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How Toyota's Pain is Detroit's Gain


GM, Ford, and Chrysler are ready to seize Toyota owners.

All major carmakers not named Toyota (TM) have managed to goose their sales figures, following the Japanese auto giant's massive recall of 2.3 million cars and trucks fitted with faulty accelerator pedals manufactured by the CTS Corp. (CTS).

Toyota has been taken to task for waiting too long to announce the recall, blaming the sudden acceleration problems on "defective floor mats" and burying its head in the sand by holding onto the desperate hope that a potentially deadly engineering defect would somehow go away.

But it isn't. "Liability for Toyota could run in the billions of dollars, because of the number of vehicles involved and the fact there are serious injury and death claims," Gary Robb, a partner at Robb & Robb LLC in Kansas City, Missouri, told Reuters.

Robb said Toyota should take a cue from Johnson & Johnson's (JNJ) 1982 recall of Tylenol spiked with cyanide, which resulted in seven deaths. J&J's response, including the introduction of tamper-resistant packaging, is considered to be a textbook example of how to handle recalls effectively.

"They saved not only their public image, but that brand," Robb said. "There are real doubts as to whether Toyota's brand, from a PR standpoint, can survive this. This has dragged on too long and there have been too many excuses."

But it's been a boon for Ford (F), which saw car sales rise 43% and truck and SUV sales rise 15% in January. And Ford sales to rental car agencies more than doubled, as Avis (CAR), Enterprise, and Hertz (HTZ) all pulled Toyota vehicles from their fleets. By Ford's estimates, its domestic market share rose to 16% last month, up 2% year-over-year.

Chrysler's January sales were up 5.7% over January 2009, giving Chrysler a 9.3% share of the market, up from 8.4% in December, according to car-buying site

GM predicted January sales would be down slightly, but it reported sales growth of 13.6%.

Were GM's successful numbers the result of a sinister government plot?

Yes, according to Republican Senator Jeff Sessions of Alabama.

Sessions told CNBC Power Lunch co-host Michelle Caruso-Cabrera last week that he believed the Obama administration was playing politics and attempting to increase GM sales on the back of Toyota's troubles.

"We've got a fabulous Toyota engine plant in Alabama. I worry about…having to compete against the federal government. With an unlimited -- they just gave $3 billion more to GMAC. The president's got to be careful here. He cannot be playing politics…with the economy of this country."

Really? With all that's going on in the world, could the administration actually be "playing politics" here and making a bald-faced grab for GM market share?

GM has unveiled a purchase-and-lease incentive program, which runs through the end of February, designed to snatch Toyota customers away. The program allows Toyota owners who terminate their lease to get $1,000 off a new GM vehicle, or 0% interest rates for 60 months.

"We decided to make this offer after receiving many e-mails and calls from our dealers who have been approached by these customers asking for help," a GM spokesman said. "Such 'conquest' incentives are used commonly in the industry."

But Sessions conveniently overlooked the fact that Ford -- which is not owned by the American taxpayer -- is also offering $1,000 in cash to Toyota owners who trade in their vehicles for a Ford, Lincoln, or Mercury.

And Chrysler is offering $1,000 incentive to owners of the Toyota Sienna, Tacoma, and Tundra who wish to switch to a Chrysler, Dodge, or Jeep. Additionally, Chrysler will offer $1,000 discounts to drivers with expiring Toyota leases who switch to any Chrysler, Dodge, or Jeep vehicle.

As far as Toyota's future, storm clouds continue to form.

Speaking at the Discovery Forum 2010, Apple (AAPL) co-founder Steve Wozniak described an unintentional acceleration problem with his 2010 Toyota Prius, which is not part of the recall.

"This is software. It's not a bad accelerator pedal," he said. "It's very scary."

According to the Los Angeles Times, "two former NHTSA administrators, Ricardo Martinez and Joan Claybrook, have said they believe that some kind of electronic glitch may be causing the Toyota problems. Similar conclusions are being drawn by independent automotive safety experts, forensic mechanics, and automotive electronics researchers, as well as many consumers."

So, while Toyota may think it has the situation under control, it looks as if its troubles are just beginning to pick up speed.
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