Undermining its Reputation, Toyota Recalls 2.3 Million Cars

Gone are the days when Toyota (TM) completely dominated the JDPower and Consumer Reports customer satisfaction and vehicle quality surveys. American car companies have made quality gains, and even firms like Hyundai have moved up strongly in many consumer polls.Toyota announced it is recalling 2.3 million vehicles in the U.S. to fix potentially faulty accelerators.The repairs will cost the Japanese car company hundreds of millions of dollars, but the open issue is what the news will cost Toyota in sales.

Ironically, Toyota's 18.3% U.S. market share is near an all time high. That puts it slightly ahead of Ford (F) according to data from car research firm Edmunds. Toyota is now struggling, after decades of work, to capture such a large share of the American market.

It not a foregone conclusion that the recall will damage sales. Car buyers seem to have ignored the Chapter 11 filing by GM. Some auto analysts thought that the negative publicity and concerns about GM's ongoing financial status would drive buyers away, but its U.S. market share has stayed over 20%. And having recalled 3.4 million cars last year, according to The Detroit News, Ford (F) engineered an impressive turnaround and launched new lines of popular cars; it is now one of the hottest car companies in the world.

Perhaps consumers have short memories or forgiving natures, but car companies have put out a lot of bad news in the last two years providing evidence that even the most negative press may not depress an auto manufacturer's sales.

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