How a Corolla Recall Could Spell Disaster for Toyota

Somehow, it keeps getting worse

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Toyota is reeling. What bad news has not come in in the last month? February began with the transportation secretary accidentally telling Americans to stop driving certain models. Then analysts sniffed skeptically at the company's profitable quarter, while commentators compared the high-flying brand to the mythical Icarus. CEO Akio Toyoda asked the public for forgiveness, only to watch haters gloat over the Prius recall. Now the beleaguered titan is announcing its popular Corolla may be added to the recall list due to steering problems. How does this add to the unfolding Toyota disaster?

  • Points More and More to Design Flaws  The Washington Post's Frank Ahrens says the first thing to notice is that it looks like "Toyota has finally gotten over the r-word (recall), swallowed its pride and has begun to show some transparency." Disturbingly, he points out that this recall adds a new problem--steering--to the earlier ones of "runaway acceleration" and "trouble stopping." That makes, Ahrens says, "the trifecta of vehicle-control issues. It suggests design flaws rather than problems with parts suppliers or driver error."

  • Corolla Magnifies Problem  Douglas McIntyre, writing at Daily Finance, says "recalling three different sets of vehicles with three different sets of problems" could pose quite a problem for Toyota. Furthermore, the new Corolla issue will "further undermine that company's reputation for quality," while "substantially increas[ing] the number of class action and liability suits filed against the auto maker." At both Daily Finance and 24/7 Wall St., he hypothesizes that the company may have underestimated the money it will lose on this fiasco.
  • And It's Already Pretty Magnified  "In January," notes Zacks Market Commentaries, "Toyota lost more volume than any other auto group in the industry, driven by the recall." Also, "it was the first time since February 1998 that Toyota's monthly U.S. sales fell below 100,000 vehicles."
  • Now in 'Full-On Crisis Mode,' declares Matthew DeBord at The Big Money. The situation: "The once invulnerable Prius has been affected, the top-selling Corolla sedan is being investigated for steering problems, and Akio Toyoda, the company's embattled president and grandson of its founder, is dodging Congress' desire to have him testify in person about the Great Recall."
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