U.S. Tough Treatment of Toyota Is Not Necessarily Protectionism

The problematic “recalls” for Toyota Motor Corporation of Japan have already gone on for several months, and the issue is getting worse by the moment. On the night of February 17th, Toyota’s president, Akio Toyoda, held a press conference in Tokyo and announced the recall of two car models with problems, the SAI and Lexus HS250h, and also apologized to the public again. In the few months prior to this, Toyota had already announced one worldwide recall after another on a variety of car models, with a total number of cars recalled reaching 8.5 million. Toyota introduced a new series of hybrid cars in recent years, which were all affected. Toyota’s stock market value of U.S. $30 billion has evaporated into thin air. This leading player in the global automobile industry is about to face extinction as a multinational company.

Although Toyota seems to have expressed their most sincere apologies, the U.S., Toyota’s biggest export market, has an unforgiving attitude towards the situation. On February 15th, the U.S. Department of Transportation released data that showed the sudden increase of problems in Toyota cars, and revealed that the number of accidents that have occured nationwide since 2000 have resulted in a total of 34 deaths. During two weeks following February 16th, when the U.S. National Highway Traffic Safety Administration spoke to the U.S. Congress on the issue of whether or not Toyota’s recall was investigated in a timely manner, three Congressional committees [have held] three hearings in a row to investigate all the measures Toyota took regarding vehicle safety defects, as well as whether or not the situation was handled appropriately by the related U.S. departments. Currently, the U.S. believes that Toyota’s recall was not timely enough. According to the Associated Press, if the investigation indicates that Toyota was in the wrong, it will face a fine of over $16 million. However, previously the highest penalty recorded for not recalling vehicles in a timely manner was paid by the U.S. General Motors Corporation in 2004, fined only $1 million.

Recent public opinion in Japan has been buzzing with criticism about the series of investigations the U.S. took on, believing that the U.S. is hostile towards foreign companies and protects the actions of its own automobile industry, in order to resolve its domestic economic recession by protectionist acts. I disagree with this assessment. Toyota’s automotive products account for a large share in the U.S. market and give the U.S. auto makers tremendous competitive pressure; it is conceivable that the U.S. protectionist forces have been eyeing these shares. However, Toyota’s current debacle in overseas markets is still mainly due to serious problems in product quality. Japanese products have always had the marketing advantage of being cheap in the world market, but because of the drive of the newly emerging market economies in recent years, some Japanese companies have continuously introduced new products with added high-tech aspects, in order to give the products more flair. However, the risk factors of the technology integration process also increase. Although the hybrid car Toyota produced was not one of Japan’s top technology products, due to the addition of different power elements, their production costs are in fact quite difficult to control. Toyota must have a price advantage in order to maintain their hold on the international market, forcing it to strive to reduce production costs, a key reason for lowering their technical requirements, which finally led to the progression of accidents due to quality, with catastrophic consequences. Clearly, Toyota’s problems gave U.S. protectionist forces an opportunity to exploit it, but the U.S. scaled up its investigation of Toyota, which should be based on the conscious choices made by its long-standing rigid consumer protection system.

The Toyota recalls sounded an alarm for global manufacturers. With the financial crisis over the past year, protectionism is on the rise because countries want to protect themselves, especially the U.S., which was the most heavily hit by the crisis; once again it is using the “big stick” of protectionism, imposing unbearably high tariffs to a number of products from China. However, Chinese products need a foothold in the international market. Besides urging all governments to comply with WTO principles and oppose protectionism, it is more important to produce high quality, reliable and safe products to attract consumers.