Toyota

A panel of the House Energy and Commerce Committee was to hear from David Strickland, NHTSA's administrator; David McCurdy, president of the Alliance of Automobile Manufacturers, a trade group which represents 11 vehicle manufacturers; Ami Gadhia, policy counsel with Consumers Union; and Claybrook, the former head of watchdog group Public Citizen.

The Transportation Department has defended its work in policing the auto industry, noting that it dispatched safety officials to Japan late last year to urge the company to take safety concerns seriously. Toyota president Akio Toyoda recently met with Transportation Secretary Ray LaHood and told him the company would "advance safety to the next level."

The agency has been investigating potential electronic problems in Toyota cars and trucks. Toyota has said it has found no evidence of problems with its vehicles' electronic throttle controls but is also studying the issue.

Automakers point to declines in highway fatalities and the use of safety technology such as anti-rollover electronic stability control as signs of safety improvements on the road. "This is not an industrywide crisis," McCurdy said in an interview.

Crisis or not, Congress is considering several reforms that could bring the biggest auto safety changes since the TREAD Act, which was approved in 2000 to help the government spot safety defects more quickly following the massive Firestone tire recall.

Sen. Jay Rockefeller, D-W.Va., who leads a Senate committee with oversight of the industry, has expressed interest in "strong legislative action," including requiring a brake override system on all vehicles. Toyota is bringing the system to new vehicles and many of the cars and trucks under recall to provide an additional safety precaution.

LaHood told lawmakers his agency may recommend every new vehicle sold in the United States be equipped with the brake overrides, something that would require a relatively inexpensive software upgrade.

Other potential reforms include raising penalties on automakers who fail to recall defective vehicles in a timely manner, requiring car executives to certify the information they provide to NHTSA and mandating car makers provide hardware that dealers need to read electronic data recorders. The "black box" information could help investigators make their own judgments about what has been going wrong.

NHTSA could also receive more funding. Many lawmakers question whether the agency has enough skilled engineers who can understand the complicated electronics of modern cars and trucks.

President Barack Obama has recommended 66 new jobs for NHTSA in his 2011 budget.

To win back sales, Toyota said it will offer zero-percent financing on most models this month plus two years of free maintenance to returning customers. General Motors Co. and Chrysler LLC matched the financing deals.

Toyota's U.S. sales fell 9 percent last month, besting some analysts' predictions that its sales would fall by double digits. Meanwhile Ford, GM, Nissan, Honda, Hyundai and BMW all reported double-digit growth compared with February 2009, at the depth of the recession. The gains might have been even higher without the blizzards that paralyzed the East Coast.

Ford's sales shot up 43 percent and the automaker outsold GM for the first time since August 1998, when GM was in the midst of a strike. Ford's gains were led by cars, which rose 54 percent, with sales of the midsize Fusion, a Toyota Camry rival, more the doubling. Those results included Volvo, which Ford is preparing to sell.

Other winners included Kia Motors Corp. and Subaru. Even struggling Chrysler saw a slight increase in sales.

February was the first full month since Toyota suspended sales of eight popular models on Jan. 26. Toyota Vice President Bob Carter said Tuesday that almost all of those vehicle have been repaired and are now on sale. Toyota also has announced temporary production cuts at two U.S. plants.

Carter estimated the sales suspension cost the automaker 18,000 sales in February. Media coverage of the safety lapses also has taken a toll. Toyota officials and federal regulators appeared before House lawmakers last week and were testifying before the Senate Commerce Committee Tuesday.

Carter said Toyota saw very few of its customers defecting to other brands in February, but it did see a drop in new buyers. Meanwhile other automakers said they were seeing increased business because of Toyota's pain.

"We feel we're getting our fair share of the Toyota business," said Susan Docherty, who was head of sales and marketing at GM until Tuesday afternoon, when she was moved into solely a marketing role. GM's sales rose nearly 12 percent.

Honda Motor Co. said sales of the Accord sedan, which competes directly with the Camry, rose 41 percent. Honda's sales climbed 13 percent overall. Hyundai Motor Co. said its sales rose 11 percent, partly because of a 58 percent increase in sales of the Sonata, another Camry competitor.

