Globalization accelerates woes for Toyota, world’s leading car manufacturer

For more than a decade, Toyota customers have reported incidents of sudden acceleration, resulting in crashes, injuries, and deaths. The company now faces charges that it intentionally hid defects from customers. Nick Freudenberg explores what role globalization may have played in accelerating Toyota’s woes, and what can be done to prevent such corporate catastrophes in the future.
About a year ago, Toyota became the world’s largest car manufacturer by sales after General Motors, the previous leader, was hit by the economic crisis. The Japanese company built its reputation and sales by emphasizing safety and quality, contrasting its products with less durable and dependable American vehicles. In the last year, however, Toyota has faced accelerating woes – declining sales, safety problems such as sticky accelerators and faulty brakes, and a spate of lawsuits, regulatory actions and unfavorable media coverage. In this report, CHW examines Toyota’s troubles, analyzes their links to broader global trends, and assesses the implications for automobile safety and public health.

Sticky accelerators and faulty brakes

For more than a decade, Toyota customers have reported incidents of sudden acceleration. At first Toyota attributed these reports to driver problems, then to problems with floor mats. Now both the company and the U.S. National Highway Traffic Safety Administration (NHSTA) have launched major investigations into sticky accelerators. By the end of March 2010, according to Reuters, Toyota had recalled about 8.5 million vehicles around the world. In early April, the New York Times reported that the U.S. Transportation Department (DOT) was seeking a $16.4 million fine against Toyota, the largest allowed, because the company had failed to promptly notify the government about potential problems with accelerator pedals. Toyota seems likely to pay rather than contest the fine.

According to Safety Research and Strategies Inc., an auto safety advocacy group, between 1999 and the end of January 2010, 2,262 cases of sudden acceleration involving Toyota vehicles were reported, resulting in 815 crashes, 341 injuries and 19 deaths. To add to Toyota’s troubles, in February, the U.S. Transportation Department opened an investigation into brake problems in the 2010 Toyota Prius, the company’s best-selling hybrid car. Shortly thereafter, Toyota recalled more than 400,000 cars. The company’s most recent problem was a Consumer Reports “no buy” warning for the Lexus GX 460 due to its rollover risk. Toyota suspended sales of its SUV the next day.

In testimony before a Congressional hearing in February, Akio Toyoda, the company’s president and grandson of its founder, apologized for the company’s missteps. “I fear the pace at which we have grown may have been too quick”, he told House members. “I regret that this has resulted in safety issues described in the recalls we face today, and I am deeply sorry for any accidents that Toyota drivers have experienced.”

Investigations and lawsuits

To determine the causes of the accelerator problems, the U.S. DOT last month asked experts from the National Administration for Space and Aeronautics (NASA) to analyze Toyota’s electronic throttles to determine if they have contributed to unintended acceleration. In an interview with Reuters, Secretary of Transportation Ray LaHood said, “We are determined to get to the bottom of unintended acceleration.” Nine NASA scientists are expected to bring expertise in electronics, electromagnetic interference and software integrity to the DOT investigation.

Key legal questions are what Toyota knew when and what they did with that information. In addition to the fine the DOT is seeking, a bevy of lawyers are pursuing these questions:

  • By early February, Toyota faced at least 30 lawsuits in the U.S. and Canada seeking class-action status on sudden acceleration.
  • In March, Orange County (CA) District Attorney Tony Rackauckas filed a civil lawsuit against Toyota, charging that the company had intentionally hid defects from consumers. “We intend to prove that Toyota ignored, omitted, obfuscated and misrepresented the evidence that was amassing for many years regarding serious safety defects in their cares,” he told reporters.
  • In September 2009, a former Toyota attorney told CBS News that Toyota had illegally withheld evidence in hundreds of rollover deaths and injury cases. The plaintiff, Dimitrios Biller, filed a racketeering lawsuit charging that his complaints about the company’s legal misconduct led to his firing. Company lawyers said that Biller had “breached his ethical and professional obligations…by violating attorney-client privilege.”
  • The inspector general of U.S. Department of Transportation is reviewing the NHTSA’s handling of the investigations into unintended acceleration, and the National Academy of Sciences is examining unintended acceleration and electronic vehicle controls throughout the auto manufacturing industry.
  • In addition, according to Fair Warning, an online publication on health, safety and corporate conduct, Toyota faces a federal criminal investigation and inquiries by the Securities and Exchange Commission, the Connecticut Attorney General, and a U.S. Attorney in New York.

