How important is safety at Toyota? According to a document sent to a U.S. congressional committee investigating Toyota and its handling of the recent disclosure defects with so many of the Toyota line of vehicles, Toyota Motor Corporation was able to saved $100 million by “negotiating” recalls of its vehicles. According to internal Toyota documents, Toyota executives described their ability to negotiate around recalls as “Wins for Toyota.” Toyota was able reduce or to delay the effect of proposed rules on roofs, door locks and protection in side-impact crashes, according to the document that was turned over to the House Committee on Oversight and Government Reform and obtained yesterday. By delaying the rules, Toyota was credited with saving about $135 million. Yet Toyota continues to claim “Our first priority is the safety of our customers and to conclude otherwise on the basis of one internal presentation is wrong. Our values have always been to put the customer first and ensure the highest levels of safety and quality.”

In contrast, over the past few years, when owners of Toyota vehicles complained about unwanted acceleration, Rep. Bart Stupak, D-Mich. said Toyota representatives “commonly responded … by concluding that the events the consumer described could not have happened.” Stupak also accused Lentz of misleading the public in television interviews in which he said Toyota studied the problem and the cause was the sticky pedals and floor mats. He said experts interviewed by the committee demonstrated that the report used an extremely small sample that would not get to the root of the problem. One of the primary authors of the Exponent report said they did not examine any vehicles or components that had the unintended accelerations.

Toyota’s Internal Documents

Toyota’s internal documents reveal:

Toyota saved $100 million referring to a 2007 investigation in which Toyota recalled 55,000 vehicles, including Camry and Lexus ES cars, citing the potential for floor mats to trap accelerator pedals, after an investigation by the National Highway Traffic Safety Administration.

Toyota was able to avoid investigations of the Tacoma pickup for rust as well as resolve a labeling recall without civil penalties, saving approximately $20 million in “buybacks.”

Toyota saved thousands of hours of labor by delaying NHTSA’s revamped consumer ratings, the New Car Assessment Program, according to the document. The program grades new models on a five-star scale based on how well they fare in crash tests.

Federal Grand Jury Supoena Issued to Toyota

As if Toyota was not already in enough trouble, a federal grand jury in the Southern District of New York issued a subpoena that requested Toyota and its units produce documents related to unintended acceleration of Toyota vehicles and the braking system of the Prius, the automaker said in a regulatory filing to the SEC. This new development of being subpoened by a federal grand jury has far reaching implications. There is no doubt that it will create issues for Toyota executives who are scheduled to testify at hearings Tuesday and Wednesday. Not only is the subpoena an indication that Toyota may face large civil penalties and fines for the automaker, but that the United States government may even decide to issue criminal indictments against Toyota executives. Even a carefully crafted apology could be used against the company or the executive in a criminal trial.

Further, considering the scope of the problems Toyota has been dealing with and the public outrage, lawmakers are likely to press for direct answers to specific questions and to be unsatisfied if executives refuse to answer questions by asserting their Fifth Amendment rights. For example, Rep. Bart Stupak, D-Mich., who will run Tuesday’s hearing, said documents and interviews demonstrate that the company relied on a flawed engineering report and resisted efforts to link Toyota’s electronics to the problems with unintended acceleration in an effort to reassure the public that it found the answer to the problem and that the problem was limited in scope. In a letter to Toyota, Stupak said a review of consumer complaints shows company personnel identified sticking pedals or floor mats as the cause of only 16 percent of the unintended acceleration reports and that approximately 70 percent of the acceleration incidents in Toyota’s customer call database involved vehicles that are not subject to the 2009 and 2010 floor mat and “sticky pedal” recalls leading Stupak to the conclusion that Toyota was not being up-front in its disclosures to the public or the handling of the problem.

SEC INVESTIGATION

In addition, the SEC is also beginning an investigation of Toyota and whether or not Toyota complied with SEC regulations since its stock is publicly traded. Quinn Gillespie & Associates, a prominent lobbying firm, meanwhile, said it had stopped representing Toyota because of a conflict that posed with another client. Quinn Gillespie officials would not identify the other client, but an auto industry official speaking on condition of anonymity to reveal private information said it was State Farm, the giant auto insurer that told federal regulators in 2004 and 2007 about reports of unexpected acceleration in some Toyotas.

It is not clear what laws Toyota might have broken. While the subpoena would specify why prosecutors sought company documents, Toyota would not comment beyond its disclosure with the SEC. Likewise, a spokeswoman with the U.S. Attorney’s Office for the Southern District of New York declined to comment, saying it does not confirm or deny its investigations as a matter of policy.

