Feb 25th - In U.S., Toyota Hit By Recalls, and Resurgent Local Rivals

Toyota Motor Corp. suffered its first drop in U.S. market share in 11 years in 2010, as massive vehicle recalls and reinvigorated local rivals created markedly tougher competition for the Japanese company.

Toyota's U.S. market share fell 1.8 percentage points to 15.2% last year. Ford Motor Co., regaining strength in its home market, relegated Toyota to third place in the U.S.

Over the past year, Toyota has been beefing up its quality control system.

Last year saw a remarkable revival of the U.S. Big Three carmakers. As their restructuring efforts started paying off, and consumer confidence in Toyota took a hit due to a series of highly publicized recalls, the Big Three increased their aggregate U.S. market share for the first time in 15 years.

Looking ahead, Toyota's uphill battle will likely continue, as rivals are stepping up their challenges, releasing models in the midsize and compact categories that have underpinned Japanese automakers' global success.

"It's as if I were looking at the Japanese market," an executive of a Japanese automaker said at the North American International Auto Show, which was held in January in Detroit.

The event was full of new subcompacts, including General Motors Co.'s Chevrolet Sonic and Ford's Focus. Korean and German rivals, such as Hyundai Motor Co. and Volkswagen AG, also plan to launch new models in the medium-compact vehicle category, in which Japanese automakers now control a roughly 50% share.

Fresh Recalls

On Thursday, Toyota announced it would recall a total of 2.39 million vehicles, including 2.17 million in the U.S., for problems involving possible floor mat interference with the accelerator pedal. Similar problems led to millions of Toyota recalls last year.

Over the past year, Toyota has been beefing up its quality control system, creating the position of chief quality officer for each major region, including North America, Europe and China, in an effort to ensure a thorough grasp of information on vehicle problems. And right after announcing massive recalls, Toyota gave 1,000 or so of its engineers an additional task of finding ways to improve vehicle quality.

One reason that Toyota's recalls tend to be increasing is that the company has learned a lesson from its bitter experience in the U.S.: Toyota has made it a rule to swiftly disclose problems as soon as their causes are uncovered, even if the problems are minor.

Toyota's efforts to achieve a turnaround in the U.S. will rest largely on the success of new models. This year, the company plans to launch an all-new Camry, its mainstay sedan. Other new U.S. offerings will include the fuel-efficient Yaris subcompact and the wagon version of the Prius hybrid.