The great Toyota (NYSE: TM ) guessing game may be coming to an end, but the company's troubles certainly aren't. Toyota executives said recently that the company's manufacturing operations may not be back to normal until the end of 2011.
That's not surprising, though it's a bit longer than some analysts had predicted. But it should be just a bump in the road over the long haul, right? After all, the strength of the Japanese giant isn't really in question.
Or is it?
This hasn't been Toyota's decade
It's almost hard to remember that just a few years ago, Toyota seemed unstoppable. Having blown past a collapsing General Motors (NYSE: GM ) to seize the global vehicle sales crown, the company and its Consumer Reports-friendly products seemed poised to become the global automotive standard-bearer.
But then, as we all know, things got complicated. The unintended-acceleration incidents, the coverup allegations, the recalls, the huge fine, the lingering concerns about Toyota's quality amid admissions by CEO Akio Toyoda that the company had grown too big too quickly, more recalls, a fall to third place in the U.S. market, still more recalls ... The last year has been a nightmare for Toyota, one that executives were surely hoping to put squarely in the rearview mirror.
But even though the immediacy of last year's events is fading, Toyota's reputation for quality (for years, the brand's most important selling point) has taken a big hit, maybe big enough to raise doubts in the minds of many brand loyalists. Add in the fact that many popular Toyota models are likely to be in short supply for months, and we may see lots of people who haven't driven anything but a Toyota in ages considering other brands.
And here's the problem: Some of those other brands are looking really good these days.
The earthquake may not be the only seismic shift
I now know two people who recently went out to buy a Toyota or Honda (NYSE: HMC ) and came home with a Ford (NYSE: F ) instead. That's a tiny sample size, but I'm thinking it might become a trend, at least in the U.S. And that trend may already be emerging. The Ford Fiesta and the Chevy Cruze -- direct competitors to Toyota's Yaris and Corolla, respectively -- sold in big numbers in April, while Toyota's sales were down.
For the first time in decades, Ford's showrooms are loaded with fresh products that compete well with the best of Japan -- and its timing is looking awfully good.
Consider: Ford's obviously doing very well, but one of the company's ongoing challenges has been to find a way to reach out to the legions of consumers who wrote off Detroit ages ago, who maybe have never considered an American car. If those consumers find shortages at their favorite dealers in coming months, as seems likely, Ford -- with its sparkling product lineup and bailout-free mojo -- seems particularly well-positioned to benefit.
Of course, Ford isn't the only company poised to benefit, and this isn't just a U.S. problem. GM, Volkswagen, and Hyundai are heavy hitters in China and other emerging markets, where Toyota has been working hard to expand, but is now almost certain to lose ground. While consumer tastes in markets like China and India are still very much in flux, strong brand preferences will start to emerge as time passes, and the window of opportunity to make big gains in market share will close. Toyota's problems could linger here as well.
The upshot: A long-term decline?
Unless GM somehow shoots itself in the foot (something that can never be ruled out entirely), it's a no-brainer that Toyota will cede the global sales crown to the General this year. Toyota has already lost production of about 500,000 vehicles in the wake of the earthquake and tsunami, and full capacity won't be restored for months. Meanwhile, GM is revamping its U.S. product line and expanding rapidly in China.
But Toyota's problems run deeper: Lingering questions about quality will continue to be fed by products that are no longer the undisputed class leaders in areas like interior fit and finish. While Consumer Reports still gives Toyota high marks for reliability, the magazine (like other critics) is more often favoring other brands these days.
For now, I have to agree with my Foolish colleague Dan Caplinger, who wrote recently that Toyota is hard to recommend even as a beaten-down value play. Toyota will recover from the natural disaster in time, but the self-inflicted problems -- and the loss of customers who may be finding out just how good the competition has become -- may cost the Japanese giant even more in the long run.