Toyota’s accelerator woes wreaks havoc with brand’s reputation

Toyota Motor Corp.’s announcement that it was halting the sale and manufacturing of eight of its popular models in Canada, the U.S., Europe and Asia poses a major reputation crisis that could make or break the brand, experts suggest.
On Jan. 26, 2010, Toyota Canada Inc. announced it was suspending sales of eight models involved in a recall for sticking accelerator pedals. The recall was also expanded to Europe and China. On Jan. 28, it announced that during the first week of February it intends to suspend the North American production of the models involved in the recall. The affected models include:
•    2009-2010 RAV4;
•    2009-2010 Corolla;
•    2009- 2010 Matrix;
•    2005 – 2010 Avalon;
•    Certain 2007 – 2010 Camry;
•    2010 Highlander;
•    2007 – 2010 Tundra; and
•    2008 – 2010 Sequoia.
As a result of the massive product liability, Fitch Ratings has placed Toyota Motor Corp’s long and short-term ratings on ‘Rating Watch Negative.’
“The recalls and sales and production suspension cast a negative light on Toyota’s reputation for quality, just as the company emerges from an unprecedented downturn in the auto industry,” Fitch Ratings said in a release.
“At present the impact of Toyota’s actions on its credit profile is difficult to quantify given the uncertainty as to the length of the suspension, the extent of the measures needed to resolve the problems, and the longer term effect of these actions on its brand equity and competitive position.”
A recall and the halt of manufacturing and sales of this magnitude has the potential to make or break an organization’s reputation, Gene Grabowski, senior vice president of Levick Strategic Communications told The Globe and Mail.
“It’s a risk strategy, but it’s a strategy that is based on the idea of showing absolute concern for the well-being of customers, which in the long run could be an advantage for Toyota,” he told The Globe and Mail.
Since the decision was announced, Toyota’s shares sank more than $7 to $79.77 on the NYSE.