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Continuing Coverage: Kelley Blue Book Experts Weigh In on Toyota

By KBB.com Editors on March 9, 2010 9:12 AM
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Before too long, Toyota will lift its sales freeze of eight models and begin applying fixes to the 2.3 million vehicles it recalled for potential accelerator pedal problems.

Then what?

That's the question our experts are busy answering for the media, the auto industry and car buyers alike. People want to know what the future holds for their companies and their cars, and Kelley Blue Book is one of the places they know to look for answers.

As our experts respond to ongoing developments and present the findings of our Toyota-related research and analysis, we'll update this page below.

>Toyota Update: Pedal Fix Approved, Will Start Later This Week
>Sticking-throttle Recall and Stop-sale Q&A for Toyota Owners, Shoppers
>Toyota's woes drag down industry (by Jack R. Nerad, special to CNN)
>CNN asks for industry reaction to LaHood's advice to Toyota owners

March 9,2010

Yet Another Headline

"News of a Toyota Prius accelerating to 90+ mph in an uncontrollable fashion in San Diego yesterday is exactly what Toyota did not need. This came after they did an eloquent and comprehensive job of presenting to the media how the sudden acceleration test made for congress was...shall we say...technically difficult to believe.

We continue to stand by our statement that this Toyota issue is statistically tiny when compared to the multiple millions of Toyota, Lexus and Scion vehicles on American roads. If a buyer is considering purchase of one these vehicles, it remains a perfectly rational decision...and one made even sweeter with the recently announced incentives.

But the general public needs to see one key difference from Toyota to help stamp out this headline-grabber: Toyota seems to know 'what the problem is not,' but they continue to struggle to tell us 'what the problem is.'"

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 26, 2010

It's Always the Humans

"In the rush of many to vilify Toyota in the days since the Congressional Hearings, we believe a key component has been ignored. It became apparent from their testimony that there was no 'master plan' within Toyota to cut corners and in turn, safety, in the name of growing market share. This is a simple case of a company growing at a rate that the humans within could not contain and manage. This fact does not lessen the negative impact on their reputation or take anything away from the families that have been ruined by rare but serious unintended acceleration accidents. But, is worthy of your consideration.

We believe that consumers should take this 'reshuffling of the deck' as an opportunity to discover just how great the automotive market is in 2010. If you are a 'Camry household,' go visit a dealer for Chevy or Hyundai or Honda or Subaru or Ford or Nissan or Dodge or WHOMEVER and experience the vast level of choice we enjoy as part of the competitive U.S. market. And if they do not have a sedan that meets your needs, stroll into your local Toyota store with the knowledge that they are addressing the issue and you can drive with confidence. Toyota would not be the successful company they are today if they did not have a history of learning from mistakes and evolving for the customer's benefit. But first, visit KBB.com to help set the stage for all of these great test drives!"

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 25, 2010

A Badge of Honor

"Among the merry band of Congressmen and women that put Akio Toyoda and Yoshi Inaba through the ringer on Wednesday, there was one gentleman (and I use the word lightly) who said something light and almost human. He prefaced his first scathing question with something along the lines of, 'While a Congressional hearing is never fun, you will look back on this with pride and a sense of accomplishment.' After several long hours of wincing my own way through this process from in a comfy chair in front of a TV, I can't help but agree.

But most important is the fact that Toyota faced the panel and said what needed to be said with dignity and a healthy sense of contrition. Our sense today is that Toyota has firmly begun the internal process needed to reset trust within their employees, buyers and owners. It pays to mention that the "sticky pedal" situation is statistically very rare, but that no longer mattered once this story was in yet another headline

As we see start to see signs of a calm and rising tide again in the automotive market, we hope that Toyota has 'patched their boat' well enough to join the new race."

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 24, 2010

A Truly Amazing Day

"The House Oversight Committee session has begun. Thus far, Transportation Secretary Ray LaHood has been vigorously defending NHTSA and the Panel has been setting the stage for a 'fair and balanced' review of the Toyota Recall Affair. The fact that such a process is underway is absolutely amazing...and something that never could have been foreseen.

Thus far, the quote of the day for me has been delivered by Rep. Edolphus Towns who is acting as Chairman of the Panel: 'If the Camry and Prius were airplanes, they would be grounded.'"

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 23, 2010

One of the Rare Moments

"As followers of the automotive industry, we often find ourselves more excited and interested in the car news of the day than our friends and family. This is understandable, as the situations and players often slowly work themselves into big news before the general public catches on.

