Toyota recall having big impact on company's reputation

Only a tiny fraction of Toyota owners have experienced problems with a sticky accelerator, but recent gas-pedal and brake recalls are having a considerable impact on the company's sales and reputation.

That's the conclusion of several recent surveys, as well as some business experts who track the performance of corporate brands.

It's true that in March, Toyota's sales rebounded from a recent plunge to capture 17.6 percent of the US market. For the first three months of 2010, its market share of about 15 percent is down only one percentage point from where it stood in the first quarter a year before.

But to achieve that result, Toyota resorted to nationwide sales incentives that it had long been able to avoid. Such incentives may, for some time to come, be a price Toyota has to pay for showroom traffic.

"They were able to command a premium because they were known to be special" in quality and reliability, says Partha Krishnamurthy, a marketing professor at the University of Houston, who has been following the Japanese carmaker's recent travails. "Now they're not special."

A series of surveys suggests Toyota has fallen sharply in customer esteem.

• In a Kelley Blue Book survey released last month, Toyota fell from No. 1 in customer loyalty to No. 3. Hyundai moved into the top spot, while Honda held steady in second place.

• Toyota recently dropped from No. 1 to No. 6 in a "perceived quality" study by Automotive Lease Guide.

• In a March Bloomberg poll, 4 in 10 Americans said they "would definitely not buy a Toyota." Although nearly half of respondents said they have a favorable impression of Toyota, 36 percent don't. That was the highest negative rating among all automakers in the survey.

Such opinions will fluctuate over time, of course.

Plenty of Toyota owners remain happy with their cars. But Mr. Krishnamurthy says it will take time – probably several years – for the company to rebuild trust with consumers.

"Their initial response was slow and sort of lukewarm," he says. It did damage that's hard to repair quickly, even if the fixes on recalled cars proceed smoothly.

Although only a small number of drivers have experienced problems, the recalls relate to high-profile safety issues with acceleration and braking.

"The brand cachet that used to give them the premiums has gone," Krishnamurthy says.