The Politics Behind the Scene

As we mentioned in our previous post, it will be interesting to watch how the politics of this situation play out. Clearly there are safety issues involved, yet some political figures appear to be more concerned with the financial gains they or their constituents receive from doing business with Toyota than with the safety of Americans. Texas Governor Rick Perry is among those who seem to be more concerned with the business impact of Toyota than with the safety concerns over Toyota vehicles and whether Toyota is telling the truth to its customers and to the government. Last week, Rick Perry commented that ,”It does sometimes appear, however, that the negative news is being encouraged by plaintiffs’ trial lawyers, union activists and those interested in cutting into Toyota’s market share.” This approach is not atypical as according to government documents, Toyota has been steadily increasing its lobbying efforts to obtain favorable legislation and treatment. For example, 10 years ago, Toyota spent $685,684 on Washington lobbying as compared to 2009 when it spent $5.2 million.

Stay tuned. We are sure that the hearings this week will definitely lead to more questions about Toyota’s handling of this crisis.

There is no doubt Toyota is deep in a crisis and is not only facing a public relations nightmare, but also probably a long line legal problems over the widespread recalls of its vehicles over the past couple of months. However, not everyone wants to hold Toyota accountable for its actions that have been linked to numerous deaths and injuries.

While the safety of the public should be the primary concern and focus of everyone involved, Texas Governor Rick Perry appears to be less focused on safety and holding the car manufacturer responsible for its actions than he is in the financial gain the state generates through its relationship with Toyota. In a letter sent this week to Texas Congressman Joe Barton of Ennis, the ranking Republican member of the Energy and Commerce Committee – called for lawmakers to keep in mind next week when company officials testify before the committee the thousands of Texas families “whose economic livelihoods depend on Toyota, … and to consider the integral role the Japanese automaker plays in the Texas economy.” Discounting the need to protect the public from a manufacturer that may have known for years that its product was defective and dangerous and was linked to deadly accidents, Rick Perry commented that ,”It does sometimes appear, however, that the negative news is being encouraged by plaintiffs’ trial lawyers, union activists and those interested in cutting into Toyota’s market share.”

Hopefully, when the hearings take place next week, members of Congress will be more focused on finding the truth, protecting the American public, and holding Toyota accountable for its actions than they are in protecting Toyota’s profits.

According to the most recent data from the National Highway Traffic Safety Administration, at least 34 people have died in accidents involving Toyota Motor Corp. vehicles that allegedly accelerated out of control in the past decade. This is a dramatic increase in the number of deaths originally believed to be linked to the unintended accelleration issues since the time that the “sticky” gas pedals have become so well publicized. This number includes at least 13 more that have been reported since January 27, 2010, the day after Toyota ordered a sales and production halt of eight models in the U.S. to fix gas pedals that it said can stick and cause unintended acceleration. To make matters worse, the number is likely to continue to increase as an analysis of the data shows that all but one of the newly reported deaths occurred years prior to the 2010 recall — some as far back as 1992.

Most of the incidents occurred between 2003 and 2009. Noting the increased fatality total, Clarence Ditlow, executive director of the Center for Auto Safety in Washington, said “We are going to go over 100 without a doubt,” Ditlow said. “The only question is what is the true number because many fatalities don’t get attributed to sudden acceleration, especially as you go further back in time before people were paying attention to Toyota.”

In addition to the fatalities, federal regulators said 22 people reported injuries from unintended acceleration accidents involving Toyota vehicles, which ranged from cuts and bruises to a woman left in a coma.

Nonetheless, the jump in reported fatalities in its vehicles marks another troubling development for Toyota, which has been furiously attempting to reassure the public about its commitment to safety in the wake of the recent recalls.

Toyota, for its part, has not released data from its own internal complaint files on accidents, injuries or deaths alleged to stem from unintended acceleration. The automaker has declined to state how many complaints of the problem have been filed, but in general databases held by manufacturers are orders of magnitude larger than NHTSA’s.