The drama that will play-out tomorrow morning is going to touch many more ears and minds than the typical Congressional hearing. When Akio Toyoda sits before this panel, millions of Toyota drivers also will be making a decision on if a Toyota, Scion or Lexus will be part of their next shopping list. Toyoda needs to convey confidence, clarity and a candid nature that will put American drivers at ease and help them feel taken care of. This will not be a simple task, but we have watched Toyota become a global industrial powerhouse and that did not happen by accident or with simple luck. We expect that this will be a decisive day in this saga...and the world will be watching."

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 22, 2010

High Noon on Wednesday

"It looked like the dust was beginning to settle as Akio Toyoda heads to the U.S. to talk to Congress on Wednesday, but the release of documents detailing how Toyota has dealt with its unintended acceleration has stirred the scene. The latest information shows that Toyota and NHTSA entered into a 'negotiation' in regards to earlier complaints of acceleration problems on both the Camry and ES 350.

Our understanding is that these types of negotiations are common practice among carmakers, as full-line recalls are very expensive and not always the most obvious solution. This revelation will create further skepticism and doubt in the minds of American consumers about automakers, as well as cast new light on NHTSA, their processes and recall policies. Hollywood will have little on the corporate and human drama this week as the scene plays out in Washington, D.C. on Wednesday, rather than an L.A. soundstage, and hopefully the winner in this game will be safety and the American driver."

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 18, 2010

'Ghost in the Machine' is right

"I saw this classic Police album title used as a headline on recent travels to describe Toyota's product recall woes, and it made me smile. But it also made me wince, as this must be precisely how my friends at Toyota USA are feeling today, as yet another industry standard for quality -- the Corolla -- has entered the big top with concerns about steering failure.

I think it is only fair to mention at this point that a modern car company is really not much more than an 'assembler.' Sure, the company designs and engineers the vehicles on the road, but other than a few main components (such as engines, major body and structure stamping and construction), the vast majority of what makes up the car in your garage is sourced from thousands of suppliers from around the globe. This does not excuse a company like Toyota from responsibility when something falters, as Toyota provides the specifications and design for the procured components. Of course, Toyota is 100 percent responsible for informing drivers if anything is amiss and providing corrective action. But, it is fair to keep all of these facts in mind as the 'ghost in the machine' makes yet another turn."

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 17, 2010

Toyota's Rising Son

"The automotive world is getting to know Akio Toyoda much quicker than expected. When it was announced that the founder's grandson was taking control of his namesake company last year, it was mostly in response to Toyota's faltering sales in the very difficult sales climate for all manufacturers. There was a sense of 'a new day' as Toyoda-san appeared to be eager to push his company into new and exciting areas. He even admitted that his cars were a bit boring and he looked forward to igniting new passion in their designs, driving experience and customers.

But with the Recall Crisis of early 2010, it appears that the overwhelming structure and formality within Toyota and Japan is going to preclude this renaissance. Next week, there will be an interesting session on Capitol Hill when Toyota is asked to testify on how and why this problem grew to such a large size, and to be sure American drivers are at no additional risk. Instead of grabbing the golden ring and taking control of the situation by attending himself, Toyoda is sending his man in charge in the United States, Yoshi Inaba. I worked on projects for Inaba-san while with a prior employer, and I know he is thorough and professional. But his boss' shadow will loom large in the Washington room that day, which will inevitably fuel more mystery on what Toyota does and does not know. Until this issue is closed, Toyoda-san's hope for passion-filled Toyota cars and drivers is miles away."

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 9, 2010

And the Troubles Mount...

"I just finished a call with a reporter from The New York Times who was pushing me for a date when Toyota's troubles would start to end, and how much incentive cash they would have to provide to reignite consumer consideration of their vehicles. Much to the reporter's chagrin, I felt (and continue to feel) that such a day is still some time off, as Toyota news is spending yet another uncomfortable day in the headlines. Until that pattern is stopped, the pain will continue.

Today's confirmation of a global 2010 Prius recall as well as a new NHTSA investigation into late-model Corolla steering systems is feeding an assumption that we are learning about these problems around the same time that Toyota is. And that is damaging. Add to this pain that there exists a sentiment that Toyota is still working on solutions that need to be tested, and we do not see a lifting of these dark clouds any time soon. They need to start a genuine campaign of contrition, transparency and confidence, now if not sooner. Otherwise, such repetitive headlines will continue to punish the brand....regardless of their validity."