Most carmakers offered deals to Toyota customers in February. According to the automotive Web site Edmunds.com, incentive spending rose 11 percent from January to $2,588 per vehicle. Toyota's incentive spending rose 26 percent, to $1,833 per vehicle. That was the fourth-highest monthly incentive total for Toyota since Edmunds began tracking data in 2002. While a boon for consumers, incentives eat into automakers' profits and companies have been trying to cut back on them.

Toyota must be worried because it has generally avoided big incentives in the past, said Paul Ballew, vice president of analytics at Nationwide Mutual Insurance and a former GM economist.

"They're jumping into the deep end of the incentive pool," he said.

According to a USA Today/Gallup poll published Tuesday, 31 percent of Americans think it is unsafe to be in a Toyota or Lexus and 55 percent say Toyota didn't respond promptly to safety problems. The poll questioned 2,021 people and had a margin of error of three percentage points.

Even though Toyota's sales dropped, the company did better than many analysts predicted, said Jesse Toprak, vice president of industry trends and analysis at TrueCar.com, an auto pricing site. He suspects incentives aren't the only reason, because they weren't high enough to attract customers worried about safety.

"This tells me that Toyota's brand strength and loyalty was far stronger than most of us thought," he said.

Automakers were expecting to see gains over February 2009, which was one of the weakest months in a very depressed year. Still, winter storms at the beginning and end of the month hurt sales. GM said its sales dropped 22 percent in the Northeast region.

"It's hard to get enthusiastic about going out and looking for a new car when you have to shovel out," said Raymond Ciccolo, president of Village Auto Group, which owns seven franchises in the Boston area.

GM sales analyst Mike DiGiovanni said sales probably would have been 5 percent higher had it not been for snowstorms. That means the gradual economic recovery is continuing despite setbacks in home sales, new home construction and unemployment, he said.

GM's sales of its Buick, Chevrolet, Cadillac and GMC brands climbed 32 percent. GM plans to keep those four brands and is phasing out Pontiac, Saturn and Hummer. It has sold Saab.

Much of GM's sales increase was due to demand for large new wagons such as the Chevrolet Equinox, which jumped 133 percent.

Chrysler, meanwhile, said its February sales rose half a percent, its first year-over-year monthly increase since December of 2007. Chrysler's minivan sales rose, as did sales of its sedans.

Sales to rental car companies and other fleet buyers also were strong. Fleet sales began ratcheting up in January and continued the trend last month, as companies began buying again after cutbacks last year.

Fleet sales generally mean lower profits to automakers than retail sales to individuals, but Toprak said a few months of high fleet sales are needed to make up for last year's slump. Ford said 40 percent of its sales were to fleets, while GM sold 32 percent of its vehicles to fleets. Thirteen percent of Toyota's sales were to fleets.

South Korea's Kia saw U.S. sales rise 9 percent on brisk demand for its Sorento and Soul, a boxy vehicle aimed at city dwellers. Nissan Motor Co. said sales surged 29 percent as Versa subcompact sales doubled. Subaru reported a 38 percent jump.

Automakers are hoping it all adds up to the end of a long winter for the industry. Ford says it plans to increase North American production by 32 percent in the second quarter to 595,000 vehicles. GM didn't reveal its production plans.

"The industry is very much on track for a continued slow but modest recovery," Toyota's Carter said.

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AP Auto Writer Tom Krisher in Detroit contributed to this report. Strumpf reported from New York.

"People are going to feel sorry for him because he had to go through a theatrical ordeal overseas, a very unusual situation for a Japanese executive," said Kuniyoshi Shirai, executive adviser at A.C.E. Consulting in Tokyo.

The Japanese don't have a monopoly on sincerity and passion, but a show of heartfelt remorse goes a long way in consensus-oriented Japan, where intentions, not just results, carry meaning.

Although tears would be a sign of weakness for an American executive, the Japanese public are swayed by emotions because empathy for a weak person is valued as an honorable trait, says Tatsumi Tanaka, president of Risk Hedge, a consultant for major companies.

