A disastrous product liability case is enough to make any manufacturer more cautious in the future.
That’s been the case recently with Toyota, the world’s best-selling automaker.
You may recall five years ago Toyota infamously battled the feds after reported problems of unintended acceleration in some of its vehicles.
The automaker initially denied problems with the cars - and it cost Toyota big time.
Eventually, Toyota ended up:
- recalling more than 11 million vehicles
- settling a class-action lawsuit for more than $1 billion, and
- paying a $66.2 million fine to the National Highway Traffic Safety Administration (NHSTA).
The company is also nearing a major settlement with the feds to end a criminal investigation, which may cost the firm another $1 billion.
Following the debacle, Toyota vowed to get to the bottom of its quality problems.
For one thing, the firm has been a lot more cautious.
Toyota has recalled more than five million cars annually in the U.S. for the past two years - the most of any automaker, according to the NHSTA.
Better safe than sorry?
The automaker recently launched a massive worldwide recall of 1.9 million of its Prius model.
That equates to almost half of all the Prius models Toyota has ever sold!
Toyota says a software flaw in the hybrid cars can cause it to enter a fail safe mode and, in some cases, shut down while a customer is driving.
The company hasn’t received any reports of accidents or injuries because of the software glitch, but has issued the voluntary recall anyway.
The firm also recently recalled approximately 260,000 RAV4s, Tacomas and Lexus RX350s because of problems that could cause the anti-lock braking system to shut down.
Widespread recalls are known to hurt a brand’s image, and Toyota’s announcement did lead to a 2.3% stock price drop from February 11th to the 19th.
But that minor blip may be worth it, and Toyota may have the right idea by playing it safe.
Despite all of the recent recalls, the Japanese company said it was poised to earn $18.8 billion this year, its biggest-ever annual profit.
The lesson here?
Recalls may bring some bad publicity, but it’s a lot better than the kind of heat that a catastrophic product liability lawsuit will bring.
What do you think of Toyota’s recent spate of recalls? Be sure to let us know in the comments section.
