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Does the Government Pose a Bigger Threat to Toyota Than its Sticky Pedals?

Posted By Nicolas Loris On February 5, 2010 @ 9:40 am In Economics | Comments Disabled

Brake Pedals [1]

Toyota’s bad press has been for its sticky pedal incident certainly isn’t surprising, but is all the negative attention warranted? When asked about the Toyota recalls, Transportation Secretary Ray LaHood responded by saying [2], “My advice to anyone who owns one of these vehicles is stop driving it, and take it to the Toyota dealership because they believe they have the fix for it” and that [3]“we’re not finished with Toyota.” Hood later toned down his remarks but immediately after his “stop driving” comment, Toyota’s stocks plummeted. Even after recovering some, the stock closed down [2]6% that day.

Much like Vice President Biden’s comments not to use public transportation or ride an airplane [4] because of swine flu, LaHood’s comments were a bit over the top and have caused some to question the government’s motive. We don’t speculate motives at The Heritage Foundation, but it’s easy to understand why a government that now owns a major stake in General Motors would want to put continuous bad press on a rival automaker. In fact, GM’s sales were up 14 percent [5]in January while Toyota’s fell 16 percent. Ford, which refused government bailout cash, had sales figures increase 25 percent. This could simply be a market response to a bad product; profits and losses are a telling sign in the economy, but the government shouldn’t be holding Toyota’s head under the water. Toyota handled the problem quickly by recognizing the problem as well as recalling and guaranteeing a fix for all 2.3 million potentially affected owners.

But when every Member of Congress and the Obama administration is a jobs, jobs, jobs message, it would cause more harm than good to keep the bad press on Toyota since its integral in the U.S. economy. Weston Konishi of the Mansfield Foundation says [6], “Toyota is now a real stakeholder in the US economy — think of its auto plants and jobs — so trying to score points against it would be somewhat self-defeating.”

While an accelerator pedal that could get trapped on the floor mat is a serious issue, the remarks and the reactions have been overblown according to David Champion [7], director of automobile testing for Consumer Reports: “When you look at the statistics we are putting an awful lot of effort on a very small risk. There has been something like 2,000 complaints of unintended acceleration in some 20 million Toyota vehicles — it’s almost like trying to find a needle in a haystack.”

Either way, this is what happens when the ref starts playing for one team. The fans begin to question every call.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/02/05/does-the-government-pose-a-bigger-threat-to-toyota-than-its-sticky-pedals/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/brake-pedals100205.jpg

[2] saying: http://www.nydailynews.com/money/2010/02/04/2010-02-04_untitled__toyota04m.html

[3] that : http://www.cnbc.com/id/35208812

[4] comments not to use public transportation or ride an airplane: http://abcnews.go.com/Politics/story?id=7470281&page=1

[5] GM’s sales were up 14 percent : http://news.yahoo.com/s/ap/20100202/ap_on_bi_ge/us_auto_sales

[6] says: http://economictimes.indiatimes.com/news/international-business/Is-US-bullying-Toyota-on-recall/articleshow/5534434.cms

[7] according to David Champion: http://www.edmunds.com/repairshops/all/Ohio/Oregon.html

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