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Toyota Facing Sales Challenges in US

Expert says the auto giant will emerge from its current recall problems with a strong product, advises aggressive consumer campaign

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Dave DeForest

The question on the minds of auto industry experts is how much damage will be done to Toyota because of its recent spate of recalls.

A number of problems such as suspected sticky gas pedals and possible power steering flaws  in certain Toyota models have left the automaker facing action by consumers, the U.S. National Highway Safety Administration and the U.S Congress - an avalanche of bad publicity.

Sales of Toyota cars in the U.S. fell 16 percent in January 2010 compared to January 2009, while sales of most other brands increased during the same month. 

Besides the recalls, the "stop-sale" on a number of Toyota's models in January will undoubtedly depress sales figures even more.

Jesse Toprak, the Vice President for Industry Trends with the auto industry analysis group TrueCar.com, says the longterm impact of the problems will depend on how aggressively Toyota deals with the issues now.  “The best way to handle this is to listen to consumers, answer their problems directly.” he said.  

Toprak also says Toyota should not give in to every consumer demand. “What happens when you have massive recalls is that it actually has a snowball effect,” he said.

Toprak explained that the recalls encourage consumers with minor problems, some having nothing to do with manufacturing flaws, to demand a return or a free fix.  “Everybody and their cousins - they are going to come out of the woodwork to complain that their car doesn’t work and they had an accident because of this issue,” he said.

Toyota cut back on factory production in several U.S. plants because of the fall in retail sales.

Toyota president Akio Toyoda, the grandson of the company’s founder, went before a congressional panel and offered an apology for the problems.

Toprak says getting the "bugs" out of its cars now will likely result in a better product in the long run. “The better news for Toyota is that once they go through this problem and fix issues, Toyotas are still going to be some of the best vehicles money can buy, simply because they will not be able to afford to go through this situation once again,” he said.

Toprak advises a large incentive program to increase Toyota car sales. “Any new marketing campaign Toyota comes up with, the effectiveness of this campaign is going to depend on how aggressive it is,” he explained  “They have to spend at least $1,000 if not more [per car] to get people in,” he said.

“I think it is not only the deal that they offer but it is also the confidence they put on their vehicles and this could be done by offering longer term warranties,” Toprak said.  He suggests the factory bumper-to-bumper warranty on a Toyota, which is now 3 years or 36,000 miles [in the U.S.], should be increased to 4 years or 50,000 miles with a power train warranty of 10 years and 100,000 miles.

The Wall Street Journal reports that Toyota will offer strong incentives such as price and financing breaks.  The report says the automaker is also planning to sweeten deals for people leasing their vehicles.

Based on TrueCar’s web traffic, Toprak said Ford is the U.S. manufacturer that has benefited most from Toyota’s problems.  “Since the recall began, the biggest beneficiary of all the brands in the U.S. was Hyundai, followed by Kia and then Ford. Honda actually came in fourth,” he said.

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