Globalization – the fundamental cause of Toyota’s problems?

For public health researchers, Toyota’s troubles provide a case study of how global market forces can lead companies to engage in practices that threaten health.

How did this happen? First, in an effort to beat its U.S. competitors, Toyota pushed to expand production, move into new markets and dominate the growing market for smaller, more fuel-efficient cars. Although the results of current investigations will not be known for several months, it appears that Toyota cut safety corners to realize these opportunities, as CEO Toyoda tacitly admitted in his apology to Congress.

Second, the current practice of sourcing and using parts around the world means that once a defective part gets into the supply chain, it can cause global problems, a trend Christian Science Monitor reporter David Grant called the “dark side of globalization.” Toyota has blamed the accelerator problem on a faulty accelerator mechanism manufactured by Chicago Telephone Supply Company, a U.S .company founded in Chicago in 1896, now located in Elkhart, Indiana. In additional to its use in Toyota vehicles sold in the United States, the CTS part was also used in 1.8 million Toyotas sold in Europe, a Ford car produced in China and the Pontiac Vibe, formerly made by General Motors. All have now been recalled for repair. Global sourcing may make it easier for producers to lower costs but they also risk spreading dangerous products around the world, as also shown by the global spread of contaminated peanut butter manufactured by the Peanut Corporation of America in Blakely, Georgia last year and the 2007 recall of tainted pet food made in China.

Third, the growth of multinational corporations and the weakening of national regulatory agencies have made it more difficult for governments to keep an eye on big companies. At Congressional hearings on Toyota acceleration problems, NHTSA Administrator David Strickland promised that his agency would take a “hard look” at the power it has. Current authority, he said, may not be sufficient to regulate modern technology. Strickland also told the panel it was unclear whether the agency can regulate “in a way that allows the auto industry to build and sell safe products that the consumer wants to drive.” DOT Secretary La Hood has also called for more resources for regulating auto safety. The $16 million fine proposed by DOT is a drop in the bucket of profits Toyota earned in the decade since accelerator problems were first identified.

Globalization – the possible solution to Toyota’s problems?

Just as multinational company-led globalization created the problems that Toyota now faces, bottom-up globalization may suggest new solutions. The intense international media and consumer group scrutiny of Toyota and regulatory and legal action on many fronts and continents makes it harder for Toyota to ignore the problem and easier for advocates to share information and resources and to plan common strategies.

As public health authorities expand the use of global treaties to regulate tobacco, alcohol and perhaps food, might a Framework Convention on Motor Vehicle Safety follow? Such an approach might slow a race to the bottom in which big companies look for the lowest cost supplies and the quickest route to showrooms, even if such measures compromises safety. An enforceable global treaty could also protect more scrupulous manufacturers from their less responsible competitors. In 2000, a new UN treaty set in motion the development of global standards for automobile manufacturing. Such a treaty could set the stage for future harmonization for technical regulations on vehicles, ranging from pollution and fuel-use standards to anti-theft devices and windshield wipers. However, to date industry groups have dominated this process and enforceable standards are nowhere in sight.

Each year about 400,000 people around the world are estimated to die in automobile crashes and 30% of the victims are under the age of 25, making auto deaths an important cause of overall mortality and premature deaths. Many more die from exposure to automobile pollution that could be prevented by available technology. By adding their voice to the call for stronger auto safety and pollution standards and for tougher oversight of the auto industry, public health advocates can help improve the safety of cars on the road, while also increasing space in the market for safer and more sustainable forms of transportation.

By Nicholas Freudenberg, Distinguished Professor of Public Health at the CUNY School of Public Health at Hunter College and founder of Corporations and Health Watch.

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