Toyota's Woes: The Bloom Is Off The Rose

The effects of Toyota's recall and suspension of sales to remedy a problem with unintended acceleration are starting to be felt. While the recall itself was national news last week, it wasn't until the suspension of sales on Tuesday night that the story mushroomed into something along the lines of a major crisis for the company.

"Easily the amount of inquiry after we froze the vehicles has far exceeded the actual recall announcement itself," said Toyota spokesman Brian Lyons.

In the short term, the economic impact of the errors the company made in the design of their pedal system (which, by the way, wasn't built by Toyota directly, but by a supplier named CTS Corporation) will be significant.

"It's going to cost them about $410 million dollars in revenue just for the simple fact that they won't be able to sell these cars for the last 6 days of January," said Jesse Toprak, vice president of industry trends at TrueCar.com, an auto-pricing and industry-tracking site.

Should reports ring true that Toyota already has a fix in place and is currently ramping up to implement a remedy soon, that could be the extent of the financial loss for the month. But every day into February they're not selling cars, they're losing $68 million. Yes, that's each day.

"There are direct financial consequences as well as the more indirect but probably more dramatic on their brand image," said Toprak.

Listen to the call we had with Toyota's Brian Lyons over the company's actions over the last week.

Toyota became the number 1 sales leader in the U.S. in 2009, something that General Motors held tight to for decades, although oftentimes pundits wondered why GM boasted about its market share leadership while profits and brand image tumbled.

At least at GM, that drive to be the sales leader isn't the primary focus.

"GM is still one of the biggest car companies but I would say we don't care about being the biggest anymore, because we're not," said a GM source who works in the company's marketing group in Detroit. "Thank god that's not a concern anymore. We just need to be the best."

The hunt to be the biggest can be difficult. Even Toyota's own CEO lamented that the company had lost its focus.

"Toyota has become too big and distant from its customers," Toyota President Akio Toyoda told reporters in fall of 2009.

Some experts believe that the company's drive to get to No. 1 forced a focus on quantity over quality -- including relying on an expanded supplier base -- which some say brought about the recent problems.

Toyota's recent string of recalls and product problems -- from a recall of Toyota Tacoma trucks for rust problems to the Lexus unintended acceleration problem associated with floor mats to this issue with Toyota products -- stings for a company that built a reputation on those very qualities of reliability and durability.

We've put together our list of the 4 things Toyota should do immediately to help consumers -- and themselves -- through this issue.

1. Be Humble And Explain The Problem

It's tough admitting when you're wrong. Toyota's proven over the last week that its strategy for dealing with this issue was not a paragon of orchestration. Although the suspension of sales was the right move, the way in which the company did it wasn't. They let five days pass and continued to sell cars that needed a fix. Furthermore, they continued to sell Lexus vehicles after their 2009 recall of those products for floor mat and gas pedal issues.

"It is huge and will hurt them a lot," said Julie Roehm, a marketing consultant who led marketing and communications for companies such as Chrysler and Walmart and who recently launched Slash Marketing on AOL Autos. "I think it will pull people from them for a while. They can turn it around though. Tylenol did, Saturn did, Audi did but all of them took a long time to do it...years."

Toyota has never been one to put their executives front and center like GM or Chrysler have in the past, but an issue like this that involves consumer safety could be an opportunity for actual Toyota executives or employees to explain the problem in real, human terms and talk about what they're doing to solve the problem.

While no one will forgive Toyota for the death of the Saylor family in 2009 due to the unintended acceleration problems with their Lexus, the public needs -- or, perhaps, deserves -- a thorough explanation.

This isn't done in a press release, either. The company has an opportunity to create videos for the web or television that could explain what's going on. As of right now the extent of the company's messaging has been their press release and a small button on their Toyota.com homepage that links to a series of frequently asked questions.

2. Explain All Problems With Unintended Acceleration, Not Just This One

One issue I have with Toyota's messaging at this point is that there are two serious recalls taking place:

- The November 2009 recall of Lexus vehicles to shave accelerator pedals down so they won't interfere with the vehicle's floor mats, potentially sticking the pedal so it's unable to be released
- The recall last week of Toyota products to fix a problem with the pedal system itself, which can wear and warp and create an unintended acceleration problem

The problem is that both center on the same issue: there are Toyota products that could have unintended acceleration problems. The distinction between the two symptoms might be different, but the consumer sees them as similar.

"The fact that they say the new issue is a new one isn't really relevant," said Rex Greenslade, a former PR executive at Ford Motor Company and president of communications and marketing firm G Works Inc. "In the eyes of the public, it's the same issue. Toyotas are accelerating and you can't stop them."

Toyota should treat both as a paired issue and discuss the solutions in a similar way.

3. Provide Incentives To Current and Future Toyota Buyers

Toyota's financial hit won't be limited to lost sales today. They'll need to think about saving the relationships with customers they have currently and those who might have considered them but instead now consider a different manufacturer.

"The biggest impact I think is going to be on those consumers who are not Toyota buyers but who could be in the market for a new car for the first time," said TrueCar.com's Toprak. "So, if you're in the market trying to decide between a Toyota or a Honda or a Ford or a Hyundai, this whole news of recall and suspending of sales will probably not help you to buy a Toyota. There are so many other choices out there that you're not going to sit around and wait for the situation to be resolved, unless you're a diehard Toyota fan."

Toprak says that he expects Toyota will need to provide incentives to owners and shoppers of up to $2,000 per car.

4. Shrink Product Lineups

In Toyota's bid to become number 1, they ramped up the vehicles to attract new audiences. For the Toyota brand that means 8 cars, 2 trucks, 7 vans or SUVs, and 3 hybrids. Lexus has 15 models itself, while Scion sells 3. That's nearly 40 products, not including the variations for trim levels.

It is our opinion that they should revise their strategy and focus on what made them attractive to begin with: reliability and durability. An example of this can be found in the current Toyota Corolla. While once an example of a well-priced, simply designed product with best-in-class fuel efficiency, the 2010 Corolla has a polarizing exterior design, fuel economy numbers that won't stand up to Ford's new Focus or GM's new Chevy Cruze and interior quality that isn't what we'd expect for a Toyota.

If Toyota shaved some products from its lineup, it could focus on recreating what made some of their product lineup special in the first place.