A Bigger Problem Than The Recalls Reveal

Even scarier for consumers of Toyota vehicles is that the NHTSA data show that many of the fatality reports involved Toyota models that were not included in any recalls. For example,

• a fatal crash on Oct. 13, 2009, in New Hampshire involved a 2005 Highlander, which has not been recalled. Toyota has issued recalls only on 2008-2010 Highlanders.According to the NHTSA complaint, the car hit a vehicle head-on, killing four people. “Believe car had uncontrolled acceleration,” said the complaint, which was filed Jan. 27.
• In addition, the data show complaints alleging fatalities involving a Scion tC, and a Lexus GS, neither of which models are included in the recalls. No Scion models have been named in any of the recalls.
• Nearly all the sudden acceleration-related fatality complaints on file for Toyota affect vehicles manufactured since the 2002 model year. Only five such allegations are included in vehicles produced prior to that time, the oldest a 1988 Camry that crashed into a brick wall.
• The majority of fatalities were in Camry and Lexus ES vehicles, which are built on the same platform and share many components. Both vehicles are subject to the floor mat recall.
• A complaint of an August 2008 accident in Chicago alleges that the driver of a Lexus ES 330 had removed the floor mats from the vehicle the morning of a sudden acceleration incident than ended with the sedan striking and killing a pedestrian prior to passing through a fence and into a concrete pillar. According to the complaint, Toyota wrote the driver on Sept. 22, 2008, stating “that the car was operating properly.”
• Another complaint detailed a 2004 crash in Indiana that took the life of a female driver whose 2003 Camry surged out of control and smashed into a building. The vehicle had less than 7,000 miles on it. A handwritten notation on the complaint, filed shortly after the accident, said “throttle stuck — engine surged.” Paramedics arriving on the scene, the complaint said, “found the driver with both feet still on the brake pedal.”

Toyota CEO and president said that Toyota feels ashamed about the recent recalls of its vehicles now affecting nearly nine million cars.

Prius and Lexus Brake Recall

The most recent recall involves 437,000 Prius and Lexus 2010 hybrid models with a software glitch that affects the brakes, Toyota president Akio Toyoda acknowledged that “people think we were slow to respond.” The first recall announced Tuesday related to a software problem that controls the antilock braking system includes the 2010 model Prius and Lexus HS250h in North America. Toyota spokesperson Ririko Takeuchi said that 155,000 vehicles will be recalled in North America including 139,000 3rd generation Prius and 16,000 Lexus models. In Japan, four hybrid models will be recalled – the 2010 Prius, the Prius Plug-in Hybrid, the Sai model sold in Japan and the Lexus HS250h. The latter three models were introduced in the country last year.

Camry Brake Recall

In its second recall in one day, Toyota announced Tuesday that it plans to recall just over 7,300 2010 Camrys for a brake defect. The problem, if not fixed, could result in leaking brake fluid, and make it more difficult for a driver to stop the car. The issue with the Camrys, according to documents filed with the National Highway Traffic Safety Administration, is a power steering hose that is too long and can rub up against a tube for the left rear brake. That could cause the brake tube to wear through, leading to a leak of brake fluid. Toyota says the problem was discovered during an inspection and it hasn’t seen evidence of this happening on the road. The automaker says that Camry owners will get recall notices in mid-March and that all fixes should be done by the end of March.

Corolla Steering Complaints Being Investigated

Also today, NHTSA said it is reviewing a number of complaints about the steering on 2009-2010 Toyota Corollas. In a statement, the government said this is standard procedure with complaints and that as of yet, no official investigation has been opened.

Sticking Gas Pedals and Floor Mat Problems

Toyota is still dealing with its recall of more than 7 million vehicles in the United States in recent months to address what it acknowledges are two acceleration-related issues:

1. Reports of uncontrolled acceleration in its cars, and

2. Gas pedals that can stick or fail to spring back properly.

Since 2003, the company has received reports of more than 2,000 accidents and 19 deaths tied to the acceleration problem. The recall affects the following vehicles:

• 2007-2010 model year Toyota Camry,
• 2004-2009 Toyota Prius,
• 2005-2010 Toyota Avalon,
• 2005-2010 Tacoma,
• 2007-2010 Toyota Tundra,
• 2007-2010 Lexus ES 350 and
• 2006-2010 Lexus IS 250 and IS 350.

Congressional Investigation

Toyota is not getting a free ride from Congress on its slow response to this defect. NHTSA and Congressional investigators want to know why the Japanese car company waited at least a month to inform its customers and government agencies of the braking problem, well after it had introduced a fix to the software in cars being manufactured.

Still dodging the questions, Toyota’s CEO told reporters he “did not recall the exact month and day” when the company first learned of the brake problem with the Prius, only indicating that Toyota was aware of the problem sometime “this year.” Meanwhile, at the press conference, Toyota president Akio Toyoda was asked if his company had withheld safety information from U.S. regulators. Toyoda answered in Japanese. “As a company, our intention is to sincerely give 100 percent cooperation,” said Toyoda. “We want to make our best effort to deal with this matter for our customers’ security and safety.” ABC News reported Thursday that former government regulators working for Toyota in the U.S. had met and negotiated with government safety officials prior to investigations of safety issues with Toyota, and that the ensuing investigations were very narrow in scope. A former Toyota lawyer also told ABC News that the automaker had tried to hide safety problems from consumers, which Toyota denies.