"It's a special Japanese aesthetic," he said. "It's a virtue to acknowledge one's mistakes and mend one's ways, and crying is seen as a symbol of that."

Japanese protocol for corporate chiefs under fire starts with a deep bow, perhaps a resignation to take responsibility, and sometimes sobbing.

Even with rigid social definitions of femininity as a soft dependence and masculinity as a stoic silence, high-profile men crying in public draws not only surprise but also favorable reviews.

Athletes and other male celebrities often win extra marks from public weeping -- in circumstances such as winning an Olympic medal or mourning death in the family.

In 2008, Toru Hashimoto, a popular Osaka governor, got teary eyed before cameras when he was lambasted over budget cuts. Tearful company chiefs are also fairly common, exemplified by startup mogul Takafumi Horie during his 2007 trial on charges of securities laws violations.

The most memorable in the history of Japan Inc. by far was Shohei Nozawa, once president of Yamaichi Securities Co., who outright bawled at a news conference when his brokerage went bankrupt in 1997, and begged the public to show mercy to his employees.

In Japan, he was widely praised as an ideal executive.

The tears were a little more subdued for Toyoda after his appearance at the House Oversight and Government Reform Committee. He had initially delegated testifying to his top U.S. executive but decided to attend after getting a formal invitation and amid media criticism.

"At the hearing, I was not alone. You and your colleagues across America, around the world, were with me," he said in English to the Toyota dealers, shaking his head and his face scrunching up as the crowd broke into applause.

Later, when a dealer told him they stood behind him, Toyoda was so overcome with emotion he practically broke down and cried.

Keiko Hamada, a 56-year-old college official, found it touching.

"I'm so worried about him. As a Japanese, I was so moved," she said. "As one Japanese, I'm rooting for Toyota."

Japan is increasingly nervous about Toyota Motor Corp.'s unfolding recall crisis, which has ballooned to more than 8.5 million cars being fixed for faulty gas pedals, floor mats and antilock braking.

Concerns are growing electronic glitches, still relatively new turf for the industry, may be behind the cases of unintended acceleration that have led to deaths and horror stories of runaway cars on highways.

Toyoda's appearance before Congress was a top news item for major Japanese broadcasters.

News shows, including those on public broadcaster NHK, showed clips of Toyoda reading introductory remarks in English and answering questions from lawmakers described as "tough."

A colorful Fuji TV morning show, which mixes entertainment and social news, characterized Toyoda as the "prince under attack," a reference to his almost royal status as grandson of the company founder.

Some analysts gave Toyoda passing marks for his performance.

"By Japanese standards, he was doing his best," said Ryoichi Shinozaki, a crisis management expert at Kyodo Public Relations Co., noting Toyoda at least avoided blatant gaffes. "He answered the questions and he appeared comfortable."

But the company's crisis was deepening because of possible defects in the electronic throttle, new investigations by federal authorities and concerns there may be cover-ups, according to Shinozaki.

"The problems aren't going away," he said after watching the hearing on TV. "The hearing is over, but the crisis is only getting more serious."

Tears and apologies will only get him so far -- and only in Japan -- possibly proving disastrous in the U.S. in the long run. Even in Japan, sentiments are fickle, and an outpouring of sympathy can turn to hostility in a flash.

In recent weeks, Toyoda has earned a new nickname that highlights a growing perception of ineptitude in handling the recall fiasco -- "child president," a sarcastic reference to Toyota's Japanese TV ads that feature a popular child actor billed as "child dealer." The moniker also takes a stab at Toyoda's privileged status as heir of a well-to-do family.

"Japanese public opinion is cruel and can shift in an instant," Shirai said. "For the U.S., an apology isn't going to be enough. As management, he needed to present specific measures."

It was only before the group of loyal dealers, who have been lobbying Congress, that Toyoda could be confident he was among allies, even for a moment.

"Words cannot express my gratitude," he said.

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Associated Press Writer Kelly Olsen contributed to this report.

