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.

[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.