Don't Call it a Comeback: Toyota's Safety Issues May Be Big 3's Gain

In the heart of downtown Detroit, on Lafayette, two next-door neighbors have managed to survive for decades despite being the purveyors of very similar products. Lafayette Coney Island and American Coney Island both sell the same basic thing (the coney dog), but any seasoned Detroiter will tell you there is the slightest difference. This situation is seen elsewhere in Metro-Detroit; a CVS and a Walgreens staring each other down from opposite corners of a busy intersection, a Home Depot and a Lowe's sharing a parking lot, and like most suburbs, two, three, or even four gas stations competing by the penny at the same crossroads.

The Big 3, Ford, General Motors, and Chrysler, have struggled to turn a profit competing against the likes of Toyota and others. Toyota is, at the most basic of levels, no different than Lafeyette Coney touting a better chili, CVS luring customers with a rebate on prescription drugs, or the Mobil station dropping the price of a gallon by $.02. When it comes to the Big 3 vs. Toyota, the Japanese auto-maker has been winning the battle over the last three decades by flaunting the reliability and safety of their product.

It is difficult for trends to shift. If rumors spread of a rat infestation at one of the Detroit Coneys, you can be sure the other would see an up tick in business; but that, of course, would never happen. If CVS or Walgreens was found to be funding terrorists, there may be some available real estate on a corner across from the other, but that, again, would never happen. If Toyota suddenly had rumors, reports, and recalls stemming from safety problems or unreliability, you would surely see more American made cars on the road; but, yet again, that would never.... Happen?

Over the last month or so, Toyota has experienced a litany of scathing reports detailing how their cars accelerate on their own or stay in idle long after the driver's foot comes off the gas. The Federal Government has responded with press conference after hearing after press conference. Every media outlet has covered the story from every angle imaginable. Toyota has recalled thousands of vehicles which may be affected and has even begun running television ads "apologizing" for their mishaps.

What's the big deal? The Big 3 have had recalls and safety issues in the past. It was an annoyance for the guilty company, but it didn't seem to greatly affect their sales when it was all said and done. Perhaps the same will be said about Toyota.

Herein lies the serious problem for Toyota. When the Ford recalled the Explorer due to problems with the tires, Ford was already fighting an uphill battle to convince the consumer it was building a safe, reliable product. When the average consumer heard of the recall, they may have changed Ford's safety rating, in their mind, from a 4 to a 3 on a 10 point scale. It did not hurt Ford terribly, especially because that same consumer viewed Toyota as a 9 on the same scale. Ford was already getting slaughtered in the consumer's mind.

With the Big 3 building their reputation slightly over the last few years, let's say from a 4 to a 6, Toyota's problems could quickly become the Big 3's gain. If that average consumer begins to downgrade Toyota's safety and reliability rating in their mind, for example from that 9 of years past to a 7, the auto industry just got a whole lot more competitive. Losing 9 to 3 is horrific, losing 7 to 6 is a comeback.

Jerry Hirsch and Stuart Pfeifer, Toyota faces massive legal liability, Los Angeles Times, February 12, 2010.
Michael O' Brien, LaHood defends agency's handling of Toyota safety issues, The Hill.com, February 10, 2010.