Crash and Burn

Toyota's Innovative Reputation Tarnished

When Japanese cars first entered the American market in the early '70s, they had a reputation for being shoddily made and unsafe. Chastened, those companies doubled-down on quality, and by the late '80s, Honda and Toyota especially became known for their reliability, performance, and styling. That reputation lasted for Toyota until this month. The gas-pedal recall was already a PR disaster when it was reported that Transportation Secretary Ray LaHood was going to warn Toyota owners to stop driving their cars immediately. Toyota shares tanked immediately after the report, causing the automaker to lose $3 billion in market value instantaneously. Toyota recovered slightly, but at the end of the day, shares were still down 6 percent. Worse, the Japanese government has demanded Toyota investigate the braking system on the 2010 Prius; the U.S. government said it will look into its brakes too. In industry terms, the Prius is a “halo” vehicle—one that may not sell well due to price or features, but one that gets attention as embodying the best the company has to offer.