IBJNews

Toyota suspending production at two Indiana plants

Back to TopCommentsE-mailPrint

Toyota is halting production at six North American car-assembly plants—including Indiana facilities in Princeton and Lafayette—beginning the week of Feb. 1 to fix gas pedals that could stick and cause acceleration without warning.

The move, announced late Tuesday, comes on the heels of last week's recall of 2.3 million vehicles. Toyota also will suspend U.S. sales of the eight models affected, including the Camry—America's top-selling car—and Corolla, another popular model.

The Princeton plant, which employs 4,200, will shut down production lines for the Sequoia and Highlander SUVs. That facility also manufactures the Sienna minivan, which was not included in the recall. Toyota makes the Camry at the 3,000-employee Subaru of Indiana facility in Lafayette under a partnership that started in 2007. Toyota gave no date on when production could restart.

The Japanese automaker's decision to suspend sales is a blow to its reputation for quality and endangers its fledgling earnings recovery. It is also a symbol of the dramatic failings of the aggressive growth strategy Toyota Motor Corp. pursued under former President Katsuaki Watanabe, a cost-cutting expert, who led the Japanese automaker to the No. 1 spot in global vehicle sales, dethroning General Motors Co. in 2008, analysts say.

The automaker's shares fell 4.3 percent in Tokyo trading.

A Toyota official, who spoke on condition of anonymity, said the sales suspension could hinder the company's ability to meet its forecast for 6 percent growth in global vehicle sales this year.

Although Toyota's Japan plants are not affected, the problem could spread to Europe, where a similar accelerator part is being used, and could affect millions more vehicles.

The problem part comes from one U.S. supplier and does not affect models that use parts from different suppliers, said another Toyota official who spoke on condition of anonymity.

Analysts said the production stoppage signaled a more serious crisis for Toyota than recalls, which are fairly routine for automakers.

"It's an abnormal situation, and there is no way to compare it with anything else," said Yasuaki Iwamoto, auto analyst with Okasan Securities Co. in Tokyo.

He said the problem should serve as a wake-up call for Toyota to be more careful with maintaining quality. There is no quick fix to a tarnished brand image, Iwamoto said.

Despite the recent recalls, Toyota has still done well on quality surveys, and leads the world in hybrids, which show off top-grade green technology.

But the latest U.S. problems mirror the spate of quality problems that plagued Toyota several years ago in Japan, its home market.

In 2006, Watanabe acknowledged lapses in quality control in Japan. One sparked a criminal investigation by the Japanese government into accidents suspected of being linked to vehicle problems. No one was charged.

At that time, Watanabe appeared at a news conference in Tokyo, bowing deeply to express remorse to consumers and dealers. Later, he acknowledged overzealous growth was behind the quality problems.

"Under Watanabe's growth strategy, it was difficult to maintain a balance between speed and quality," Iwamoto said. "The problems came about because of the strains that came from his expansion efforts."

Watanabe, who took office in 2005, was replaced last year by Akio Toyoda, the grandson of Toyota's founder. Toyoda, seen as a charismatic figure that can bring together not only employee ranks in Japan but suppliers and dealers, has repeatedly said his company is in a crisis that could peril its survival.

He has also avoided the past fanfare involved in announcing sales targets.

Toyota quietly gave global sales targets Tuesday that showed it was optimistic about getting on track to recovery since the financial crisis in late 2008 sent demand crashing, especially in the key North American market.

Toyota said it expected to sell 2.19 million vehicles in North America in 2010, up 11 percent from 2009. Globally, Toyota said it was planning sales of 8.27 million vehicles this year, up 6 percent from 2009.

But those numbers could change with the latest developments. Also at risk are Toyota's earnings.

Last year, Toyota reduced its loss forecast for the fiscal year through March 2010 to 200 billion yen ($2.2 billion) from its initial projection for a 450 billion yen ($5 billion) loss, citing a gradual recovery in global demand.

Toyota announces earnings Feb. 4.