The only difference? Toyoda and Inaba appeared more sincere than your typical American in their embarrassment at not being able or willing to remember anything substantive. Whether that reflected cultural differences or simply a lack of experience with the political theater of a standing-room-only Congressional hearing is hard to say. The whole event had a distinct feeling of culture clash, with American aggressive political posturing smashing into Japanese demure saving-face subtlety, accentuated by Toyoda's inability to speak English, which required repeated pauses in the action while the CEO had questions translated for him, responded in Japanese, and then had his answers translated.

In hearings that are sure to attract a significant television audience, every legislator considers him or herself a prosecutor with five minutes to prove the defendant guilty. (Unless of course, you have Toyota manufacturing plants in your district, in which case you are considerably more friendly.) And to be sure, there's plenty of grist to crucify Toyota with. The company did its best to co-opt the American regulatory process, appears to have known about problems long before acknowledging them in public, and seems to have dragged its feet on recalls. As a result, Toyota's going to have some big legal bills in the years ahead.

But aside from looking good to any constituents watching on TV, it's hard to see what the committee members accomplished via this process.

You could, if you wanted, try to score some political points, as when a smirking Jason Chaffetz, R-Utah, tried to get Toyoda to blame American unions for his company's problems. Or you could, like Eleanor Holmes Norton, D-D.C., get in a dispute over whether Toyota cars made in the United States should be considered American or Japanese. If you were a Republican, you were likely to try to implicate the Obama administration's bailout of Detroit in some way, though no one could quite figure out how to make that charge stick.

Perhaps the larger meaning of this hearing was simply its recalibration of what Toyota -- and Japan -- signify to Americans. At the outset, Paul Kanjorski, D-Pa., commented that Toyoda was about to have "a unique experience" withstanding "the interrogation of a Congressional committee." The possibly unintended symbolism -- Toyoda as a prisoner of war -- neatly inverted longstanding images of all-conquering Japanese technological superiority, particularly as expressed in the auto industry.

In a country that has long been embarrassed by its own auto companies and is probably exhausted by the never-ending stream of American business leaders summoned to Congressional hearings so we can all hear their unsatisfying explanations of how they screwed up, the focus on Toyota offered an opportunity for some schadenfreude. Finally, someone else is bungling on a massive scale!

Because whether or not Toyota is found legally liable of covering up problems with its vehicles or not acting quickly enough to address them, there's no denying that Toyota's image has been severely damaged. Paul Kanjorski observed that the slogan "Made in Japan" has long conveyed a sense of the highest quality, but he told Toyoda that "you've injured that thought process in the American public."

On that count, Toyota does appear guilty.

Toyota, in an internal presentation in July 2009 at its Washington office, said it saved $100 million or more by negotiating an "equipment recall" of floor mats involving 55,000 Toyota Camry and Lexus ES350 vehicles in September 2007.

The savings are listed under the title, "Wins for Toyota -- Safety Group." The document cites millions of dollars in other savings by delaying safety regulations, avoiding defect investigations and slowing down other industry requirements.

The documents could set off alarms in Congress over whether Toyota put profits ahead of customer safety and pushed regulators to narrow the scope of recalls. Two House committees are holding hearings this week on the Japanese automaker's recall of 8.5 million vehicles in recent months to deal with safety problems involving gas pedals, floor mats and brakes.

"You can feel that the staff were thinking more about company profits than customers," Mamoru Kato, an analyst at Tokai-Tokyo Securities, said in an e-mail after viewing the documents. "It's unfavorable for Toyota ahead of the hearings."

The world's largest automaker has been criticized for responding too slowly to complaints of sudden acceleration in its vehicles, threatening to undermine its reputation for quality and safety.

The documents were turned over to the House Oversight and Government Reform Committee -- which is scheduled to hold a hearing Tuesday -- and obtained by The Associated Press on Sunday. The presentation was first reported by The Detroit News.

Toyota President Akio Toyoda is scheduled to testify at a separate House Energy and Commerce Committee hearing on Wednesday.

"This is any executive's worst nightmare -- a damning document comes out and exposes your company as having basically gone slow and tried to delay addressing significant safety problems with their product," said Jeff Kingston, director of Asian studies at Temple University Japan.

