For the auto industry, 2009 was filled with calamity and heartache.
The litany of travails is long, and it extends to virtually every
cranny of the industry.
General Motors, the company once
deemed so dominant in the American marketplace that politicians
actively talked about "breaking it up," dipped so low that it fell into
an orchestrated bankruptcy, emerged as a ward of the federal
government, and for punctuation had its chief executive fired by a
government task force.
Chrysler -- along with Ford and GM
one of what was formerly known as the domestic "Big Three" -- also
tumbled into bankruptcy to find a rescuer in an Italian auto
manufacturer that had bailed out of the North American market more than
a decade before.
Both government-brokered moves were
accompanied by Draconian cuts in dealer counts, and dealers who did not
have a hand in either of those games still saw sales fall so
precipitously that many faced business failures of their own. Consumers
saw proud brands with strong followings canceled seemingly overnight.
In
such a cataclysmic year, it is not surprising that many consumers sat
on the sidelines. And so as we entered 2010, it was with more than a
little relief and hope for better times ahead.
Then the unintended acceleration issue surrounding many Toyota
vehicles erupted, quickly evolving to the unprecedented step of
regulators persuading Toyota not only to cease selling vehicle models
in question but also to cease building them. The scenario was almost
unimaginable.
Toyota, widely seen as the most highly regarded
auto manufacturing company in the world, a company whose very name
spells quality and reliability to millions of consumers in the U.S. and
around the globe, has been brought to a veritable standstill by a
product-quality-related safety issue.
[Toyota] can have nothing but a negative effect on an auto industry already brought to its knees.
--Jack Nerad, Kelley Blue Book
Two gigantic safety-related recalls and
the dreadful publicity surrounding alleged product-quality related
deaths and injuries offer a difficult enough series of blows to
weather, but that isn't all that Toyota faces. While other brands also
have issued safety-related recalls of comparable size and somehow
emerged to regain their positive images and remain a force in the
market, at no time has a manufacturer ceased the sale and even the
production of vehicles on such a massive, pervasive scale.
An
examination of the Toyota models whose sales have been suspended is a
litany of market leaders representing millions of sales in the U.S.
alone. Consider the names and the number of model years represented in
the sales suspension: 2005-10 Avalon; 2007-10 Camry; 2009-10 Corolla;
2010 Highlander; 2009-10 Matrix; 2009-10 RAV4; 2008-10 Sequoia and
2007-10 Tundra.
The inability to sell these very popular
models doesn't leave Toyota dealers across the country dead in the
water, but it comes very, very close.
Toyota believes it
understands what the problem is and has a remedy for it, but some
safety experts still maintain that a defective accelerator pedal
mechanism does not account for all the reported cases of unintended
acceleration. Because many of these cases defied duplication after they
were reported, their cause may never be known. What is known is that
thousands of drivers are nervous about driving their Toyotas.
But
as devastating as the situation is to Toyota, the ramifications for the
Japanese auto manufacturer and the auto industry as a whole are even
more far-reaching.
First, there are the ripple effects on
nonaffected Toyota models, plus the Toyota-built Lexus and Scion.
Certainly these massive recalls and the stopping of sales and
manufacturing will have a negative effect on Toyota's overall brand
image. Further, the situation can have nothing but a negative effect on
an overall auto industry already brought to its knees by consumer
credit woes, unemployment and the generally negative economic climate.
Will
consumers who were about to purchase a Toyota turn to alternative
brands or will they just sit on their wallets until the smoke clears?
It is highly likely that a percentage of potential car buyers simply
will decide to wait and see what happens.
Further complicating
the situation are the millions of owners of recalled Toyotas who
suddenly have seen the confidence they have in their vehicles shaken
but who, at the same time, find those vehicles difficult to trade in or
sell privately.
We at Kelley Blue Book see the effects of the
recalls and publicity rattling down through the used-vehicle market.
Some dealers and private buyers are reluctant to accept the suspended
model Toyotas right now. The models also are commanding lower prices
than they did before the recall.
So the news surrounding Toyota
is not only a dark day for that highly respected company, but also a
cause for concern across the industry.
Frequently the media looks for winners and losers in such a situation, but there are no winners here.
The opinions expressed in this commentary are solely those of Jack R. Nerad.
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