Toyota gives Detroit an opening — and a warning

January 28, 2010

Detroit’s Big Three must be breathing a huge  sigh of relief. Toyota recently sped past General Motors to become the largest seller of vehicles in the United States globally.

But the Japanese carmaker, which cherishes its reputation for quality, has been forced to stop selling eight of its top models while it tries to fix a problem involving accelerator pads that stick. This glitch has caused 275 crashes and 18 deaths since 1999. Toyota is also recalling 2.3 million vehicles and halting production for a week. But American automakers shouldn’t get too giddy.

First, it’s not yet clear how Toyota’s sales will be affected. The news is likely to put off some current owners and prospective buyers. And Ford probably stands to benefit most among the domestic manufacturers, largely because it enjoys a better reputation and a more comprehensive line-up of competing vehicles than G.M. or Chrysler. But if Toyota can come up with an effective fix quickly, that could prevent mass defections.

The opening provided by Toyota also comes with a warning. The company’s woes have been exacerbated by its mass use of sharing platforms and parts across different vehicles and different geographies. Cars in Europe also suffered from sticky accelerators. In general, the measure is a smart one that can shave as much as 60 percent off engineering costs on similar vehicles, according to Barclays Capital.

Indeed, it’s one of the ways Toyota managed to overtake  American rivals in their own backyard. Ford, G.M. and Chrysler have been playing catch-up for years. Ford, in particular, is making a big push to share platforms as it cranks up global production of the popular Focus.

But as the Japanese automaker is now finding out, the approach can prove incredibly expensive when something goes awry. That should serve as a timely reminder to Detroit that investing in quality control can be at least as important as cutting costs.

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The day Detroit follows your prescription and invests in effective quality control will be the day Goldman Sachs stops packaging and leveraging junk derivatives.

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