U.S. Markets open in 6 hrs 17 mins

Toyota gets aggressive with new Prius recall

Rick Newman
Daily Ticker

Here’s a tale of two Toyota (TM) recalls:
In 2009, a few Toyota customers began to complain about vehicles that would accelerate to dangerous speeds on their own, including the family of four people who died in the crash of a Lexus sedan. Toyota insisted nothing was wrong with its vehicles, which led to media exposes, Congressional hearings, government fines, a pile of lawsuits and, ultimately, the recall of more than 7 million vehicles after Toyota did acknowledge a problem with “sticky” gas pedals and floor mats that could jam the accelerator. The whole embarrassing episode may have cost the company $5 billion or more.

Related: Ford bets on a real recovery
Now, Toyota is recalling 1.9 million Priuses, including every version of the current-generation Prius, first introduced in 2009. Toyota says a software glitch could interfere with the gas-hybrid system and cause it to malfunction or even shut down. The recall affects 713,000 vehicles in North America, with the rest being in Japan and Europe.
Unlike the 2009 fiasco, the latest Prius recalls weren’t triggered by high-profile crashes or government pressure, as Aaron and I discuss in the video above. Rather, it appears that Toyota has recalled the vehicles as a preventive measure, to head off the sort of harm and controversy that caused the worst crisis in Toyota’s history.

Related: GM nails its home market, struggles overseas
There’s often tension between regulators and automakers over recalls, partly because it’s not always clear if a defect is a genuine safety problem or just a quality flaw. Recalls can be expensive, because the manufacturer typically foots the bill to fix every vehicle brought to a dealership. So carmakers often resist pressure to notify owners about problems and urge them to bring their cars in for a fix.
Toyota seems to be taking the opposite approach in this case, issuing an unusually widespread recall that could cost the company tens of millions of dollars. Toyota can certainly afford it: Analysts expect the company to report record revenue and profit once its fiscal year ends in March. But Toyota has always been one of the world’s most profitable automakers. Following the 2009 and 2010 scandals, CEO Akio Toyoda promised to cleanse the company of a culture of arrogance that led to its dismissal of consumer concerns and a we-know-better approach toward regulators, which obviously backfired.
It’s obviously inconvenient for Prius owners to bring their cars in for an unscheduled trip to the dealership. But other than that, recalls are typically painless, assuming the manufacturer has accurately pinpointed the problem. For Toyota, this could be a momentary hassle followed by the blissful sound of no scandal erupting.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.