As Toyota stumbles, Detroit eyes gains

The storm battering Toyota Motor Corp. TM-N

intensified as the company broadly extended its safety recalls, providing a rare opportunity for its rivals to halt the relentless gains in market share earned by decades of intense focus on quality.

Toyota expanded its vehicle recalls Thursday to Europe and China, on top of a U.S. recall of 2.3 million vehicles last week, another one million this week, and a decision to halt sales and production of its most popular vehicles in North America. The company is working on new replacements parts for sticky accelerator pedals that could cause a vehicle to move suddenly or fail to stop.

The recalls strike at the heart of the reputation Toyota developed since it first started selling cars in North America more than five decades ago and rode to global sales leadership: that the vehicles it sells have the highest quality and are the most reliable.

Now, the recall fiasco opens up opportunities for competitors to win back consumers worried that Toyota’s commitment to quality and safety was compromised by a rapid expansion into global sales leadership.

Asian auto makers for many years have gained market share at the expense of North American auto makers, which have long struggled with inferior quality ratings. Even though their quality has improved, the perception among drivers that Detroit doesn’t match up with Asian companies persists. But the Detroit Three are jumping at the chance to change those perceptions and win back share.

The crisis at Toyota represents a “huge opportunity for Detroit,” said Jake Fisher, senior automotive engineer at Consumer Reports magazine, which publishes annual rankings of how drivers rate the firms that supply their cars.

“Think about this,” Mr. Fisher said. “They go into the Toyota dealership and ‘No, we can’t sell you a Camry’ and just for the hell of it, they walk into a GM dealership or a Ford dealership. These people are going to be really shocked to see how far the domestics have come in the time they’ve been away.”

Auto makers are moving to take advantage of Toyota’s halt in the sale of its top-selling vehicles in the United States and Canada, such as the mid-sized Camry sedan, compact Corolla and RAV4 crossover utility vehicle. Ford Motor Co. joined General Motors Co. in offering $1,000 (U.S.) in rebates to owners of Toyota and Honda Motor Co. Ltd. vehicles.

“We’ve never been in a better position to have a shot at these people,” said Ford spokesman Robert Parker.

“Clearly with the void right now and people needing vehicles I am sure that there’s going to be even more interest in Ford,” Ford chief executive officer Alan Mulally said Thursday after Ford reported its first annual profit since 2005.

Toyota is facing deepening problems with class-action lawsuits in the United States that linked last week’s accelerator pedal recall to a larger recall of Toyota vehicles in November that was based on floor mats causing pedals to jam and cars to crash.

The suits said the acceleration problems are caused by defects in the vehicles’ electronic throttle-control system.

The U.S. Congress is also planning to examine the issue. Members of the House of Representatives said they intend to hold a hearing on Feb. 25 to review the complaints of sudden acceleration.

“It’s not radios that don’t work and other niggling stuff that so often involves a recall,” said Joe Phillippi, who heads Auto Trends Consulting Inc. in Short Hills, N.J. “These are serious safety issues that have resulted in someone’s death.”

The problems with the accelerator pedals widened to include Ford, which suspended production of a commercial vehicle sold only in China that uses pedals from the same supplier as Toyota, CTS Corp. of Elkhart, Ind.

Still, some industry experts say Detroit will have a hard time winning over Toyota’s customer base. Consumers intent on buying Toyota vehicles are more likely to be also looking at models from Honda, Nissan Motor Co. Ltd. and South Korea-based Hyundai Motor Co., said Chris Travell, vice-president of automotive for Maritz Canada Inc.

“The situation with Toyota may change it a little bit, but it’s not going to be a mass exodus away from Japanese-based brands into Detroit,” Mr. Travell said. Ford, GM and Chrysler Group LLC have improved their quality, but the perception among many consumers is that their quality still doesn’t match that of Japan-based companies, he noted.

Toyota’s share price fell for the second straight day in trading on the New York Stock Exchange. The shares fell $2.10 (U.S.) or 2.6 per cent in New York to $77.67.

Debt-rating agency Fitch Ratings Ltd. said it put the company’s debt on negative watch because of the recalls and the suspension of sales and production.

With files from Bloomberg News and Associated Press

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