Honda and Toyota Take Some Punches
As far as I can discern, Honda and Toyota have bullet-proof reputations for quality, safety and reliability. But it seems that reputation is more perception than reality these days. The bruises have barely healed from one quality problem when they get hit with another. This week, Honda and Toyota got socked again with some bad news.
To start, the new 2007 Toyota Tundra scored "below perfect" in the most recent National Highway Transportation Safety Administration (NHTSA) frontal impact tests. The Tundra got only four out of five possible stars. There is deep shame this week in San Antonio, Torrance and Tokyo for this unforgivable engineering faux pas. Unfortunately for Toyota, the domestic brands from GM, Ford and Dodge all got five stars in the same crash test.
[Note: I won't get into the NHTSA's test data and how it's unlikely that these tests will accurately predict how the truck will protect you in an actual crash. There are so many variables in any on-road crash that the tests can't predict. What are the weather conditions? What other safety features does the truck have? How fast are you going, what payload is onboard or being towed, what is the condition of the tires, etc. But the public doesn't think about these things when they see crash result tests advertised. And frankly, I'm not sure it makes that much of a difference in the final sales decision. The ratings become merely an advertising tool for the manufacturers and sales staff.]
In a rare show of back bone, Ford suggested that it might incorporate Toyota's "failure" into its advertising which compares the abilities of the F-150 pickup truck to the competition. "They can't beat us on capacity and now they can't match us on safety", mused Ford's spokesman, Jim Cain. He's right, now I hope Ford follows up with the punch.
Toyota is a darling of the Consumer Reports. I wonder if the thousands of respondents to the CR annual surveys don't just give their Hondas and Toyotas high grades because they are brainwashed to do so.
Let's look briefly at Toyota's most recent recalls. In May 2006, Toyota recalled nearly 1 million cars worldwide for various defects that could cause safety problems. "Intermediate shafts and sliding yokes" in the steering linkage could crack or break causing the driver to lose steering control of the vehicle. Woops. That recall included 170,000 Prius models in the U.S. because the steering shaft could become loose or crack in certain conditions. Total recalled vehicles for Toyota in the US in 2006 were 766,000
I guess things were getting "better" for Toyota in 2006 as Toyota had to recall a whopping 2.2 million cars in 2005.
In January 2007, Toyota issued recalls for more than 500,000 2004 -- 2006 Sequoia SUVs and Tundra Pickups (not the new full-size model). Toyota said there was a possibility of excessive wear to a front suspension lower ball joint that could make it difficult to steer the vehicle and stay in the center lane. Drivers may notice more noise coming from the front suspension. Gee, is that the noise you hear before the suspension breaks and you swerve out of control on the freeway?
We haven't even cleared the first quarter of 2007, but it looks to me like Toyota's US recalls are on the up tick again. GM gets hit with front page news every time this happens and the consumer absorbs that bad news into their already negative image of GM vehicles. However, when it comes to Toyota, the news shows up on the second or third page in the business section. The "bad news" about Toyota reliability seems to be shrugged off by consumers. To Toyota's credit, the quality problems are taken extremely seriously and the company has poured vast resources into fixing problems before they become problems.
I've talked to owners of the Prius. They love that car no matter what goes wrong with it. You know that software problem that plagued them earlier? The on that shuts the car down in the middle of the road with no mechanical fix? That was written off as just being a software glitch -- sort of like another security hole in Microsoft's Vista -- it's ok because it's new technology and all it takes is a software upgrade. And since most Prius owner didn't have a steering column failure, that particular recall was merely a minor inconvenience for "an otherwise fantastic car" which they universally love. Go figure.
Honda has troubles too. Just a few weeks ago, Honda settled a class-action lawsuit alleging that the odometer readings were false and that more miles were recorded than actually driven. This affected residual values, lease contracts and warranty claims. Since the covered period is 2002 -- 2006, the settlement covers hundreds of thousands of vehicles.
Honda isn't going to "fix" the odometers; it will just pay financial settlements to lessees, out-of-mileage warranty claims, and other specific amounts related to over-mileage issues. But what are individuals and dealers going to do about these cars as they are sold and resold? The odometer statement is no small matter. A false (higher) odometer reading will taint the resale value. I haven't heard anything about this looming problem; yet Honda continues to enjoy a bullet-proof reputation for quality.
In February 2007, Honda had to recall almost 30,000 Civic Hybrid sedans manufactured between September 2005 and September 2006 (last generation Civic Hybrids). Honda says that there is a defect in the electrical system which would cause a short circuit that would stop the engine and prevent it from restarting.
This week, Honda announced a recall of 166,000 cars for a faulty component in the fuel pump. The cars affected are the Accord, Accord Hybrid, Odyssey, Acura TL, Acura RL, and Acura TSX from the 2005 model year and some 2006 Honda Ridgeline pickups. At least there is some consolation in knowing that the Japanese culture of Honda will have lots of executives and underlings bowing in shame as management re-emphasis the importance of quality. Now only if you could get any humility and service out of your local Honda dealer...
Honda still enjoys a ridiculously high residual value after three years -- over 50% -- better than any German brand. Honda is also the perennial darling of Consumer Reports. They haven't found a Honda in years that they didn't like.
It's easy to predict how these latest missteps will affect Toyota and Honda. There will be no consumer pull-back or loss of market share or sales. Honda and Toyota will continue to ride the wave of public support and admiration. Sales will advance while GM, Ford and Chrysler lose market share.
When it comes to the car business and sales, consumer perception is reality. The Teflon, bullet-proof, or, dare I say Kevlar -- reputations for safety, quality and reliability for Toyota and Honda will march forward no matter how the domestic boys spin things. It's hard to get people to change course, particularly when it comes to their beloved, long-lasting, reliable, economical, green and tough Toyotas and Hondas. There are going to have to be a lot more recalls and disappointed customers to shake those perceptions.
