Toyota's troubles could remake the auto industry

Toyota - known for low-cost manufacturing systems, reliable vehicles, best hybrid technology and loyal customers - had reached the zenith as the world’s largest producer of vehicles.

Suddenly, Toyota’s quality problems and bungled crisis management are threatening to reorder the world rankings of automotive companies.

So why all the fuss about Toyota’s quality problems? I think there are several reasons:

1. Scale and market position.

Audi was struck with sudden acceleration problems in the 1980s, nearly wiping Audi out of the market. Together with its parent, Volkswagen, Audi had less than 2 percent of the U.S. market, yet the problems and various news reports nearly killed off Audi in the U.S.

But Toyota sells about 16 percent to 17 percent of all new vehicles, according to Ward’s Automotive. The pedal recall affects 5 million Toyotas already on the road. That’s equivalent to about three years of the company’s U.S. sales.

2. Culture.

The American way of mea culpa is so foreign to the Asian culture. Shame or loss of face is handled internally and avoided publicly in most Asian cultures, unlike the prevailing American way of admitting mistakes openly.

Japanese-based top management has been reluctant to speak out, yet Jim Lentz, COO of Toyota Motor Sales USA, has been remarkably unconvincing in his remarks on news programs.

And Akio Toyoda, CEO of Toyota, was virtually invisible until late last week.

This reflects a cultural tendency to withdraw during a time of embarrassment rather than outwardly show contrition.

3. Denial.

Toyota had a massive problem with engine oil sludge affecting some 3.5 million vehicles earlier last decade. Even with this prior experience, Toyota seemingly didn't learn much from its prior experience and has again been in denial of product defects:

• First it’s the floor mats catching under the pedal. Now it’s a mechanical bearing subject to moisture that is to blame. Could it be the electronical control unit? What and who is a Toyota owner to believe?

• Toyota has publicly stated that there are no sudden acceleration related problems with the ECU, the electronic control unit. Yet when local TV stations show what the dealer technicians are doing as part of the recall retrofit, footage shows a laptop being hooked into the ECU port to fix the ECU programs.

• Toyota was quick to point at a supplier as the manufacturer of the faulty pedals. Yet the design and engineering specifications are Toyota’s. And the supplier also works with other vehicle manufacturers that don’t have a sticking pedal problem.

• Given the floor mat recall in November, Toyota has known of the sudden acceleration problems for some time, yet it took pressure from federal officials for Toyota to bring about the latest round of action.

Is this the end of the story?

Not by a longshot. Only time will tell, but right now events at Toyota are like a snowball rolling downhill.

You can bet on a future backlash from carpenters and tradesmen who currently own a Tundra or Tacoma and about zero sales conversions from General Motors, Ford, Chrysler and Nissan pickup truck owners.

Used Toyota values and lease residuals will be dramatically lower. Only time will tell for how much and how long.

Toyota's Japanese headquarters and Toyota USA need to centralize crisis management. The cultures are different; the multiple spokesmen are contradicting one another and confusing the public, particularly Toyota owners.

Toyota's U.S. leadership is trying to say the right thing, but it's coming across as insensitive, insincere and empty.

If Toyota losses pile up, they only have themselves to blame. But it will deeply affect the economic well being of its suppliers and communities around the 14 plants in North America.