Toyota Recall

Attached is an article about a recently announced Toyota recall of 2.77 million vehicles worldwide.  The recall is a result of flaws in its steering and water pump systems of many of its gasoline and hybrid vehicles, including 670,000 Prius models from between 2004 and 2009 in the U.S. alone.  The car repairs will take a few hours total.  Product quality issues would seem to be a major headache for Toyota, given the fact that they have been gaining so much momentum in stealing market share from U.S. competitors as of late.

This may be an opportunity for U.S. automakers to step in and attempt to demonstrate that their cars are made of superior quality, particularly through both informational and persuasive advertisements that show how their products are differentiated.  If this advertising scheme were effective, automakers such as Ford and G.M. could charge higher prices for their “quality” premium and achieve higher profits.  However, Toyotas have proven to be of very high quality at a very reasonable price, so this minor hiccup for Toyota may not present U.S. automakers a very large opportunity to regain lost market share.

2 thoughts on “Toyota Recall

  1. Defects are to some extent random, everyone suffers recalls. So using high quality to differentiate your brand is treading on thin ice, you yourself will have recalls, typically sooner rather than later, and all it would take is one that gains traction in the media to undo all your ad campaigns. You can advertise (safety) star ratings, but that doesn’t work so well, manufacters go to considerable lengths to see than they never fall below 4-star levels (and generally aim for 5 stars).
    This sort of competition has a prisoner’s dilemma aspect, if one raises their rating by a star, others will attempt to follow … and once everyone garners 5 stars, the highest rating, NHTSA then faces pressure to cinch standards tighter. At one level we as consumers benefit, but (say) adding side curtain airbags also costs us money. So how much money are we willing to spend to lower car-related fatalities by (a statistical model level of) 25 lives a year?
    Back to advertising: if the half-life of a (positive) ad is at most a few months, what of a negative news headline? What does it take to shift quality perceptions? – perhaps repeated ad medium duration (one month?) campaigns?
    • In my opinion, negative news headlines can have adverse affects that last the entire life of a consumer (and therefore have multiple year half-lives).

      Maybe I’m wrong, but look at a company like JP Morgan Chase & Co. The bank is already walking on thin ice given the perception of the financial sector and big banks in the current economy. Add to that the many recent scandals the company has faced (i.e. the London Whale loss, energy trade manipulation, its mutual fund scandal, and its association with LIBOR manipulation) and you have a recipe for disaster which is evident in the decline of the company’s stock over the past few years. Some writers have even gone to put the once sacred name of JP Morgan in the same sentence as Enron (http://www.huffingtonpost.com/mark-gongloff/jpmorgan-chase-power-market_b_1647131.html).

      Now I watched a lot of TV over break, and I mean a LOT of TV. I couldn’t help but notice this ad being played multiple times during primetime (seen here: http://www.youtube.com/watch?v=T3nT2xj3Y-w). This ad is clearly not informative, but do you think it is able to shift quality perceptions– Or has the hole been dug too deep?

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