Are Toyota (NYSE:TM) Defects Building Better Reputation?

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By Hanson So on October 16, 2014 Automobile

Toyota (NYSE:TM) Motor Corporation is a Japanese brand of automotive manufacturer based in Aichi, Japan. In January 2014, it was marked as the fourteenth largest company in terms of revenues on a global basis. It’s the world’s first auto manufacturer to produce over 10 million vehicles per annum.

The company was established in 1937 by Kiichiro Toyoda. Since then it created cars under three brand names, Toyota (NYSE:TM) brand, Hino, Lexus, Ranz and Scion. It holds shares in big companies like Daihatsu (OTC: DHTMF), Fuji, Isuzu and Tesla (NASDAQ: TSLA). It has joint ventures with GAC Toyota (NYSE:TM), Sichuan FAW Toyota (NYSE:TM) Motor, Toyota (NYSE:TM) Kirloskar and TPCA.

Toyota (NYSE:TM) being such a big name, maintains its reputation by promising elegance and safety. But recently Toyota (NYSE:TM) made its fourth global recalling of 1.67 million cars for three separate flaws. These included 759,000 Toyota (NYSE:TM) and Lexus sedans for fuel pipes leakage and fire risks. This procedure will cost the company millions of dollars.

Toyota (NYSE:TM) stated that the company isn’t aware of any crashes, injuries, fatalities or fires caused by the above mentioned vehicles. These cars were manufactured back in 2005 to 2010. They involve the Toyota (NYSE:TM) Crown, Mark X, Crown Majesta, Lexus IS, LS Sedans and GS. The actual reason for these recalls are reports received back in July 2011 of brake fluid leakage which could result in mediocre performance by the vehicle. Another such report surfaced again in January 2013.

The case will be supervised and heard under David Kelley, partner based in New York at Cahill Gordon and Reindel LLP along with a former US Attorney before being appointed to supervise safety procedures of the carmaker.

Kelley plans to carefully look into Toyota (NYSE:TM)’s policies in connection with how accurate they are to its public statements of three years. Toyota (NYSE:TM)’s approach here is to recall vehicles from worldwide and fix the existing problem before the occurrence of a major accident, which will result in the company being held responsible. According to Takashi Aoki, the fund manager in Tokyo at Mizuho Asset Management Co, these recent developments are not expected to harm the brand image in any way, or lead to decrease in shares, as no deaths or crashes are associated with the defects at hand. On the other hand such safety measures might work in favor of Toyota (NYSE:TM) as being considerate for its customers.

802,000 models of Crown, Noah, Crown Majesta and Voxy models, manufactured from June 2007 to June 2012 are being recalled from China, Japan and other Asian markets. The plan is to replace its rubber seal in the brakes which is causing the crack and fluid leak.

190.000 Auris and Rumion cars are undergoing remission control change with in Japan that are causing fuel leaks and fire risks.

Such measures are promoting Toyota (NYSE:TM)’s reputation, making it the world’s best selling automaker. Reputation only tends to be effected if there are any deaths associated with the vehicle or if the matter becomes political.