those younger generations has never been what they wanted it to be. This recall is particularly not going to help for Generation X, who are very much into quality, integrity, excellence,” Wolkonowicz says.

And GenY consumers simply don’t find Toyota products especially appealing. “They see them more as products for their parents.”

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