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 9, 2010

UPDATE: Media Statement on Toyota Values from Kelley Blue Book's kbb.com

"Clearly the Toyota recall from last week had an effect on most vehicles in the Toyota stable, including the new Prius. With today's recall of the new 2010 Prius, consumers looking for a deal on a hybrid might find one in the latest recalled model. Now consumers can pick up a 2010 Prius closer to dealer invoice value than its suggested retail price, a difference of $1,000 - $1,500, as we're adjusting the vehicle's Fair Purchase Price transaction values downward on Friday, February 12. While today's newest recall covers the 2010 Prius, it casts a shadow over older Prius models as well. Older Priuses not affected by the recall have seen a drop in their used-car value by 1.5 percent. We at Kelley Blue Book expect this weakened demand to persist as additional investigations take place into the 2009 and 2010 Toyota Corolla steering issues, as well as some Lexus products. As NHTSA currently investigates the Corolla, the value of affected Corollas has fallen 3 percent as of right now. Should the glut of Toyota vehicles continue to build in coming weeks, there could very well be further softening of Toyota's values."

         - Juan Flores, director of vehicle valuation, Kelley Blue Book's kbb.com


February 8, 2010

Media Statement on Toyota Values from Kelley Blue Book's kbb.com

"Kelley Blue Book updates values on a weekly basis, and this past Friday, February 5, company analysts initially decreased the used-car values of recalled Toyotas by 1 - 3 percent in response to the slowing demand for Toyota models in the marketplace following the consumer recall. This coming Friday, February 12, Kelley Blue Book will once again adjust values for these vehicles downward by an additional 1.5 percent on concerns around the growing supply of unsold Toyotas on both dealer lots and at auctions. At this point, it's clear that the market is shifting away from these Toyota products right now, allowing us to project their lowered values. In the coming weeks there will be much more data available on the sale of used Toyotas and any shifts in demand, which will provide greater insight into how the values of these vehicles might be affected in the future."

         - Juan Flores, director of vehicle valuation, Kelley Blue Book's kbb.com


February 8, 2010

Wheels are Turning Once Again

"If you have been following along, you are aware of our confusion over the Toyota recall situation. At the core of this story is a company uniquely qualified and financially fortified to handle such a problem. But they didn't. And the reasons why will come from the pens of future historians, as we are all too close to the fire today.

However, a ray of encouragement comes from the tales of Toyota dealers taking the initiative and working customer by customer to re-establish badly tarnished trust - not in the dealers, but in the brand. Toyota dealers have traditionally ranked low in customer satisfaction studies, as in many cases they were able to succeed beyond expectations because the product flew off the lots. They just had to collect the sale and provide future service. But as of today, success will come from going the extra mile and building a new relationship with current, and more importantly, future customers. Exactly what dealers of GM, Nissan, BMW, Ford, Hyundai, Honda and all the rest have been doing for years."

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 5, 2010

Ouch

"You may recall in yesterday's entry I suggested that Wednesday was a day Toyota would soon want to forget, and that Thursday was not looking much brighter. Well, Friday brings news that their all-powerful Prius is next to fall under the recall's dark shadow. Since there always is extra interest in this car and its undeniable success, the damage to Toyota in general continues.

Some have asked what the impact of this news will be on the Prius, and Toyota's loosely defined plans to create and offer a small line of vehicles under the Prius name in the near-future. When the latest Toyota concept was introduced last month in Detroit, many of us in the room nodded in unison and whispered that we had just witnessed confirmation of this plan. My feeling is that today's potential brake recall news on the 2010 model causes more damage to Toyota than to such a Prius sub-brand. This sense comes from the fact that most Prius buyers have a larger emotional reason for considering a Prius. From a focus on ecology to geopolitical energy policy to clean emissions for our future to simple maximum MPG savings, there always is a higher calling to Prius ownership. And yes, there also is the undeniable 'look at me' factor. Therefore, I see 'Toyota' suffering under today's news more than 'Prius'.

'They are in the headlines again today? Ouch.'"

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 4, 2010

When Will This End?

"Our friends at Toyota had a Wednesday that I am sure they will want to forget. And today is not starting much better. In talking to many members of the media on Feb. 3, I came to an uncomfortable consensus - amazingly, Toyota seems to be dealing with new revelations like Elin Woods must have felt as Tiger's multiple 'friends' began to surface on TMZ. 'Another one? And another? When will this end?'

The sad truth is that a series of further damaging revelations often is more painful and damaging than a quick full disclosure. Should you remove a bandage slowly? Or all at once? I vote for one quick pull. For reasons we may never learn, Toyota appears to pulling their bandage very slowly, and therefore keeping their recall situation -- from floormats to throttle pedals to throttle linkage to electronic master controls to 2010 Prius brakes -- firmly in the public eye and scrutiny. It is not necessarily the content of these recalls that now matters. Rather, it is the slow and painful exposure that is leading all of us to wonder when this might end, and just how much Toyota knows...or does not know. Brand trust is in peril."

