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Business
Print Edition> Business
UPDATED: March 6, 2010 NO. 10 MARCH 11, 2010
Toyota in Turmoil
Toyota's blind spot in car engineering makes re-branding in China difficult after a global recall involving millions of autos
By LIU YUNYUN
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HARD SELL: Toyota cars line up at a dealership in California. Toyota Motor Sales USA Inc. on March 2 reported February sales of 100,027 vehicles, down 8.7 percent from a year earlier (XINHUA/AFP) 

Toyota Motor Corp.—the world's largest carmaker. China—the world's biggest auto market. When the two come together, no matter is too trivial to address. But when the situation involves an international recall due to defective auto components, a simple warning to car owners is not enough.

China's ascension to the top of the world auto market list made a visit by Akio Toyoda, president and grandson of the founder of the Japanese auto behemoth, all but inevitable. Days after his emotional testimony to the U.S. Congress and apology to American consumers, Toyoda arrived in Beijing with similar apologetic intentions.

Toyota currently faces $3.6 billion worth of claims for compensation—the highest in auto history—as defects in its sedans were believed to have claimed 34 lives in the United States since 2000, according to U.S. media reports.

"The incident has caused an impact and worries to Chinese consumers," Toyoda said at a press conference in Beijing on March 1. "I hereby express my sincere apologies for these worries."

Toyoda was accompanied by all of the company's top-level managers of Toyota's China operations.

In the wake of massive recalls in the United States due to potential accelerator pedal problems, Toyota decided to recall 75,552 RAV4 sport-utility vehicles in China—a negligible portion of the auto giant's global recall of 8.5 million vehicles.

Of the recalled models worldwide, five are produced and sold in China: RAV4, Corolla, Camry, Highlander and Yaris. Yet, only one model was recalled in China. Toyota China insists the gas pedals applied to cars sold in China were provided by different companies than those in the United States and have no similar problems.

On February 25, the General Administration of Quality Supervision, Inspection and Quarantine of China issued a risk warning notice on its website on defects of the accelerator pedal and brake system in Toyota cars. The notice asked Toyota car owners to watch and report possible failures and said the administration will collect more information in order to decide if further actions are necessary.

Too big to ignore

Domestic passenger vehicle sales surged to a new record high in January this year, reaching 1.316 million units, a robust growth of 113 percent that continues to lead world totals.

In 2009, Shanghai Volkswagen, Shanghai General Motors and FAW Volkswagen took up the first three spots on the passenger car sales list, selling 727,700, 708,400 and 669,200 units, respectively. The combined sales of Toyota's two joint ventures were half that of Volkswagen.

Toyota has two joint venture factories on the Chinese mainland—FAW Toyota Motor Co. Ltd. in Tianjin Municipality, and Guangzhou Toyota Motor Co. Ltd. in Guangdong Province.

Toyota's 2008 plan to boost its market share in China to 10 percent by 2010 has been all but dashed given the current situation. But still, Toyoda sought to make amends.

"The Chinese market is very important, so I flew here in person hoping my personal apology and explanation will give customers some relief," said Toyoda, who later bowed to the media to express the sincerity of his apology. "Every car carries my name and so I am most concerned about the loss of confidence among Chinese consumers."

Toyoda said the company was confident its 800,000 sales target this year was still within reach, and had no intention to lower the target despite the damage to Toyota's reputation following the recall.

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