It sure sounds like a big deal: On Thursday, Toyota (NYSE: TM ) announced a global recall of 1.53 million (with-an-M) vehicles, the company's 14th recall campaign in what has been a year of quality-related woes for the giant Japanese automaker.
I've taken Toyota to task several times this year for its handling of some of those earlier recalls. Documents were spun, reports were delayed, blame was shifted to places it might not have belonged ... it was a parade of PR blunders that made Toyota look like an out-of-touch, arrogant colossus, just as the companies' harshest critics had been saying for years. It was almost a textbook example of how not to manage a crisis.
With that background in mind, it's tempting to follow the lead of my fellow Fool Rich Smith, who reacted to the recall news by saying, "It's hard to overestimate how bad this fiasco is for Toyota."
But I disagree. I think it's quite easy to overestimate -- in fact, I think the whole thing is no big deal. One could even argue that it reflects well on Toyota.
One of these things is not like the others
As recalls go, this one's a mixed bag. On the one hand, it's an awful lot of cars: About 750,000 in the U.S. and another 599,000 in Japan, mostly sedans and midsize SUVs made from 2004 to 2006. There are a couple of separate problems being addressed, but most of the U.S. cars are affected by a seal in the brake system that could dry out and cause a small leak if the wrong brand of brake fluid is used.
Is it a safety issue? Yes, if it's ignored. On the other hand, it's not a particularly dramatic problem. A slow leak of brake fluid makes the brakes feel weird over time, and eventually, the car becomes harder to stop. But such a leak would trigger a dashboard "Check Brakes" warning light, leading most owners to get the problem addressed long before there was any serious danger.
Because it's a safety issue, Toyota was legally obliged to issue a recall right away, even though no accidents or injuries have been blamed on the problems. And that's exactly what the company did. In fact, National Highway Traffic Safety Administration head David Strickland actually praised the company in a Detroit News interview, saying, "Toyota really is taking safety much more seriously than they did before I took office [in January]" and that it is "working very hard to be a better company going forward."
Is this sounding like a PR disaster to you?
This is what business as usual should look like
Every automaker has recalls from time to time. Honda (NYSE: HMC ) announced on Thursday that it would be recalling some of its own cars for the same brake problem, probably attributable to a part used by a common supplier. Even tiny Tesla Motors (Nasdaq: TSLA ) , which has built fewer than 2,000 cars ever, had a recall recently, as did Ferrari. And of course even this giant-sounding Toyota recall pales in comparison with massive headache-inducers like Ford's (NYSE: F ) ongoing efforts to fix 17.5 million cars with faulty cruise-control switches.
Ford's cruise-control recall is serious stuff. The defective switches, which were used for years in many different models, can cause fires even when the cars are turned off. And those recalls have drawn their share of media attention and owner howls over the years. But if recent sales figures and earnings projections are any guide, that fiasco isn't doing much damage to Ford's business now. In fact, the company is doing exceptionally well, because they've corrected the problem and moved on.
That's what Toyota's doing now -- correcting the problem, promptly. That's what the company didn't do earlier this year, and that's what caused all the trouble.
And that's why this recall isn't going to be a big problem for Toyota. It's just business as usual. That makes all the difference. The fact that Toyota is taking this approach now shows that the company has learned something. And that is good news.
General Motors is another automaker that has had more than its share of recalls over the years. Is GM finally on the right track?
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