Latest News

As Toyota gets to work, insurer adds to mystery

As Toyota's Georgetown plant resumed full production Monday after a weeklong shutdown to fix a problem with accelerator pedals, the nation's largest auto insurer revealed it had alerted federal safety regulators on numerous occasions starting in 2007 about reports of unexpected acceleration in the vehicles.

Japanese news media also reported Monday that Toyota is close to recalling as many as 300,000 of its popular Prius hybrids over brake problems — a decision that would further embarrass a trusted brand suddenly beset by safety problems.

The warnings from insurer State Farm, which maintains a vast store of crash data based on its customer base of more than 40 million, followed a stream of consumer complaints about the alleged defect. Regulators received the warnings more than a year before they pressed the automaker to issue recalls affecting millions of cars and trucks.

Congressional investigators are now focusing on whether the government reacted properly to years of complaints and other evidence regarding the acceleration problems.

State Farm's warnings to the National Highway Traffic Safety Administration are likely to add to criticism that the agency missed or overlooked signs of trouble.

"When we see something that might be helpful, we pass it along," said Dick Luedke, a State Farm spokesman.

Luedke declined to go into detail about the alerts, except to characterize them as "numerous" and not "everyday" occurrences. He directed further questions to NHTSA.

NHTSA spokeswoman Karen Aldana said the agency received a claim letter from State Farm in September 2007 regarding a Camry crash.

"Our investigative staff reviewed the report and added the information to our complaint database," she said in a statement.

Aldana offered no comment on the other alerts from State Farm on Toyotas.

The State Farm warnings in the Toyota case echo ones the insurer made more than a decade ago about accidents involving Fire stone tires and the Ford Explorer. When congressional investigators at the time discovered that the agency hadn't heeded the State Farm warnings, the furor in part led to legislation that created an "early warning" system for auto safety.

"If the question is, has NHTSA learned its lesson since then? I don't think it has," said Joan Claybrook, NHTSA administrator from 1977 to 1981, who testified at the Ford-Firestone hearings.

In Japan, Kyodo news agency and the country's top Nikkei business newspaper reported Monday that Toyota was likely to notify the U.S. and Japanese governments Tuesday of its plan to recall the Prius hybrid.

The reports also said Toyota was likely to announce recalls of its much smaller selling Lexus HS250h and SAI hybrids, which use a braking system similar to the Prius. Early Tuesday, Japan's business daily Nihon Keizai reported that Toyota would suspend production of both of the two additional hybrids.

A week has passed since the problems emerged, and analysts say further delays could be devastating to the automaker's already damaged reputation in a global market it fought for decades to dominate.

"Listening to management now, I think they still think there isn't a real problem with the Prius," Christopher Richter, auto analyst at CLSA Asia Pacific Markets, said Monday.

"But at this point you don't resist," he added. "Because right now any Toyota vehicle that is perceived to have a problem — you just say, 'We fix it.' That's how you win back the trust."

Kelley Blue Book, meanwhile, has dropped the value of recalled Toyotas by as much 3 percent. The auto research Web site estimates resale or trade-in values could fall up to 10 percent in the short term.

Kelley, which two months ago named Toyota the best brand for resale value, says recalled models are now worth $200 to $500 less per car. Another cut of the same magnitude is planned as soon as the coming week unless the recall controversy abates and demand for Toyotas stops declining, Kelley spokeswoman Robyn Eckard says.

Similarly, since the first recall for sticky accelerator pedals on Jan. 21, Edmunds' estimate for the trade-in value of a 2009 Toyota Camry has fallen by 4 percent to 6 percent, to $13,967, while the 2009 Toyota Corolla has declined 6 percent, to $11,233.

"My advice to a consumer would be 'If you don't have to trade one in, wait,'" says Michelle Krebs, senior analyst for Edmunds. "Values will stay down for a bit. But Toyota's got really strong brand equity."

People in Georgetown, where the sprawling Toyota Motor Manufacturing Kentucky plant makes its home, agreed, saying they are eager to see the company's recall problems blow over.

"I think they can get it worked out," said Jeni Gruchow, co-owner of Fava's restaurant in the heart of town. "It happens to other companies. It's horrible that it's happening to Toyota."

In interviews, residents expressed confidence that Toyota would thrive again.

"Toyota's past will take care of its future," said George Lusby, the county judge-executive.

Mayor Karen Tingle-Sames also was optimistic. "Really, the community has a lot of confidence in Toyota, that they will be able to work through and fix everything they need to fix and get on top of everything," she said.

Just down the street from Fava's, Jason D. Mays, a regular at the Lock and Key Cafe, drained his mug of coffee and speculated about the muted response here to Toyota's woes.

"In my honest opinion," he said, "I do not think it's as important to people as the Friday night Scott County game or the Saturday Georgetown College basketball game, because they have enough faith in that behemoth of a plant three miles down the road, they are really not worried about it."