The US Congress is looking with intense interest at the responses of Toyota and the National Highway Traffic Safety Administration (NHTSA) to safety concerns raised about several Toyota vehicles. The House Energy and Commerce Committee and the House Oversight and Government Reform Committee plan hearings in the coming week on what is clearly the biggest automotive safety issue in Washington since the Ford-Firestone case, which led to enactment of the Transportation Recall Enhancement, Accountability, and Documentation Act (TREAD Act) in 2000.
The public airing of the issue on Capitol Hill began early this month when Secretary of Transportation Ray LaHood and other witnesses testified before an earlier Oversight and Government Reform Committee hearing, and it will continue with this week’s committee hearings - one of which will feature testimony by Toyota President Akio Toyoda. The House committees have also requested extensive documents on the case from both Toyota and NHTSA. The Senate Commerce, Science, and Transportation Committee plans its own hearings in March. Intense media coverage, which was a key driver of the Ford-Firestone case in the late 1990s, has kept the issue before the public and fueled interest among members of Congress.
The implications of the Toyota case are only now emerging. The case clearly could have enormous impact on Toyota’s reputation in the marketplace and on its sales, production, and profits. But the case also has potentially important ramifications for Washington legislative and regulatory activity related to entire auto industry. What follows is a brief look at how the Toyota case could affect the Washington policy environment in the months ahead.
The impact of the case will likely extend far beyond Toyota, however, and NHTSA will be under pressure to be more aggressive about safety complaints against any OEM in the future.
The most obvious implication of the current case is that NHTSA will look more closely at any safety complaints involving Toyota in the future. Relations between NHTSA and Toyota have reportedly been deteriorating since at least a 2005 dispute over a potential recall of Toyota pickups, and safety concerns have been raised about a growing number of Toyota models in recent years. Tensions between Toyota and the regulatory agency could intensify as Congress looks at who is to blame for what many perceive as a slow response to safety concerns at the OEM.
The impact of the case will likely extend far beyond Toyota, however, and NHTSA will be under pressure to be more aggressive about safety complaints against any OEM in the future. The Toyota case will energize automotive safety groups, such as the Center for Auto Safety and the automotive safety group at Ralph Nader’s Public Citizen, to push NHTSA and the auto industry on safety concerns.
NHTSA has instituted a relatively small number of formal recalls in recent years and the agency is facing criticism for not moving earlier on the Toyota sudden acceleration issue. Safety groups have complained of a “truce” between NHTSA and OEMs, but any such truce may be drawing to a close.
While Congress often moves at a glacial pace, lawmakers can move very quickly when they sense of a crisis – and the Toyota case clearly qualifies.
A major risk for the entire auto industry is NHTSA’s decision to expand its investigation of electromagnetic interference (EMI) and its impact on electronic throttles. While NHTSA is still only investigating this issue, the ramifications could be significant for the entire industry in light of the increased use of electronics in vehicles and the difficulty in proving any kind of EMI problem. Concerns about software raised in the Toyota case are similarly troubling for the industry.
Congressional hearings on the Toyota case could open the door to new safety legislation, much as the Ford-Firestone case of the late 1990s led directly to the TREAD Act of 2000. While Congress often moves at a glacial pace, lawmakers can move very quickly when they sense of a crisis - and the Toyota case clearly qualifies. The industry could face expanded reporting requirements in particular, as well as the prospects for NHTSA having less flexibility in dealing with whether a defect investigation moves to a formal recall. Congress could use the upcoming surface transportation authorization bill to pressure NHTSA to be more aggressive on safety issues. Congress could also use that bill and the pending fiscal year 2011 appropriations to give a relatively understaffed NHTSA more resources to be more proactive.
Some have tried to portray the Toyota case as “Japan-bashing”, but this issue has fundamentally been driven less by the fact that Toyota is a Japanese OEM than by concerns about driver and passenger safety and by disappointment in a company whose reputation was built largely on the quality of its products. Toyota’s corporate nationality may be an issue for some in Congress and organized labor, especially those who believe that Toyota and other Japanese OEMs have long benefited from a protected home market. This case could thus feed into resentment toward Japanese (and other foreign) OEMs among those US lawmakers who already harbor such attitudes. But any impact of Toyota’s corporate nationality is balanced by the fact that the company has a large US workforce spread over many states, and thus also has many natural allies in Congress.
This case highlights the challenges facing the Obama Administration in dealing with the automotive industry in the aftermath of the GM and Chrysler bailouts.
This case highlights the challenges facing the Obama Administration in dealing with the automotive industry in the aftermath of the GM and Chrysler bailouts. While there is no evidence that federal regulators’ dealings with Toyota on safety issues were in any way influenced by the government’s equity positions in GM and Chrysler, conservatives are already using the Toyota case to press their concerns about the government’s unprecedented stakes in two major OEMs.
This case has clearly damaged Toyota’s reputation with the American public and the OEM has launched an aggressive campaign to regain the public’s trust. But Toyota’s reputation in Washington has also been tarnished, particularly among groups that once held the OEM in high regard (safety advocates and “green” activists, for example).
What has been most damaging for Toyota’s reputation is the perception that the OEM has been less than forthcoming about safety issues - a perception reinforced by Toyota’s constantly shifting explanations for the safety problems. Toyota was very successful in portraying itself as being somehow different from a typical large corporation, but the safety case has undermined that unique image. This week’s Congressional hearings will thus be an important part of Toyota’s effort to rebuild its reputation, both inside and outside the Washington beltway.
Ian C. Graig, chief executive of Global Policy Group, Inc., has written in the past in AutomotiveWorld.com on such issues as the US biofuels boom, advanced technology vehicle manufacturing loans, government efforts to aid GM and Chrysler, and US fuel economy and emissions regulations. Global Policy Group is a Washington-based research and government relations consultancy whose clients include leading US, European, and Japanese firms in the automotive, energy, utility, information technology, and financial services sectors. For more information, visit www.globalpolicy.com or contact Ian Graig directly at firstname.lastname@example.org.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.