It might be a stretch to say that Toyota didn't see this coming. But Toyota Motor executives are likely stunned by how quickly the brand's latest recall fiasco has affected the standing of the once-sterling Toyota marque, at least in the minds of some consumers. And soon it could affect the breakneck pace of Toyota's sales bounce-back in the U.S. this year.
Last week, Toyota announced a recall affecting 7.4 million vehicles worldwide, the biggest number seen in the auto industry in 16 years. The recall is to correct faulty electric-window switches that could catch on fire, but Toyota had reported no accidents or injuries as a result of this problem.
Presumably because this "massive Toyota recall" of 2012 sounds too much like the "massive Toyota recall" of 2010 not to mention subsequent recalls, consumer perception of Toyota's brand "has plummeted" according to YouGov BrandIndex research. Its score slumped badly over the last few days and now occupies the bottom in a chart of 32 car brands tracked by the service, down from sixth place just a week earlier.
Now there are reports that Toyota saw this potential recall looming a few years ago and could have done something proactive to stem the damage. In any event, Toyota hadn't launched any sort of crisis-communications program, neither a mea culpa effort nor one that shows its determination to move past the latest recall — nothing like the personal video by Toyota USA CEO Jim Lentz two years ago that you can watch at top.
So Toyota may have a car portfolio in need of a refresh but the brand seems to be performing well — they are discounting now to bolster share in the US market but even their current incentives are below the market average — until the recall hit. The Toyota brand was on a positive trajectory since the tsunami in Japan, as reflected in the automaker's #10 position (up 9 percent) on Interbrand's 2012 Best Global Brands port.
And according to Experian's latest auto loyalty study, the Toyota brand portfolio (including Lexus, Prius and Scion) led the U.S. industry on the key corporate loyalty metric in the second quarter, while the Ford brand was the leader for brand loyalty:
Toyota saw its corporate loyalty increase from 41.6 percent in Q2 2011 to 47.3 percent, enabling it to pass both General Motors and Ford Motor Co. This increase marks the first time Toyota has achieved the top spot in corporate loyalty since Q3 2009.
To put this in context, the Ford corporate consideration set of car brands includes Lincoln (which may actually drag down Ford); Hyundai includes Kia; Honda and Acura; GM with Chevy, Cadillac, Buick, and GMC. Experian Automotive defines corporate loyalty as measuring whether a new vehicle purchase matches a prior vehicle owned at the corporate level. This includes all brands under the corporate umbrella. Rounding out the top five in corporate loyalty after Toyota Motor Corp. are General Motors (46.2 percent), Ford Motor Co. (46.0 percent), Hyundai Motor Group (45.3 percent) and Honda Motor Company (43.1 percent).
“Toyota has done an outstanding job of regaining customer trust and getting repeat customers into showrooms,” said Jeffrey Anderson, director of consulting and analytics for Experian Automotive. “To restore normal operations and regain customer trust in such a short time following the earthquake and tsunami is a truly remarkable comeback.”
Such momentum may make Toyota's brand stewards confident, especially because the new recall doesn't involve much apparent danger, while the massive 2010 recall was around a problem with unintended acceleration in which many Toyota customers asserted to have problems leading to accidents and injuries. But that message doesn't appear to be getting out to consumers. And Toyota's 2010 problem was exacerbated in 2011, of course, by natural disasters that sliced its logistics network. This time around, Toyota has a different concomitant problem: a Japan-China geopolitical spat over some islands, which is raining fury on Toyota and other Japanese brands in China and slashing sales.
One auto industry insider who declined to be named told us that "The Toyota brand is resilient. There is a tendency to get all twisted up in the short term when these big recalls happen. The reality is that there are a lot of electronics and motorized functions in vehicles, I’m not sure if anyone will ever be able to execute flawlessly. Look how long it took Audi to get over its rapid acceleration issues (although it was proven and involved fatalities). What Toyota demonstrated is that even through rapid acceleration (not sure if it was ever proven) they we able to quickly rebound. That is another indication that they have a strong brand."
But while Toyota may be perceived as wasting valuable time in getting its arms around this latest body blow, other constituencies are reacting with all due haste. S&P Capital IQ analyst Efraim Levy just reduced his rating of Toyota's NYSE-listed stock, for instance, down to hold from buy. "They were having immense success in the U.S.; the Asian crisis was behind them — the brand was back," Levy told TheStreet.com. "But then you start having these other factors add up."
George Cook, a former Ford marketing executive and a marketing professor at the Simon School of Business at the University of Rochester who has been studying Toyota’s recovery, tells Marketing Daily the scale of the recall is part of the issue with Toyota's consideration this time around. "This is a big number, and while there have been no accidents, I think it's a two-edged sword," he commented, while adding that at least they were proactive instead of reactive. "That's very, very good, which was not the case with the accelerator incident; they are trying to repair their image versus the previous 11 million recalls."
Cook believes owners will give them credit for that, but while Toyota owners can be cultish, that could change. "I think at some point in time, because of the sheer numbers, someone has to say, 'How many more do we have of these?' So I think it could damage ownership loyalty. They will ask, at some point, if Toyota really has control of quality anymore."
All this comes as Martha Stewart is making Toyota a centerpiece of her "American Made" initiative as Toyota shifts more of its auto output to the United States. But even the estimable doyenne of domesticity — in the home and now, apparently, in the factory — won't be able to save Toyota's brand reputation. Toyota itself needs to start "subtracting" from the growing toll on its brand — smartly, effectively and fast.