Recall of 1.27 Million Cars Mars Toyota's Reputation
The Wall Street Journal

By Jathon Sapsford

Oct. 18, 2005

TOKYO – Toyota Motor Corp.'s stellar reputation for quality took a drubbing with the announcement of a major recall of 1.27 million vehicles because of a faulty light switch on the steering column.

Coming on the eve of the Tokyo Motor Show, an event dominated by Toyota, the recall will affect 16 different models, including the Corolla sedan and the RAV4 sport-utility vehicle. Most of the recall will affect customers in Japan, but will also affect 137,000 vehicles exported to markets including Singapore, Australia and Thailand. Toyota said the recall will cost the company 14.7 billion yen, or roughly $128 million.

Toyota, Japan's largest car maker by sales, has long had a reputation as one of the world's most quality-conscious companies, consistently winning top accolades from such arbiters as J.D. Power & Associates for its ability to make cars that run longer with fewer problems. But the company has been rushing to answer surging demand for its products in markets at home and abroad by building a slew of new factories all over the world.

Toyota's senior managers have repeatedly expressed concern over how the company will keep a handle on quality as the company produces everything from mini-cars in Eastern Europe to minivans in Thailand to large pickup trucks in Texas.

"Because of our bigger size, so-called big-company disease has become insipient at our company," said Toyota President Katsuaki Watanabe at a conference in Tokyo, before the recall was announced. "We are not immune to those problems."

Toyota said it would recall cars manufactured between 2000 and 2002. The problem is with the light switch on the steering column of some right-hand drive cars, most of them sold exclusively in the Japanese market. Company officials said that with time, the switch would grow faulty and the headlights would begin to flicker, and in some cases no longer work.

Toyota said the move isn't likely to have a major impact on its earnings. But the move is a second blow to its reputation, coming only a few days after the company said that it would recall 160,000 of its popular Prius sedan, a low-emission, fuel-efficient gasoline-electric hybrid that is growing in popularity along with the rise in energy costs.

The most recent recall, filed with Japan's Ministry of Land, Infrastructure and Transport, was the biggest on record for a Japanese automaker. The previous record was held by Nissan Motor Co. which in 1996 recalled 1.04 million cars due to a defect related to car radios.

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