Mamoru Katou, analyst at Tokai Tokyo Research, said he could not calculate the exact damage to Toyota's results because the duration of the sales suspension was still undecided. But he said it was certain to be significant, especially if the suspension continues for a month or two.

He said Toyota was likely reorganizing production plans, such as switching suppliers, and shipping in parts from Japan. "The problem is extremely serious," said Katou. "The models are precisely those Toyota had been preparing to sell in big numbers."

The Japanese automaker said the U.S. sales suspension includes the following models: the 2009-2010 RAV4, the 2009-2010 Corolla, the 2007-2010 Camry, the 2009-2010 Matrix, the 2005-2010 Avalon, the 2010 Highlander, the 2007-2010 Tundra and the 2008-2010 Sequoia.

Toyota sold more than 34,000 Camrys in December, making the midsize sedan America's best-selling car. It commands 3.4 percent of the U.S. market and sales rose 38 percent from a year earlier. Sales of the Corolla and Matrix, a small sedan and a hatchback, totaled 34,220 last month, with 3.3 percent of the market and sales up nearly 55 percent from December of 2008.

The auto company said the sales suspension wouldn't affect Lexus or Scion vehicles. Toyota said the Prius, Tacoma, Sienna, Venza, Solara, Yaris, 4Runner, FJ Cruiser, Land Cruiser and select Camry models, including all Camry hybrids, would remain for sale.

The announcement follows a larger U.S. recall months earlier of 4.2 million vehicles because of problems with gas pedals becoming trapped under floor mats, causing sudden acceleration. That problem was the cause of several crashes, including some fatalities.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. So the Mayor adds another non value added layer to having a vehicle towed? Whereby the City Government RECIEVES AN ILLEGAL KICKBACK FROM A LGOISTICS COMPANY THAT SUBS THE WORK TO LOCAL TOW COMPANIES? What is the service the City performs for receiving the "tribute"? This is RICO!!!!! What a corrupt and unnecessary layer. What a dirtbag Mayor and his cronies.

  2. Owner occupied housing. Clear enough?

  3. So people think I am paranoid. It's from experience in dealing with puds requested by developers who make major donations themselves to representatives, have nice fund raisers for those running for office and hide through pac's. then there are the public relation firms. You will note some pr comments below. You there Clyde Lee? My opinion. Commercial along 421, great. Multifamily housing, terrible idea that will change the town. Senior condos or zero lot line homes west, great. I suggest keeping all entries to commercial areas at 421. All entries to owner occupied on sycamore. Will keep the traffic on sycamore down some. Two other things. You can't trust what will be there in 10 years. Steve builds quality stuff, but areas change over time. Look at the changes at the wall mart center at 86th and 421 over the last 10 years. Look at the apartments and neighborhoods behind St Vincent's. Raintree properties WILL decrease in value if commercial and multifamily goes in near. It has already been happening around the bridges area. The houses that have been sold recently are way below market. Several deals not closed due to the Illinois construction and the whole unsurety of the bridges. It's pretty simple, Zionsville will approve the whole thing because the city council has been groomed over a LONG period of time for this. I might even suggest some are in their position as a result of this.

  4. Esta, do you have a dog in this fight? You seem to really want to knock anyone against this project. No, I didn't move to Indiana for the architecture. I moved here for that red barn in the field. The horses and fields of corn. A place that is NOT overdeveloped. There are plenty of nearby places in Indianapolis that could be REDEVELOPED instead.

  5. RKW - OK, we get it, you're paranoid. The question is, are you paranoid enough? Greg - Yes, Pittman(s) is (are) at it again. They are developers, they build things. It's what they do. So when you go to work tomorrow, Greg, you're at it again too. Cliff - Really? You moved to Indiana for its progressive architecture? That's like moving to England for the cuisine. Zionsvillain - The house you moved to was once a field or woods. I'm willing to bet folks were upset when that ground was plowed under and a house was built. But I guess now that you are in, everything should stop? "My house was OK, but the next one is sprawl." SE Guy - Please don't paint us with such a wide brush. Most reasonable Zionsville residents welcome planned, measured development.

ADVERTISEMENT