IBJNews

Toyota suspending production at two Indiana plants

Back to TopCommentsE-mailPrintBookmark and Share

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. I think the poster was being sarcastic and only posting or making fun of what is usually posted on here about anything being built in BR or d'town for that matter.

  2. Great news IRL fans: TURBO the IMS sanctioned movie about slugs running the Indy 500 has caught the Securities and Exchange Commission because Dreamworks had to take a $132MILLION write down...because the movie was such a flop. See, the Indy/IMS magic soiled another pair of drawers. Bwahahahahahaha! How's CARTOWN doing? HAHAHAHA...Indy is for losers.

  3. So disappointed in WIBC. This is the last straw to lose a good local morning program. I used to be able to rely on WIBC to give me good local information, news, weather and traffic on my 45 minute commute.Two incidents when I needed local, accurate information regarding severe weather were the first signs I could not now rely on WIBC. I work weekend 12 hour nights for a downtown hospital. This past winter when we had the worst snowfall in my 50 years of life, I came home on a Sunday morning, went to sleep (because I was to go back in Sunday night for another 12 hour shift), and woke up around 1 p.m. to a house with no electricity. I keep an old battery powered radio around and turned on WIBC to see what was going on with the winter storm and the roads and the power outage. Sigh. Only policital stuff. Not even a break in to update on the winter storm warning. The second weather incident occurred when I was driving home during a severe thunderstorm a few months ago. I had already gotten a call from my husband that a tornado warning was just southwest of where I had been. I turned to WIBC to find out what direction the storm was headed so I could figure out a route home, only to find Rush on the air, and again, no breaking away from this stupidity to give me information. Thank God for my phone, which gave me the warning that I was driving in an area where a tornado was seen. Thanks for nothing WIBC. Good luck to you, Steve! We need more of you and not the politics of hatred that WIBC wants to shove at us. Good thing I have Satellite radio.

  4. I read the retail roundup article and tried Burritos and Beers tonight. I'm glad I did, for the food was great. Fresh authentic Mexican food. Great seasoning on the carne asada. A must try!!! Thanks for sharing.

  5. John, unfortunately CTRWD wants to put the tank(s) right next to a nature preserve and at the southern entrance to Carmel off of Keystone. Not exactly the kind of message you want to send to residents and visitors (come see our tanks as you enter our city and we build stuff in nature preserves...

ADVERTISEMENT