Toyota Gets Wrecked by Labor's Runaway President

If you want a glimpse of where Barack Obama's vision of American government is taking us, have a look at what is happening to Toyota Motor Corp., the biggest victim so far of the president's war on business.

The U.S. government owns 61 percent of General Motors Co. and 10 percent of Chrysler Group LLC. The Obama administration seems to have decided that the best way to increase the value of those shares is to orchestrate an attack on the competition.

At issue is the outcry over the accusation that Toyota vehicles may accelerate unexpectedly and uncontrollably. Over the past six months, the automaker has recalled 8.5 million cars worldwide--6 million in the U.S.--for suspected floor-mat and accelerator issues that might be causing the problem, as well as for separate braking problems.

The government should never have been allowed to own General Motors, and now we can see why. It is impossible to say how it will turn out for Toyota.

Testifying before Congress on Feb. 24, Toyota President Akio Toyoda offered his personal apology while vigorously defending the actions of his company regarding the recall. Since then, one model that was not recalled for accelerator problems, the popular Prius, has faced similar allegations, due largely to highly publicized incidents in New York and California.

False or overblown accusations of product failure have occurred before, of course. Two decades ago, the image of Volkswagen AG's Audi brand was severely damaged by allegations of acceleration malfunctions in the Audi 5000. Sales plummeted. Lawsuits flew. But when the investigation by the National Highway Traffic Safety Administration was complete, no defect could be identified that would cause the problem.

Driver Error

According to Richard A. Schmidt, a professor emeritus of psychology at the University of California, Los Angeles, who was a consultant in the case, the most likely explanation for the Audi sudden accelerations was driver error. This theory was supported by statistical evidence that the problem was more common with older drivers and those with limited experience with the vehicle, such as car-wash workers.

While Toyota has admitted to some defects, there are a number of factors that would advise caution in this case as more and more allegations pile on.

First, the similarities to the Audi case look strong.

Second, after the problem began to be publicized, the number of complaints skyrocketed. If cars really were careening all over the place, then it seems odd that those affected would wait until the issue became hot to report it.

Third, the litigation-industrial complex has gotten involved, and the windfall-seeking trial bar is on the warpath with dollar signs in its eyes. Do a Google search for "Toyota recall" and count the advertisements for free lawsuit evaluations.

Rushing With Lawyers

Yet rather than hold off judgment until the data are in, government officials have joined the trial lawyers in what seems more and more like a rush to judgment.

According to the Los Angeles Times, the Federal Bureau of Investigation, the U.S. attorney for the Southern District of New York, the Securities and Exchange Commission and even the Los Angeles city attorney are conducting probes into the Japanese automaker. That's on top of investigations from federal automobile regulators, Congress and the news media over Toyota's sudden-acceleration problems.

The truth is, recalls happen all the time, often involving significant problems. In 1996, Ford Motor Co. recalled 7.9 million vehicles for possibly faulty ignition modules. Five years later, it recalled 10 years' worth of Ford Explorers for tire problems alleged to have caused 200 deaths. One model, the 1980 Chevrolet Citation, has been recalled an incredible nine times, according to NHTSA.

What's different in the Toyota case is the political timing.

Sparing Unions

With his Democratic friends in Congress, Obama was elected with the financial support of organized labor, to the tune of more than $100 million dollars. One of his first acts as president was to use taxpayer money to spare his union supporters from making large sacrifices as U.S. automakers headed toward bankruptcy, going so far as to virtually nationalize the biggest unionized automaker.

Now he is using the power of government to harass the main competition of his union backers--a company, Toyota, that happens to have a mostly nonunionized workforce.

This is the kind of thuggish government action one might expect from Vladimir Putin. It isn't acceptable behavior in our democracy.

There remains the genuine possibility that Toyota cars are faulty. But it is beginning to look as if mechanics will never find a cause.

Evidence First

Making a credible case against Toyota means proving that sudden acceleration was much more common in its vehicles than in others before the malfunction received a great deal of publicity. Evidence would also need to show that the problems aren't correlated with the age or experience level of the driver, and that the acceleration issue leads to higher percentages of death and injury for Toyota drivers.

It is appalling that a major company is being wounded before all the data are in. The government should never have been allowed to own General Motors, and now we can see why. It is impossible to say how it will turn out for Toyota. Don't be surprised if Honda Motor Co. is next.

Kevin A. Hassett is a senior fellow and the Director of the Economic Policy Studies at AEI.

Photo Credit: fatboyke/Flickr/Creative Commons

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About the Author

 

Kevin A.
Hassett
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.



    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

  • Phone: 202-862-7157
    Email: khassett@aei.org
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