A win for Toyota?! Ooops…

First, for a little context and perspective, please be advised that product recalls affect hundreds of millions of people in the United States every year.  And many have been prompted by defects in cars that “caused the deaths of innocent Americans.” 

Remember the rollover and tire problems that plagued Ford Explorers in 2000?  Industry experts say that those defects caused “as many as 250 deaths and more than 3,000 catastrophic injuries” before Ford issued a recall. 

I won’t even mention the recalls that have been related to defective Chinese products….

More to the point, in each case CEOs duly appeared before Congress for a humiliating tongue lashing. Notwithstanding that these hearings never produce any insights about or remedies to these defects. Those usually come from negotiation between company executives and government regulators – in this case the National Highway Traffic Safety Administration (NHTSA).

All the Toyota vehicles bear my name. For me, when the cars are damaged, it is as though I am as well. I, more than anyone, wish for Toyota’s cars to be safe, and for our customers to feel safe when they use our vehicles… I am deeply sorry.

(Akio Toyoda, CEO Toyota Motor Company)

In fact, the only thing novel about yesterday’s hearing was the CEO involved.  After all, the media has portrayed him variously as a member of the Japanese royal family and as a member of the Japanese Yakuza (mob). 

No doubt this is why these plebian congressmen could not resist reveling in the schadenfreude of Mr Toyoda himself, the grandson of the company’s founder. Especially since this was not the case when Mr Ford, the great-grandson of that company’s founder, appeared before Congress, hat in hand, begging for a bailout in 2008.

At any rate, they have now had their day.

That said, it would be naïve not to appreciate that this public flogging of Toyota over the safety of its cars was infused with an unbridled dose of commercial nationalism. For selling cars is a zero-sum business. And these congressmen know full well that the worse they make Japanese cars look, the better they make American cars look:  not only to Americans but also to the Chinese and other potential customers worldwide.  And fair enough, since but for its deadly brakes defect and the craven attempt by executives to cover it up, none of this would be happening.

Of course there’s also the fodder they’re providing for the trial lawyers who contribute so handsomely to their campaign coffers.  For taking shots from Congress is cheap compared to the shots Toyota will be taking from class action suits, which will cost it billions.

So, when all is said and done, this will hardly be a “win for Toyota” – as its executives were caught boasting in a compromising internal memo when they thought they were going to get away with a limited recall.  Far from being limited, they have now had to recall over 8.5 million cars and trucks … and counting – by far the largest in history.

NOTE: The fact that Toyoda agreed to appear before Congress reflects the importance not only of the US market to Toyota’s bottom line, but also of American goodwill to Japan’s foreign policy agenda.  After all, foreign CEOs are beyond the reach of Congressional subpoenas, and most have sensibly avoided these dog and pony shows like the plague.