Toyota Advisers Fault Lack of Local Control, Safety Chief for Auto Recalls

Toyota Motor Corp. (7203)’s centralized structure, skepticism of external critics and lack of a global safety chief are among flaws the carmaker needs to address as it recovers from record recalls, an outside advisory group said.

Toyota President Akio Toyoda created the North American Quality Advisory Panel in March 2010 as the company recalled millions of autos in the U.S. and abroad for flaws linked to unintended acceleration. The group, led by former Transportation Secretary Rodney Slater, reviewed Toyota’s operations for more than a year before issuing a report yesterday.

The company “erred too much on the side of global centralization and needs to shift the balance somewhat toward greater local authority and control,” the advisers said. The flaws “hindered information sharing and contributed to miscommunication” and “delayed response time to quality and safety issues,” the report said.

Toyota, Japan’s largest carmaker, recalled millions of U.S. autos in 2009 and 2010, mostly for floor mats at risk of jamming accelerators and sticky gas pedals. The Toyota City, Japan-based company paid a record $48.8 million in fines for how some of the recalls were conducted, and officials including Toyoda were called before Congress to discuss plans to fix the defects.

In North America, where Toyota’s operations are divided into units responsible for sales, engineering and manufacturing, the company would benefit from a more unified structure and greater local authority to make decisions, the panel said.

“We tried to call it as we’ve seen it,” Slater said on a conference call. Toyota has already adopted some of its recommended changes, he said.

‘Meaningful Steps’

The advisers’ recommendations have resulted in “meaningful steps” to give Toyota’s North American operations more autonomy and make the company even more focused on safety, Toyoda said in a statement.

“The panel has given us further insights into how we can best achieve our vision of exceeding customer expectations with the safest and most responsible vehicles,” said Toyoda, the grandson of the automaker’s founder.

The advisers found Toyota doesn’t take complaints about its vehicles from outside sources as seriously as it should.

While the carmaker is focused on applying internally gathered data to improve vehicles, it “does not appear to treat feedback from external sources, including customers, independent rating agencies and regulators, the same way,” the panel said.

Toyota Skepticism

As a result, Toyota initially treated consumer complaints about unintended acceleration “with a degree of skepticism and defensiveness,” according to the advisers.

“There are sometimes very important signals in all those noisy data,” said Brian O’Neill, a panel member and former president of the Insurance Institute for Highway Safety.

The company also lacked a direct chain of managers specifically responsible for safety issues, the panel said.

Toyota fell 0.5 percent to 3,245 yen at the 3 p.m. close in Tokyo.

The panel didn’t identify any additional causes for unintended acceleration in Toyota and Lexus vehicles.

The report doesn’t help settle the debate about the causes of unintended acceleration, Jeremy Anwyl, chief executive officer of automotive data service Edmunds.com, said in a statement.

‘Uniquely Vulnerable’

“The report confirms our view that Toyota’s culture, one that works well in times of stability, left it uniquely vulnerable to a fast-moving crisis,” Anwyl said.

The National Highway Traffic Safety Administration ended its probe of Toyota models in February after NASA, the U.S. space agency, said it found no electronic causes of unintended acceleration during a 10-month review. Safety advocates and some lawmakers had suggested electrical faults as a reason.

“There’s still a serious debate as to whether these were serious safety problems,” O’Neill said.

Sean Kane, president of Safety Research & Strategies, a Rehoboth, Massachusetts-based advocacy group that researches auto defects and works with attorneys suing carmakers, said yesterday that NASA’s report showed “deficiencies” in Toyota’s vehicle electronics.

“NASA identified numerous failures in Toyota electronics that could lead to unwanted acceleration,” Kane said in an e- mailed statement.

Panel Members

In addition to Slater and O’Neill, the panel includes Norman Augustine, former CEO of Lockheed Martin Corp.; Patricia Goldman, a former National Transportation Safety Board vice chairman; Mary Good, the University of Arkansas at Little Rock’s dean of engineering and information-technology; Roger Martin, dean of the University of Toronto’s Rotman School of Management; and Sheila Widnall, a professor at the Massachusetts Institute of Technology, and former Secretary of the Air Force.

The advisory group said it didn’t identify any specific problems related to Toyota’s ability to fully integrate electronics and software or its methods for ensuring that changes in software don’t cause unintended consequences.

The advisers will continue studying Toyota’s oversight of suppliers and other issues for at least one more year, said Slater, who declined to provide details on the panel members’ compensation.

Toyota’s U.S. sales unit is based in Torrance, California.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net.

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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