Toyota's loss: Ford's and Hyundai's gain

Toyota's strong market share gains of the last decade had already leveled off before its recall problem.By Chris Isidore, senior writerFebruary 2, 2010: 10:28 AM ET

NEW YORK (CNNMoney.com) -- Who will benefit from Toyota's woes?

At a press conference Monday to announce the fix for more than 5 million recalled vehicles, Jim Lentz, president and chief operating officer of Toyota Motor Sales U.S.A., promised the company would return to its commitment to quality.

Still, many believe that despite the gas pedal fix, Toyota (TM) may lose market share in the U.S. this year for the first time in 16 years. Simply put, Toyota can no longer claim to be the highest quality automaker.

"If you look at the quality gap today compared to ten years ago, it isn't there any more. It's more of a perception gap," said Jesse Toprak, vice president of industry trends for car pricing site TrueCar.com.

Art Spinella, head of CNW Market Research, said Toyota's gold-plated reputation had already been punctured by less serious recalls even before this problem. He said it will take a lot of time for Toyota to get back the reputation and loyalty it had until recently.

"The fall was quicker than the rebound will be. That's for sure," he said, adding that he thinks Ford (F, Fortune 500) and Hyundai are well positioned to gain from Toyota's stumbles.

Michelle Krebs, senior analyst with car sales site Edmunds.com, senior analyst with car sales site Edmunds.com, agreed that these two should benefit the most from Toyota's problems.

"Ford and Hyundai were already gaining on [Toyota]," Krebs said. "If you look at what Ford did in '09, they slashed the [market share] gap between Toyota and themselves by half. They may well pass them this year."

Spokespeople at Ford and Hyundai had little or no comment Monday when asked about whether they expected to gain market share at Toyota's expense.

Honda and GM could benefit too. Japanese rival Honda Motor (HMC) is also well positioned to profit from any Toyota mishaps. It traditionally is the brand that auto buyers look at most often when also considering whether to buy a Toyota.

But Honda spokesman Chris Naughton said the company has not seen any unexpected surge in customer traffic in its showrooms since the Toyota recall was announced.

What to do if your car is on the list

Other experts said that GM, in addition to Ford, could gain ground at Toyota's expense. Some suggested that GM, which has lost market share to Toyota every year since 1989, could even see its ever-narrowing lead in U.S. auto sales grow once again this year.

"People are more likely to expand their search. They might have not considered an American car before," said William Baker, professor of marketing at San Diego State University. "This is potentially a very good thing for GM."

But experts said a "buy American" move may not help the other member of Detroit's Big Three. Chrysler Group does not have the competitive product to benefit from Toyota's troubles. Similarly, European automakers and Japanese rival Nissan are not expected to report any significant improvement in sales. 

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Toyota is ready for replacement

Toyota said Monday it has developed a fix for gas pedals in millions of recalled vehicles and is already shipping the new parts to dealers.

The fix involves reinforcing the pedal assembly in a way that eliminates the excess friction that has caused the pedals to stick, the company said in a press release. Toyota recalled 2.3 million vehicles in the United States for this problem.

Toyota said replacement parts are already being shipped and that dealers will work extended hours to fix the recalled vehicles.

"We know what's causing the sticking accelerator pedals, and we know what we have to do to fix it," said Jim Lentz, Toyota's president and chief operating officer, in a statement.

Toyota will begin contacting customers as early as this week to let them know when to bring in their vehicles for the fix. The automaker said it will cover all costs related to the fix, which will take about 30 minutes.

It's not clear how long it will take to fix all 2.3 million cars, Lentz told CNNMoney.com. Much will depend on how quickly customers bring their cars into dealers for repairs.

Customers will begin receiving notices late this week and dealers will start doing repairs this weekend, Lentz said in a conference call.

Dealers will be open extended hours, he said.

"My guess is that the stock of Krispy Kreme will probably go up," Lentz said "because we'll be handing out a lot of donuts."
The fix involves installing a precision-cut steel reinforcement bar into the accelerator pedal assembly, which will reduce surface tension and prevent the friction that has caused the pedals to stick, Toyota said.

0:00 /5:47Toyota exec confident in pedal fix

Toyota recall: What to do if your car's on the list

The company said it has confirmed the effectiveness of the newly reinforced pedals through "rigorous testing" on pedal assemblies that had previously shown a tendency to stick.

"We are very confident that the installation of a reinforcing bar is as successful a repair as it would be replacing the pedal," Lentz said.

Toyota announced plans last week to suspend sales of the models, including its best-selling Camry, subject to the recall. It also took the unusual step of halting production of those models.

Production lines for these vehicles will re-start on Feb. 8, the automaker said.

The recall has taken a severe toll on Toyota's once-stellar reputation, which Lentz acknowledged in a video statement posted on Toyota's Web site.

"I know that we've let you down," Lentz said "[Toyota] will work hard to fix your vehicle properly and regain your trust."

The recall affects Toyota's 2009-2010 RAV4, Corolla and Matrix; 2005-2010 Avalon; certain 2007-2010 Camrys; 2010 Highlander; 2007-2010 Tundra and the 2008-2010 Sequoia. The Camry Hybrid is not included in the recall.

The Japanese automaker also recalled cars in Europe. That recall involves eight different models, several of which are not sold in the United States. The precise number of vehicles involved in that recall is still being determined, but it could be as many as 1.8 million.

The gas pedal recall is separate from an earlier one, begun in November to fix a problem in which the gas pedal can become caught on the edge of a removable floor mat.

The floor mat recall was recently expanded so that it now covers a total of 5.3 million vehicles.

In cases where vehicles are subject to both recalls, Toyota (TM) said it intends to remedy both at the same time.

Toyota has been under scrutiny for suspected unintended acceleration for approximately 10 years. A total of 19 deaths have been connected to unintended acceleration in Toyotas over the decade, according to some analysts, a figure the National Highway Traffic Safety Administration called "plausible," based on its own research.

All major automakers experience some complaints of unintended acceleration. It is unclear how the rate of complaints and crashes in Toyota vehicle compares to that of other major automakers.

Lentz said he is confident that resolving this issue and the floor mat entrapment problem will solve the problem for Toyota. The automaker has also said it is making "brake override" -- a system that cuts engine power to the wheels as soon as the brake pedal is pressed -- standard equipment on all of its cars.

The "brake override" software will also be added to the internal computers on some cars as they are brought in for recall repairs, a Toyota spokesman said.

Lentz promised, however, that Toyota will continue to be alert for issues with unintended acceleration.

"We will still be vigilant and keep our eyes and ears open down the road," he said.

-- CNNMoney.com's senior writer Peter Valdes-Dapena contributed to this report.