02.03.10 9:15 PM ET
Detroit's Big Chance?
With new questions about brake failure on the Prius, Toyota's future as the world's No. 1 automaker is in doubt. Paul Eisenstein on whether the Big Three can capitalize.
"We're back," proclaimed Daily Show host Jon Stewart on Tuesday night, as the logos of Detroit's Big Three automakers popped up onto the screen—and into millions of American homes.
For the first third of Stewart's half-hour show, the target was Toyota Motor Co., the Japanese automaker that not long ago seemed invincible. But now, facing two massive recalls and with a growing number of safety investigations under way in the United States and abroad, the automaker's near, if not long-term, future is looking decidedly uncertain.
Click Image to View Our Gallery of History's 10 Biggest Car Blunders
Ford and General Motors have been rising steadily in the quality and reliability charts. Only days after Toyota's first "unintended acceleration" recall, last October, Consumer Reports declared that Ford products were now at "world class" quality levels, while the latest GM models, such as the new Chevrolet Equinox crossover, were getting there, as well. And the most recent long-term dependability study from J.D. Power and Associates put Buick, one of four brands to survive GM's bankruptcy, ahead of Toyota's vaunted luxury brand, Lexus.
• Ralph Nader: Blame Obama for Toyota’s Car Troubles Taking hits from Stewart and David Letterman certainly won't make lives easy at Toyota. But the real question is whether the Big Three, who have had plenty of problems of their own, can take advantage of the situation.
"It depends on how it all plays out," said Alan Mulally, CEO of Ford Motor Co., "how fast Toyota gets this behind them."
The Japanese automaker clearly hoped to put the situation in the rearview mirror as quickly as possible when it announced its first safety recall, last October. But its efforts have been star-crossed, and since then, the situation has only worsened. A second major recall, on January 21, was accompanied by the decision to close five U.S. plants temporarily and halt sales of six of Toyota's most popular models.
But even that didn't put Toyota back in control of the crisis, with a new investigation under way looking into reports of brake failure on the popular Toyota Prius, and U.S. Transportation Secretary Ray LaHood accusing the company of being "safety deaf."
For Toyota, that's the equivalent of getting rope-a-doped in the boxing ring. Safety and quality together have long been what Jim Lentz, the president of Toyota Motor Sales USA, calls the "cornerstone" of the brand.
GM has been making a point of relaying the results of the dependability study to consumers in a series of commercials featuring sports hero Howie Long, many of them directly comparing products like the Equinox and Chevy's midsize Malibu sedan to comparable Toyota models.
Although Ford hasn't directly challenged the competition, it also has been shifting its marketing efforts away from the usual images of cars soaring along scenic open highways to a more direct presentation of product attributes.
The timing of Toyota's meltdown, said Mark Fields, president of Ford's Americas division, could "open everybody's eyes" to Ford's message, particularly the emphasis on safety, quality, and reliability.
"Obviously, the guys at GM and Ford, Chrysler, too, are looking at this as an enormous opportunity to take market share away," said Joseph Phillippi of AutoTrends Consulting.
But Phillippi quickly added that the Big Three are well aware of how fast fortunes can change in the auto industry, especially considering two of the companies filed for Chapter 11 bankruptcy less than a year ago. They're reluctant to get too aggressive and openly taunt Toyota for its current misfortunes.
Nonetheless, "all's fair in love, war, and automotive marketing," said a GM executive who asked not to be identified by name. And the automaker has made at least one direct jab at its troubled rival. Insisting it was just responding to calls from nervous Toyota owners, the one-time industry leader launched a special incentive program last week for those trading in the Japanese automaker's products.
The program, offered on top of any other existing GM incentives, gives Toyota owners the option of getting $1,000 in cash, cutting $1,000 off their lease payments, or taking a zero-interest, 60-month loan. The offer runs through the end of February. Ford quickly followed up with a similar giveback plan, as did South Korean carmaker Hyundai, which views Toyota as its No. 1 competitor, a deep-seated enmity that insiders say dates back to the indignities Koreans suffered at the hands of the Japanese during World War II.
Can Detroit—never mind Hyundai and other brands—capitalize on Toyota's deepening troubles? "I certainly wouldn't count [Toyota] out," said Phillippi. "There's a lot they can do to combat bad press, and they have a lot of cash" to support a rebuilding campaign. Indeed, in the wake of the first recall, the automaker launched a $1 billion marketing blitz that observers estimate is the most costly three-month campaign in automotive history.
A major portion of that "spend" was wrapped around the Prius, featured in a colorful series of save-the-earth TV spots and print ads. But those ads could now backfire, said Dave Sargent, head of automotive research at J.D. Power.
If the investigation into the high-profile hybrid turns into yet another recall, he said, consumers might see that Toyota is suffering "less from a one-time problem and more like something systemic."
The fact that plenty of other brands now deliver the levels of safety and reliability Toyota once stood out for only makes it easier for consumers—especially those, said Sargent, entering the market for the first time—to switch loyalties.
Reporter, publisher and Bureau Chief of The Detroit Bureau and TheDetroitBureau.com, Paul A. Eisenstein has covered the auto industry since 1979. One of the world's most widely published automotive journalists, Eisenstein's work routinely appears in such publications as The Economist, Germany 's Auto Motor und Sport, MSNBC.com, Cigar Aficionado, Wired, Motor Trend, TheDailyBeast.com, and dozens more. He's a regular commentator on NPR, and a frequent guest on numerous other broadcast outlets.