Class action lawsuits from at least a dozen law firms are being filed against Toyota in exploitation of the recent accelerator recall; trial lawyers now only lack tragic stories to justify billion dollar settlements. The federal government, of course, is there to help.
When GM had recalls recently, there was little news attention. But the Toyota story is huge, not because the problem is so major, but because it is widespread. A lot of people are affected. They will lose a couple hours of time each. Big deal.
The story is also newsworthy, I suspect, because Toyota is foreign-owned.
You don't hear Toyota owners clamoring for revenge against the company, however. As a long time customer, I mostly am worried that people like me will wind up paying higher prices and dealing with overly-cautious dealers , not due to the recall, but to the legal threat and government intimidation. I dread talking to a dealer who feels he has some lawyer listening in.
Some of the media passion against Toyota probably abated, however, when the governors of American states like Kentucky and Indiana where Toyotas are made spoke up in defense of the company--and the employees/voters who will be hurt if Toyota is punished unduly.
Meanwhile, according to former Volkswagen executive Heinz Gundlach, speaking yesterday in Boca Raton, Florida, VW plans to open its own plant (finally) in the US next year. Chattanooga, TN will receive the blessing of the German investment and the hiring of 1200 new employees.
Gundlach also shared some sobering numbers about the state of the auto market. The total number of cars sold in the U.S. has declined during the recession, while sales (including VW and GM, as well as new local models) are going up in China. In 2007 China bought five million cars; last year (2009), China bought nine million. The U.S. bought 14 million in 2007, and only 10 million in 2009. In the U.S., 500 of every 1000 people already own a car, while only 30 in every 1000 in China own a car. It is not hard to anticipate China's overtaking the United States as the number one car market soon.
Meanwhile, within the U.S., what Gundlach calls the "Detroit Three" (they used to be "The Big Three") have seen their market share drop in ten years from 65 percent to 44 percent. (When I was a kid, it was 95 percent.) Remember, this decline in the share of the auto market pie is taking place while the market "pie" itself is growing smaller. The prospect: the customers Detroit is losing are probably not coming back.
Regardless of the absolute and relative decline of U.S. auto companies, some 75 percent of cars bought in America are built here (or in neighboring Canada and Mexico). Dealing with fluctuating exchange rates is simply too risky for foreign companies like VW; the price offered the buyer can jump up or down too much, based only on the changing value of the dollar versus, say, the Euro. That and the politics of national pride have caused foreign car makers to open plants here. VW is one of the last to do so. The Koreans will probably be next. Right now, if you order a part for a Hyundai, it has to come from Korea.
Yes, unions and health care costs are a problem for American manufacturers, Gundlach says, but not decisive ones. Labor constitutes only 20 percent of a car's full cost, which is why, he indicates, China is not much of a threat to automakers in the U.S., Japan and Europe. The material that goes into a car comes from all over. That is why you have Toyotas made in Kentucky today and Chrysler PT Cruisers made in Toluca, Mexico. China will not sell many cars in the U.S. for some time.
What does matter in competitive advantage is simply the quality of the product. "Product, product, product!" Gundlach stresses. For decades, Detroit let go of that concern in its pursuit of novelty, indulging in constant change. In contrast, Toyota understood the importance of consistent, reliable quality of the product and the service behind it--and has prospered.
With my gas-efficient, cheerful, easy-to-park 2010 Carrolla (I call it my "Red Crayola"), I am confident that Toyota will take care of me. I am hopeful that Detroit will give them increasing competition for my business in the future. But meanwhile, I wish the government and the trial lawyers would leave them all--and me--alone.