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 3, 2010

Moving Forward? Not Just Yet

"Like a bad dream, the Toyota throttle situation continues to take uncomfortable turns. Since the very unfortunate fatal accident in San Diego back in the Fall of 2009, Toyota seems to always be one step behind this situation. And subsequently, the headlines have followed. That is where the damage in the short (and maybe long) term will arise.

While we admit that hindsight is crystal clear and always unfair, one cannot help but wonder if some degree of this problem could have been anticipated and addressed by Toyota. Anyone who has followed this issue closely must be sharing Toyota's feeling of dread for what the next day's news will bring, and that is where the real story lies. How can a company so rich with people, talent and financial resources seemingly struggle to keep up with these revelations? Now word that the U.S. Government is calling and looking for answers as the problem lurches from mechanical issues to possible faulty electronic controls feeds this sense that Toyota is not in control.

Toyota now has recalled approximately 8.1 million vehicles worldwide...more than they sold in all of 2009. We at Kelley Blue Book's kbb.com stand by our statement that they will survive this crisis, but their carefully nurtured reputation for quality has been stained. The winner in all of this will be the consumer as GM, Ford, VW, Honda and others all are starting to scramble to pick up Toyota's slack. The U.S. auto market, which already was a tough place to prosper, just got a whole lot more interesting."

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 2, 2010

When Bad News is Good

"Over the course of the day, January sales results will be filtering in from the various manufacturers. Of course, extra attention and scrutiny will be on the data from GM, Ford, Chrysler, and especially Toyota in light of their recent troubles.

But before we all read these numbers like tea leaves, recall that January is rarely a hot sales month. Inclement weather in much of the country is not conducive to shopping, and the Christmas hangover can be strong.

The thing we all need to be on the look-out for is fleet sales. Within certain companies, these deliveries can equal 20-30 percent of their overall sales. And when this business dried-up in late 2008, the impact can be felt today. Early reports suggest that fleet sales maybe up slightly versus January 2009, and that is a good sign of a healthier economy. Businesses may be feeling as if it is a good time to reinvest in themselves with new rental cars and delivery trucks, which is a faint signal that the economic pendulum is swinging back toward pro-activity.

Toyota, however, has never been a big player in the fleet business, as they instead have supported their residual values with a primary focus on retail. Now that their recall activity is in full-swing and general consideration of their products is in question, they will not have fleet to fall back on at the start of 2010.

In fact, a recent survey of kbb.com visitors shows a 21 percent drop within those shoppers who were considering a Toyota before the recall. And, among the high-volume Toyota vehicles (Camry, Corolla and RAV-4) affected by the recall, shopper activity has dropped between three-to-four percent since the full details were announced.

So, where does that leave us? Ultimately we are left with many existing questions on the health of our industry and economy, but thankfully there are indications that the clouds may be clearing. Unless, of course, you are a Toyota dealer, where it seems the clouds are moving in for the next month or two."

         - James Bell, executive market analyst, Kelley Blue Book's kbb.com


February 1, 2010

Toyota Recall Could Raise Other Used-Vehicle Values

"Toyota's much-publicized recall may have far reaching effects in the used-vehicle marketplace. As Toyota's perceived quality continues to take a hit, there may be a substitution effect as in-market consumers that had been considering a vehicle from Toyota begin to look for alternatives. This shift in demand could potentially lead to appreciation in vehicles that directly compete with the vehicles affected by Toyota's recall.

Additionally, as rental-car companies adjust their fleets to account for their loss of Toyota inventory, they have been putting vehicles that were intended to be sold at auction back into service. Potentially, Kelley Blue Book expects that a reduction in the supply of available vehicles at auction could push used-car values upward, most noticeably on models that directly compete with recalled Toyota vehicles."

          - Juan Flores, director of vehicle valuation, Kelley Blue Book's kbb.com


Toyota's Next Challenge

"News that Toyota dealers will begin throttle pedal repair first tells us that Toyota does understand one important rule of automotive success - without support of the dealer network, their perilous situation could take a further turn for the worst (if that is even possible). When Toyota passed GM as No. 1 in 2008, I warned them - America loves underdogs but often loses respect for the new champs. The incredible amount of scrutiny that Toyota has endured since the 'Throttle Summer of 09' caught them off-guard, and no doubt was fueled by this 'kick No. 1 around' attitude."