Toyota said in a statement: "Our first priority is the safety of our customers and to conclude otherwise on the basis of one internal presentation is wrong. Our values have always been to put the customer first and ensure the highest levels of safety and quality."

Company spokesman Paul Nolasco in Tokyo had no further comment, saying only that the company handed over some documents to the committee.

Transportation Department spokeswoman Olivia Alair called the document "very telling. And that's why Secretary (Ray) LaHood has been saying we're going to hold Toyota's feet to the fire and make sure they do what's necessary to make their cars safe for the driving public."

The new documents show the financial benefit of delay. In the presentation, Toyota said a phase-in to new safety regulations for side air bags saved the company $124 million and 50,000 man hours. Delaying a rule for tougher door locks saved $11 million.

On defect regulations, the document boasts that Toyota "avoided investigation" on rusting Tacoma pickup trucks. The National Highway Traffic Safety Administration investigated the case in 2008 but closed it without finding a safety defect. Toyota agreed to buy back certain rusty pickups, inspect other and extend warranties.

The document lists seven "Wins for Toyota & Industry," including "favorable recall outcomes," "secured safety rulemaking favorable to Toyota" and "vehicles not in climate legislation." Another page lists "key safety issues," including "Sudden acceleration on ES/Camry, Tacoma, LS etc."

In one passage, the document says Toyota "negotiated 'equipment' recall on Camry/ES re SA; saved $100M+, w/ no defect found."

NHTSA had launched an investigation in March 2007 over allegations that floor mats were interfering with accelerator pedals. Toyota told the government a month later that there was "no possibility of the pedal interference with the all-weather floor mat if it's placed properly and secured."

By that August, the government had connected the problem to a dozen deaths and a survey of 600 Lexus owners discovered 10 percent reported sudden or unexpected acceleration. But the recall in September 2007 was limited to 55,000 Camry and ES350 vehicles to replace the floor mats.

The 10-page internal presentation was dated July 6, 2009, less than two months before a high-speed crash near San Diego killed a California highway patrol officer and his family and reignited concerns over sudden acceleration in Toyotas.

In October 2009, Toyota issued its largest-ever U.S. recall, involving about 4 million vehicles, over concerns of pedals getting stuck in floor mats.

The presentation lists Yoshi Inaba, Toyota's chief executive in North America, on its cover. Inaba is scheduled to testify before the House Energy and Commerce Committee on Wednesday, along with Toyoda and Jim Lentz, president of Toyota Motor Sales USA. The committee is also expected to hear from LaHood, NHTSA Administrator David Strickland and safety advocates.

The Oversight Committee is holding a hearing Tuesday with Lentz, LaHood and Strickland. A Senate committee is planning a March 2 hearing.

Toyoda arrived in the United States on Saturday and appeared to be preparing for the hearing, the Yomiuri newspaper, Japan's largest, reported Monday. Nolasco, the Toyota spokesman, said the company does not comment on the moves of individual executives, citing security reasons and company policy.

Toyota has said it will create an outside review of company operations, do a better job of responding to customer complaints and improve communication with federal officials.

Toshiro Yoshinaga, an analyst at Aizawa Securities in Tokyo, said that Toyota's actions as seen in the documents shows the company believed the problems with its vehicles were unlikely to become a major issue and illustrate the company's weakness in crisis management.

"Toyota's perception was extremely optimistic," he said. "It's sense of crisis has been lacking."

Yoshinaga also said the documents put the company in a futher bind ahead of Toyoda's testimony.

"But a pinch can also be a chance," he said. "If Toyoda can offer a proper explanation then the issue can settle down. If not, then it won't."

Temple Universty's Kingston said Toyoda must make clear that the company has learned a lesson from growing too quickly and losing track of quality control, though even that will be unlikely to stave off harsh criticism from lawmakers.

"He's going to be taking an awful pummeling, I think," Kingston said.

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Ken Thomas reported from Washington. Associated Press Writer Malcolm Foster in Tokyo contributed to this report.