There's nothing like a healthy dose of schadenfreude to stimulate op-ed production. You stumble, and suddenly I feel a heckuva lot better about myself. And just as irritatingly, I'm more than willing to tell you why.
Such is the predicament of today's Toyota (NYSE: TM): It stumbles, and op-ed scriveners far and wide reach for the keyboard, puff their chests, and generate a flood of here's-how-you-screwed-up opinion.
That's understandable when considering the size of the target and the extent of the problem.
Cut down to size
The Godzilla of the auto industry has been reeling for the past couple of weeks. It's recalled roughly 9 million vehicles, including the Prius, for a number of issues including brake-software glitches and sudden or unintended acceleration. All the while, management continues to fumble away explanations like butterfingered football players in an NFL blooper reel.
Investors have been less than amused. Since January's high of more thna $91 per share, they've watched Toyota's share price lose 22 percentage points, and seen roughly $30 billion blown off its market cap as of yesterday's close.
The disaster could have been worse, though, considering this was never supposed to happen. For decades, Toyota could do no wrong. Its places atop the J.D. Power and Consumer Reports quality ratings were as secure as any federal government job.
Perpetual quality assured that Toyota could always move the needle, despite its ever-expanding girth. In 2000, Toyota's annual revenue stood at $118 billion. By 2008, it had advanced to $249 billion. Yes, Honda (NYSE: HMC) was able to maintain pace, but in terms of sales, it remains a fraction of Toyota's size. Meanwhile, Ford's (NYSE: F) 2000 annual revenue of $141 billion had shriveled to $129 billion by 2008.
All the while, the media praised Toyota for its impenetrable reputation and quality.
Forget Caesar, remember Toyota
That's hardly the case today. More writers come to bury Toyota than to praise it. More conspiratorial types suggest that something sinister is afoot. Now we see "a growing unease among Americans that something is deeply wrong with Toyota, that some flaw has found its way into the company's culture, that a sickness is festering somewhere below the surface," one Newsweek article opines.
There's also the predictable sprinkling of exaggerated doomsaying. "Toyota is destined to endure a lost decade or two," we hear. Or "Toyota is the new Audi" -- which, if you'll remember, was hit with similar allegations of unintended acceleration in the mid-1980s, when supposedly faulty gas pedals on its popular 5000 series sedan were linked to half a dozen deaths and a few hundred crashes. The problem was eventually determined to be driver error -- drivers hitting the gas instead of the brake.
Other playfully imaginative writers have likened Toyota's travails to American Express (NYSE: AXP) when it was embroiled in the great (though quite amusing) salad-oil scandal of 1963. The scandal was engineered by Allied Crude Vegetable Oil, which discovered that American Express would lend against its salad-oil inventory. Allied CEO Anthony De Angelis was sufficiently entrepreneurial to goose margins by filling the tanks with water before topping them with oil and secretly pumping oil between storage tanks.
The ruse was eventually discovered, and American Express took a huge financial hit in real dollars and lost roughly half its share price. (The amusing part was that Amex was sufficiently obtuse to authenticate three times as much salad oil as Allied had storage for.)
Tomorrow's another day
Toyota should recover, just as American Express recovered after the great salad-oil scandal, just as Johnson & Johnson (NYSE: JNJ) recovered after the tainted-Tylenol deaths of 1982, and just as Coca-Cola (NYSE: KO) recovered after the New Coke fiasco of 1985.
Besides, is it really that bad? In 2008, Ford recalled 14 million vehicles for faulty cruise-control switches. From 1971 to 1981, GM recalled more than 16 million vehicles, yet kept successfully selling autos. And if current Chrysler savior and former quality basketcase Fiat can mount a comeback, who can't?
So if you're reveling in Toyota's misery, enjoy the moment. In the meantime, you just might pick up a good deal on a Toyota vehicle, or maybe even Toyota stock.