Still struggling to get control of the unintended acceleration problems with its Toyota and Lexus vehicles, Toyota is now dealing with reports that its 2010 Prius hybrid vehicles have a defective braking system.

Reports of the brake failures appeared as early as August when Japan’s Land and Transport Ministry began receiving reports from drivers who had experienced brake failure while driving their Priuses over bumpy roads or on slippery surfaces. Toyota is currently investigating a total of 85 complaints relating to incidents in which Prius brakes have intermittently stopped working. Toyota also admitted yesterday that there were 13 more incidents that had arisen over the past two months which was a “greater than usual” number of reported incidents.

The problem with the brakes is being described by some as a complete failure of the brakes to engage for a period of time, perhaps as long as a few seconds, even though the operator has the brake pedal fully depressed. Toyota’s investigation into the Prius brakes is thought to be focused on the computer that links together the two separate braking systems at the heart of the model’s groundbreaking hybrid technology. The car is slowed down by a combination of traditional mechanical brakes and the electromagnetic resistance that recharges the batteries. The fact that problem may be in the design of the electrical system is important as the technology was developed and designed by Toyota itself and not its suppliers. As a result, Toyota will be hard pressed to blame its suppliers for the brake failures in the way it is trying to do with the problems it is having with its other vehicles that are experiencing unintended accelleration issues.

Toyota’s handling of this defect issue with the Prius as well as the defects with its other models involving unintended accelleration issues are calling into question Toyota’s credibility and the quality of its products. Toyota is being criticized for developing a corporate mentality of denying responsibility and responding slowly to safety issues to avoid negative publicity, and trying to blame the problems of unintended accelleration on its suppliers of component parts.

While Toyota is not ready to admit that its Prius vehicles have a brake defect, saying last week that it was “still confirming the facts” surrounding the brake failure claims, Toyota’s actions appear to be inconsistent with that statement. For over a month, Toyota has been modifying its production lines to address the brake problem. For over a month, Toyota has been fixing the problem with new vehicles before they are sold. In addition, the company has been providing emergency fixes for Japanese Prius owners who have complained of brake troubles. However, Toyota has not notified its customers who own the affected vehicles of the reports of brake failure problems or issued any recall notices yet.

Toyota, is holding a press conference about the brakes today, but Toyota has not announced whether it has decided to issue a recall of Priuses. Toyota is obviously feeling pressure to do something in light of all of its recent public black eye. The US Transportation Secretary, Ray LaHood, said that he planned to call Akio Toyoda, the Toyota President, “and explain to him that this is serious business”. Meanwhile, Masayuki Naoshima, the Japanese Minister for Trade, summoned Toyota’s head of quality control, Shinichi Sasaki, to a meeting last night. Mr Naoshima later said: “there is a small computer inside the brake and Toyota is making adjustments and improvements.”

While Toyota is considering what steps it is willing to take, the real issue needs to be the focus on customer safety.

Federal class action lawsuit has been filed in Charleston, West Virginia claiming Toyota’s massive recall is not large enough in scope to cover all of the affected vehicles. The lawsuit claims that other models have faulty electronic throttle systems that might cause unwanted acceleration.

The Charleston lawsuit, filed in November, names 13 models dating back to 2002 for the Toyota Camry and 1998 for Lexus vehicles that have an electronic throttle-control system, or ETCS, which allegedly has “a dangerous propensity to suddenly accelerate without driver input and against the intentions of the driver.”

Moreover, when reports of incidents caused by unwanted acceleration led to an investigation by the NHTSA in 2004, the information provided by Toyota officials was limited in scope so as to exclude incidents that lasted longer than one second or where the driver couldn’t stop the unwanted surge by applying the brake, according to the lawsuit.

The lawsuit alleges “Toyota, through [Toyota Motor North America], deceptively concealed from NHTSA as well as from the news media and consumer safety groups that monitor NHTSA safety defect investigations, an entire universe of potentially relevant customer complaints,” the lawsuit states.

In addition to those, the lawsuit alleges, several other models and years are at risk:

• 2007-08 FJ Cruisers,
• 2003-08 Tacoma pickups,
• 2002-09 Camrys,
• 2000-09 Tundra pickups,
• 2001-09 4Runner SUVs,
• 2001-09 Land Cruisers,
• 2005-09 RAV4s,
• 2001-09 Sequoias,
• 2004-09 Siennas,
• 2005-09 Corollas, and
• 2004-09 Highlanders.
• “Lexus models” from 1998 to 2009 also are listed.