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Toyota recall update: dealers face full lots, anxious customers

As the Toyota recall grows to 9 million cars worldwide, dealers in America handhold worried customers and brace for losses of up to $2 million a month.

By Husna HaqCorrespondent / January 29, 2010

'No Sell' signs are posted in the windows of new Toyota vehicles at Wondries dealer in Alhambra, Thursday.

Nick Ut/AP

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Boston

With Toyota suspending sales of eight models this week due to flawed gas pedals, dealerships across the country are feeling the pain with lost revenue, panicked customers, and discouraged sales staff.

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US Toyota dealers may lose as much as $2.47 billion in combined monthly revenue from the halt in sales of both new and used versions of those models, according to a Bloomberg news report. John McEleney, chairman of the National Automobile Dealers Association and a Toyota dealer, told Bloomberg that each of the 1,234 Toyota dealers in the US could lose out on $1.75 million to $2 million a month in revenue.

“It ripples through,” says Robert Boch, co-owner of Expressway Toyota in Dorchester, Mass. “When they say ‘by building a car you employ 50 people,’ well, you certainly feel it now. From the plant to the finance company to sales people, we’ve all been affected."

Persisting problems with accelerator pedals getting stuck led Toyota to suspend sales of certain vehicle models earlier this week, including the popular Camry and Corolla sedans. Toyota had already recalled 2.3 million sold vehicles since last week.

As the recall grows worldwide to 9 million vehicles, Toyota announced it had figured out how to fix the sticky pedals and is already sending new gas pedal systems to car factories, according to Toyota’s website. It will reveal how it plans to fix faulty pedals next week, and expects repairs to be completed within a month.

Some dealerships have been hit especially hard.

Of the 209 new vehicles on Mr. Boch’s lot in Dorchester, 128 had faulty pedals and were not sellable.

“The recall affected 60 percent of our new car business,” Boch says. He estimates January sales will be off 25 percent due to the sales suspension. “Three of our best-sellers have been Camry, Corolla, and RAV4, and all may be affected [by the recall].”

Only 20 percent of the new car inventory at Greg Tufankjian’s Toyota dealership in Braintree, Mass., has been affected by the recall. But that’s enough to throw off his sales.

“Camry and Corolla are our volume-selling vehicles,” Mr. Tufankjian says.

The recall also forced some dealers and their sales staff to play counselor to hundreds of worried customers.

“A lot of the work this week has been educating customers,” says Boch. “Empathetic conversations. A lot of hand-holding, explaining. There hasn’t been a dull moment.”

Toyota hasn’t yet released a fix for the problem, so Boch eases customer concerns with offers of free visual inspections and test-drives for those with affected vehicles. His technicians have been trained to spot sticky pedals.

“We did 25 test-drives yesterday,” he says. “At least it gives [customers] peace of mind.”

While there may be a lull in new car sales, dealers such as Boch are gearing up for a surge in repair work once a fix is released. Boch expects his dealership to be operating on a 24/7 schedule to repair the 200 new cars on the lot, in addition to the thousands of affected cars in his area.

Meanwhile, Toyota’s crisis has created an opening for other carmakers. GM, Ford, and Hyundai have all scrambled to claim some of Toyota’s slipping market share.

“[Customers are] saying ‘Well, gee, the one pillar Toyota built its brand on was reliability, quality,’ ” says Aaron Bragman, a an automotive research analyst at IHS Global Insight. “Now that quality is questionable, and suddenly they’re looking at the Hyundai dealer across the street.”

“Competitors have caught up to Toyota very visibly,” he adds. “That’s dangerous for Toyota in the long-term.”

Some General Motors, Ford, and Hyundai dealerships have started offering discounts and no-interest financing for Toyota owners.

“We’ll see some Toyota clients getting worried. We hope we’ll be able to reap some benefits from it, ” says Sean Picotte, sales manager at Colonial Buick Pontiac GMC of Watertown, Mass. “We always welcome business from our competitors.”

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