          - James Bell, executive market analyst, Kelley Blue Book's kbb.com


January 29, 2010

Toyota: Moving Forward at Last

"The news that the technical throttle problem had been identified and replacement parts are being built allowed many Toyota observers to exhale. But, the financial burden has now shifted to dealers that must sit on their current inventory, repair recalled customer vehicles, and hold sales for corrected new product.

Beyond the burden, now firmly on the shoulders of Toyota dealers, is a responsibility by Toyota headquarters to take a hard look at their existing policies - from a component quality and standards perspective, as well as their apparent inability to make tough choices early on in moments of public chaos and scrutiny."

          - James Bell, executive market analyst, Kelley Blue Book's kbb.com


January 28, 2010

Survival of the Fittest

"With the eve of the 2010 Winter Olympics just around the corner, a different sort of International competition is on display...and it is getting nasty. As many of you know, Toyota is in the midst of a swirling storm of recall, sales and production chaos as they work to sort out the big 'sticking throttle' issue. While most in the business are pulling for Toyota as the financial impact on many local communities could be heavy if this drags on for long, our friends in Detroit are looking to this moment as a way to recapture lost market share.

In recent KBB.com traffic analysis, we saw that of people who were looking at new Toyota models, 11 percent cross-shopped new vehicles made by Ford and 13 percent cross-shopped new vehicles made by GM. So, there remains a massive opportunity to impact the impression of Ford and GM within this loyal owner base. And nothing starts such a conversation like cash! Both GM and Ford have announced strong new incentives for current Toyota owners to switch to one of these domestic brands. In years past, such a move might be seen as shallow given the perception - real and perceived - that these domestic products were sub-par. But among the latest 2009 and 2010 offerings from GM and Ford are vehicles more than comparable from a quality, refinement and efficiency perspective. While Toyota struggles, GM and Ford are asking drivers to give them a second chance, and in many cases, this will lead to very impressed new GM and Ford drivers."

          - James Bell, executive market analyst, Kelley Blue Book's kbb.com


January 27, 2010

The Effects of the Recall on Toyota's Reputation

"Monitoring the auto biz is so much fun that I sometimes have to remind myself that it is work. And what amazes me is how certain storylines that I expect to 'go big' often drift off to sleep while others seem to build their own momentum.

Unfortunately for Toyota, the sticking throttle issue is now going global. Reports this morning are that they are in discussions with European governments on the best way to address a recall and suspension of production AND sales, similar to what was announced yesterday for the United States and Canada. The only question that seems to remain is what impact all of this news will have on their existing customer's loyalty as well as their reputation for quality with new buyers.

At Kelley Blue Book's kbb.com, our position has been that Toyota is unique in the auto world in that they have the intellectual base and financial strength to proactively survive the sort of recall and suspension action they are now reactively supporting. The voice and action of the consumer will be the ultimate judge on if we are witnessing Toyota's slide from a pedestal they worked so hard for 40+ years to meticulously build."

          - James Bell, executive market analyst, Kelley Blue Book's kbb.com


Advice for Consumers Trying to Trade-In or Sell a Toyota

"Given the news, this is not the best week for a consumer to try to trade-in their Toyota for a new car. While dealers are savvy about these things and understand that the car can still be re-sold once proper repair has been identified, they might be reluctant to accept the vehicle in trade, or offer a lower price for it than would otherwise be the case. Given those facts, consumers might want to hang on to their car for a few more weeks until the situation clarifies. The same holds true for those planning to sell their car themselves, or in our kbb.com parlance, 'private party.'"

          - Jack R. Nerad, executive editorial director and executive market analyst, Kelley Blue Book's kbb.com


How the Recall Will Affect Toyota's Future Resale Values

"Toyota is not sweeping this under the rug; they are looking after their consumers, and this should help keep Toyota in high regard and their residual values stable. Kelley Blue Book has a team of analysts at auctions across the country, and we will be monitoring how the Toyota recall affects the auction lanes over the next several weeks. However, we don't expect that the Toyota recall will affect the two-, three- and five-year residual values of these vehicles."

          - Eric Ibara, director of residual value consulting, Kelley Blue Book's kbb.com


How the Recall will Affect Toyota's Current Used-Car Values

"On the used-car values side of the business, Kelley Blue Book's kbb.com would not be surprised if there was some incremental softening in Toyota values among the models that are two or three years into their product cycle and in need of a refresh."

          - Juan Flores, director of vehicle valuation, Kelley Blue Book's kbb.com

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