Toyota is not having its 'Gerald Ratner' moment (From The Northern Echo)

Toyota is not having its 'Gerald Ratner' moment

8:59am Friday 5th February 2010 in

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With car makers having struggled through the recession, Business Editor Owen McAteer looks at whether the bad publicity surrounding Toyota could bring down the world’s biggest car maker.

DESPITE a stream of bad publicity, experts believe that Toyota is not having its Gerald Ratner moment.

The company’s global recall, involving about 180,000 cars in the UK, will cost the company an estimated £1.25bn this financial quarter.

The cars could potentially be affected by a sticking accelerator pedal and the company is contacting owners through the Driver Vehicle Licensing Agency to book their cars in for a 30-minute repair.

Despite the mass recall, according to the car manufacturer the problem has been linked to only 26 accidents in Europe, with none recorded in the UK.

To make matters worse for the beleaguered car firm, a separate problem affecting the brakes in its Prius hybrid models has been identified by customers in the US and Japan.

It is likely that all these problems can likely be rectified, but the worry for Toyota from this week’s headlines will be the long-term effect on its reputation and sales.

Crisis communication consultant John Huntley, managing director of John Huntley Training, told the BBC: “It’s going to take Toyota years to get out of this one.”

As Dr Chris Tsinopoulos, lecturer in operations at Durham University, pointed out last night, the main reason people buy Toyotas is for reliability. “It is not because they are top of the exciting list,” he said.

Worries about the quality of a product can bring down even the most successful business.

Gerald Ratner was the millionaire chief executive of Ratners Jewellery, which he built into the world’s largest jewellery retailer with 2,500 shops, making £125m a year, and with a £2bn turnover.

But after he made uncomplimentary remarks at an Institute of Directors national conference in 1991, regarding product quality, the company suffered financial losses and ceased trading.

Dr Tsinopoulos, who has expertise in manufacturing and industry, doubted that a similar fate was lying in wait for Toyota, the world’s biggest car maker, providing no further problems turned up in the near future.

He said: “A colleague was talking to someone renewing their company car fleet and they are still going for Toyota, it has not affected their decision.

“It comes down to cost and overall reliability.

“But you never know, if these things start building up and, in a year from now there is another glitch, there is the possibility that will change.”

However, he believed there was likely to be a short-term impact.

He said: “This is just a glitch, but given the publicity that it has received, I think this reliability issue in the back of a customer’s mind will have an impact in the short term. If people are buying a car now they may think twice about buying a Toyota.

“This perception of reliability takes a lot of time to build. It will have an impact but I don’t think it will be very significant in the long term.”