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Is This Toyota's Smoking Gun?

By John Rosevear – Updated Apr 6, 2017 at 1:56PM

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New documents paint the company's safety practices in an even worse light.

Imagine for a moment, just hypothetically, that you're a major automaker. Several of your car models seem to have an unfortunate tendency to accelerate out of control every now and then. People have died, and uncomfortable questions are being asked. You really, really want the problem to go away.

What do you do? 

A) Drop everything, put all of your best people to work full time on the problem until it's solved, and get all the affected cars fixed as soon as possible, cost no object. After all, your customers' lives and your company's reputation are on the line.
B) Come up with a cheap-to-fix "solution" that may or may not actually address the problem, restrict it to just 55,000 vehicles, persuade regulators to accept it, and celebrate it internally as a money-saving "win." After all, cost savings matter, and this move would save the company $100 million or more.

Guess which route Toyota (NYSE:TM) chose? If you guessed "B," you're right. And if you think this is maybe just speculation on my part, just one more guy in the media beating on Toyota, think again: There are documents.

I've seen them. In fact, lots of people have seen them.

And more to the point, so has Congress.

A new dimension to the drama
The document in question, which came to light Monday, is a PowerPoint presentation that was part of a vast load of papers turned over to a congressional committee last week. It's from Toyota's Washington office, and mentions a number of "wins" achieved by the company's lobbyists. One slide in particular, titled "Wins for Toyota-Safety Group," has some particularly eyebrow-raising bullet points. Among them:

  • Successfully got delays on new Federal safety rules, including rollover and side-impact protection standards;
  • Successfully persuaded regulators to close cases on safety issues with the Sienna minivan and Tacoma pickup without declaring the problems to be "defects" and requiring recalls to fix;
  • And the big one, in their own words [my notes in brackets]: "Negotiated 'equipment recall' on [Toyota] Camry/[Lexus] ES re: SA [sudden acceleration], saved $100M+, w/no defect found."

In other words, "We got 'em to recall just the floor mats, not the cars themselves. Saved us a bundle. High fives all around!"

Just when I think this mess can't get worse, it gets worse.

But dude, they're lobbyists. This stuff is what they do. What's the big deal?
It's probably true that Washington staffers for Ford (NYSE:F) and General Motors and Honda (NYSE:HMC) and the other automakers push back on rule-making and investigations … and that many other companies, from Pfizer (NYSE:PFE) to Monsanto (NYSE:MON), from Altria (NYSE:MO) to Boeing (NYSE:BA), maintain Washington offices, have close relationships with regulators, and employ lobbyists to do similar things.

But Ford and GM and Honda and those other companies aren't on a very public hot seat after years of foot-shuffling and obfuscation.

And only Toyota is now facing very public criminal investigations.

Wait. Criminal investigations?
Yes, folks, we've moved beyond congressional grandstanding -- even as that grandstanding is just getting started. Toyota said Monday that it had received two federal subpoenas: one from the Securities and Exchange Commission, and one from a federal grand jury in New York.

Of course, subpoenas don't necessarily mean that charges will ever be filed. But they're a sign that people -- federal law enforcement people -- are now thinking in those terms. Pending class action suits -- an aggrieved maybe-whistleblower, a former Toyota lead defense counsel who claims to have proof that the company withheld evidence of safety defects -- will add even more drama to the congressional hearings getting under way Tuesday.

So is it a smoking gun?
I don't think this document is likely to be remembered as the smoking gun. In truth, it is probably not atypical of the mentality found in many big companies' Washington offices. But it surfaced at an exquisitely bad time for Toyota.

The Associated Press reports that Toyota execs were expected to "apologize for the company's slow handling" of the sudden-acceleration problems during their congressional testimony. Given the current trajectory of events, apologizing could become quite a regular habit for them.

Read more about Toyota's ongoing crisis:

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Fool contributor John Rosevear owns shares of Ford. Monsanto and Pfizer are Motley Fool Inside Value recommendations. Ford is a Motley Fool Stock Advisor pick. The Motley Fool has a disclosure policy.

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Toyota Motor Stock Quote
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