The U.S. v. Toyota

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by Tony Lima
February 5, 2010

Copyright 2010 Tony Lima.  All rights reserved.

Thursday I heard a Toyota dealer being interviewed on NPR.  He made an interesting point.  Various U.S. government agencies are going after Toyota in a big way.  “But since the U.S. government effectively owns G.M. and Chrysler, isn’t this unfair competition?” he asked.

Let me put this another way.  If some of the accusations that have been hurled by government officials had, instead, come from Ford executives, there would be talk of lawsuits.  Exhibit 1 is the advice U.S. Secretary of Transportation Ray LaHood gave to Toyota owners: “My advice,” Mr. LaHood said in his characteristically folksy tone, “is if anybody owns one of these vehicles, stop driving it. And take it to a Toyota dealer.”[1]

Now that’s marketing!!  Put the force of the federal government behind your products!

It’s a fact that, over the last few decades there have been a constant stream of reports about cars that accelerate suddenly. Here are several examples.

From 1986: “The expanded inquiry involves 1.4 million mid-size and full-size cars made by the Ford Motor Company for the 1984 and 1985 model years, 100,000 Audi model 5000 cars made for the 1984 and 1985 model years, 350,000 model 280Z and 380Z sports cars made by Nissan for the 1980 through 1985 model years, 400,000 Alliance and Encore cars made by American Motors/Renault for the 1983 through 1985 model years, and 140,000 Cressida luxury cars made by Toyota for the model years 1981 through 1984.”[2]

From 1987: ”The National Highway Traffic Safety Administration (NHTSA), citing numerous complaints, has reopened its investigation of problems with sudden acceleration in 35,000 late-model Mercedes cars.”[3]

But, in many cases, the outcome of these investigations is similar to the 1989 case involving Audi: “The National Highway Traffic Safety Administration said today that it had closed a three-year investigation of sudden acceleration in Audi 5000 models, saying driver error was the main source of the problem.”

”’The major cause appears to have been drivers unknowingly stepping on the accelerator instead of the brake pedal,’ the agency said.”[4] [emphasis added]

Let me put it bluntly.  The alleged problem with sudden acceleration in Toyota vehicles may not even exist.  Toyota’s recall and retrofit solution is to insert a small bar to prevent the accelerator from becoming tangled with the floor mat.  This is like a doctor giving a bottle of little white sugar pills to a patient.  It makes the patient (Toyota driver) feel better, but doesn’t solve a problem that may not exist.  On the plus side, bringing a Toyota in for the recall gets people into the showroom.  There have been reports of some folks buying a new Toyota while waiting for their car to be fixed!

I hasten to add that my comments don’t apply to the problems with the Prius model. Reports indicate that driving a Prius over a very bumpy road can cause alternating acceleration and braking. In that case, the most plausible explanation is a software bug.

Understanding the economics of these accusations takes us into two fields of research.  The first is called rent-seeking, behavior that pursues income or wealth far in excess of productivity.  Some trial lawyers are notorious examples, filing class-action lawsuits at the drop of a hat.  Some of the lawsuits over sudden acceleration have undoubtedly been motivated by rent-seeking.[5]

The second thread of research is the economics of bureaucracy. A government bureaucracy will strive to perpetuate its “mission.” (In the business world once a mission is completed, the group managing the project disbands.) This economic theory hypothesizes that bureaucrats behave in ways that will (1) keep them employed and (2) increase their power.  When the NHTSA accuses “evil” auto companies of producing defective products, the agency is meeting both these goals.  Accusations of sudden acceleration are very attractive because long investigations are required (generating ongoing headlines in the media) and very difficult to prove or disprove (leaving the auto companies with the implied presumption of guilt).

This leaves me wondering why Toyota succumbed to the pressure from the NHTSA so quickly.  Oh, wait, no it doesn’t. It’s just another prescription for sugar pills. Toyota is learning about doing business in the U.S. under the Obama administration.  Bow to your masters in Washington or you’re in for a long, rough ride.  Your trial will be held in three venues:

  • The media and the internet;
  • Manipulated public opinion;
  • Propaganda from the executive branch of the U.S. government.

[1] Leibovich, Mark and Matthew L. Wald, “LaHood Backtracks on ‘Stop Driving It’.” New York Times, February 3, 2010.  Available at http://www.nytimes.com/2010/02/04/business/04lahood.html?scp=3&sq=lahood&st=cse. Accessed February 5, 2010.

[2] Stuart, Reginald, “Inquiry on Auto Acceleration Expanded By U.S.”  New York Times, February 23, 1986.  Available at
http://www.nytimes.com/1986/02/23/us/inquiry-on-auto-acceleration-expanded-by-us.html.  Accessed February 5, 2010.

[3] “U.S. Agency Reopens Inquiry Into Mercedes Acceleration.”  New York Times, November 5, 1987 (AP).  Available at
http://www.nytimes.com/1987/11/05/us/us-agency-reopens-inquiry-into-mercedes-acceleration.html?scp=4&sq=sudden+acceleration&st=nyt .  Accessed February 5, 2010.

[4] “U.S. Closes Study on Audi.” New York Times, July 14, 1989 (Reuters).  Available at
http://www.nytimes.com/1989/07/14/business/us-closes-study-on-audi.html?scp=22&sq=sudden+acceleration&st=nyt.   Accessed February 5, 2010.

[5] My lovely wife read this and noted, “Lawyers are scum.”  I don’t agree with that.  But I do think some lawyers are closely related to the green topping some ponds acquire in late summer.

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.

2 Replies to “The U.S. v. Toyota”

  1. Tony Lima

    From the New York Times, March11, 2010, p. A25 (op-ed piece). by Richard A. Schmidt. Currently at http://www.nytimes.com/2010/03/11/opinion/11schmidt.html?ref=todayspaper but the url may change.

    “THE Obama administration has said that it may require automakers to install “smart pedals” on all new cars. This kind of system — already used in BMWs, Chryslers, Volkswagens and some of the newest Toyotas — deactivates the car’s accelerator when the brake pedal is pressed so that the car can stop safely even if its throttle sticks open.

    But based on my experience in the 1980s helping investigate unintended acceleration in the Audi 5000, I suspect that smart pedals cannot solve the problem. The trouble, unbelievable as it may seem, is that sudden acceleration is very often caused by drivers who press the gas pedal when they intend to press the brake.

    I looked into more than 150 cases of unintended acceleration in the 1980s, many of which became the subject of lawsuits against automakers. In those days, Audi, like Toyota today, received by far the most complaints. (I testified in court for Audi on many occasions. I have not worked for Toyota on unintended acceleration, though I did consult for the company seven years ago on another matter.)

    In these cases, the problem typically happened when the driver first got into the car and started it. After turning on the ignition, the driver would intend to press lightly on the brake pedal while shifting from park to drive (or reverse), and suddenly the car would leap forward (or backward). Drivers said that continued pressing on the brake would not stop the car; it would keep going until it crashed. Drivers believed that something had gone wrong in the acceleration system, and that the brakes had failed.

    But when engineers examined these vehicles post-crash, they found nothing that could account for what the drivers had reported. The trouble occurred in cars small and large, cheap and expensive, with and without cruise control or electronic engine controls, and with carburetors, fuel injection and even diesel engines. The only thing they had in common was an automatic transmission. An investigation by the National Highway Transportation Safety Administration found no electro-mechanical defects to explain the problem. Nor did similar government studies in Canada and Japan or any number of private studies.
    …”

  2. Pingback: Toyota’s acceleration problems: I told you so «gonzoecon.com