Toyota fined $32.4 million for not notifying safety issues

Toyota is to pay a fine of $32 million to the US transportation department for not notifying them on the safety issues in the stipulated time. The auto giant has agreed to do so and this it hopes will bring an unfortunate year to an end.

In a year of major reputation crisis Toyota had it the worst in the auto sector with the recalls and the reputation blitz that followed.  Toyota was the worst performer among major automakers in the U S this year, with a rise of just 0.2 percent in its single-biggest market.

While the famed management style – The Toyota Way may have been great all these years, being such a global leader with a huge US market and managing it all from far far away has had its effects. Traditional management rules from Toyota city, in Japan, probably brought out these problems in the first place.

As far as business reputations go the automaker has had its worst year till date. Recalling 11 million vehicles worldwide and now being slapped a record fine has brought up the pay-out made by the company to nearly $50 million. And billions could follow if related lawsuits  succeed.

Toyota faces refund claims

After a massive global recall, the Japanese car giant ‘Toyota’ is yet again feeling the heat with the car owners demanding for full refund of their cars. Adding to the already grief ridden recall saga, Toyota  invited loads of criticisms followed by legal battles ever since the revelations of their car’s tendency to accelerate out of control. The technical glitch seems too hot to handle for Toyota, and now the customers are out of control.

Thankfully, the recent recall by both  Honda and Toyota has let the consumer’s to lose their confidence for Japanese vehicles.  Has this change in consumer preference exposed the grey area for Toyota or other Japanese car makers? Blessing in disguise, the American car makers, ‘GM Motors’ and ‘Ford’ are finally ready to capitalize on their once undisputed Japanese competitors.

Lately the Attorneys Toyota Actions Consortium (ATAC) added rackerteering claims on Toyota for its number of  lawsuits. Tim Howard,who is coordinating the ATAC even said that :

“It’s become increasingly apparent that Toyota profits were not built on quality products, but on a willful pattern of deception, fraud and racketeering.”

Undoubtedly all these development has tormented the reputation of Toyota globally. The growing list of enraged customers proves how PR was never considered at the first place followed by the absence of  a strategic reputation management. Setting an examples how things can slip off your hands, if not dealt the way it has to be. Toyota has lost its reputation and number one position  for being the most favorable customer loyal car maker in US. But its only matter of  time before we know how grave the scar is for Toyota and other Japanese car companies.

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Maruti Suzuki Recall- Joins the band!

Joining the race of car recall is Maruti Suzuki (Suzuki Motor Corp has 54.2 percent stake). The biggest carmaker in India is heading to call back 100,000 cars of hatchback model A-Star from the Indian market. The reason cited is to replace a faulty fuel pump gasket, which could potentially lead to fuel leaks. The company in a statement said,

The car recall belongs to Aug 2009 lots. In November 2009, we came across an anomaly reported in the fuel tank in some of the vehicles and by December 2009, we started contacting the customers through letters

The company further says the recall actually began in November, but did not disclose the move until late February. This latest development comes at a time when quality related concerns is already gripping the auto industry with recall from Toyota and Honda already in the bandwagon.

A-Star being a popular model in Europe, Maruti had made it a point to apprise the European regulatory authorities about the recall, but the question remains! Why Maruti did not make this disclosure in India. Maruti says the recall will have very little effect on the company, but the impact was felt elsewhere. The investors packed Maruti’s stock to an all time low at 3 percent after the recall announcement.

Maruti being a leader in car market in India have never bullied on their stand, but from the Reputation management point of view had they disclosed the recall earlier, the investor would not have panicked as it reflected on the share market. Secondly there will be doubts about the way company handle information and  disclose them to investors. Finally will this affect Maruti’s reputation or are they going to put up a better show than Honda and Toyota, have to wait and see how it takes shape.

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Honda Recall for faulty airbags

Close to the heels of Toyota recall, Honda Motor Co is all out to make a similar move to replace the faulty airbag deflator in their cars. The No.2 automaker of Japan is about to recall 4+ million cars.

About 12 incidents have been reported including one fatality.  This is the second time Honda is recalling their cars for the same reason, previously it was in November 2008 and June 2009. The series of recalls from Honda also includes the one for faulty window switch.

The current recall applies to 2001 and 2002 year model; CL vehicles, Civic, Accord, CR-V, Pilot, Odyssey, and 2002 Acura TL. Honda is currently concentrating the recall in the United States

A Honda spokesman said “the defect was caused by insufficient stamping pressure during the production of the inflator”. On the contrary the US unit of Japan’s Takata Corporation; manufacturer of the airbag stated ‘they are not aware of any defect in airbags supplied to Honda’.

Known for their reliability and quality over the years, the recent incidence has jolted the customer’s faith in these Japanese (Honda, Toyota) vehicles.  This has also effected its production and sale in many countries.  Quick to grab the market share the domestic car makers; General Motors, Chrysler and Ford are looking to cash in on the woes of their unbeatable Japanese competitors.

As from the reputation management point of view, we feel if Honda is able to turn the buzz rapidly and positively, the damage will only be marginal. A positive step to regain customer confidence, Honda has already started contacting it’s customers by mail asking them to take their cars to the authorized dealers.