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Secretive Culture Led Toyota Astray

By Linebaugh, Wall Street Journal - February 10, 2010

Toyota Motor's President Akio Toyoda, second from left, and Vice President Shinichi Sasaki, left, bow following a news conference Tuesday.

On Jan. 19, in a closed-door meeting in Washington, D.C., two top executives from Toyota Motor Corp. gave American regulators surprising news.

Evidence had been mounting for years that Toyota cars could speed up suddenly, a factor suspected in crashes causing more than a dozen deaths. Toyota had blamed the problem on floor mats pinning the gas pedal. Now, the two Toyota men revealed they knew of a problem in its gas pedals.

The two top officials from the National Highway Traffic Safety Administration "were steamed," according to a person who discussed the meeting with both sides. As the meeting closed, NHTSA chief David Strickland hinted at using the agency's full authority, which can include subpoenas, fines, and even forcing auto makers to stop selling cars.

Toyota had known about the gas-pedal problem for more than a year. Its silence with U.S. regulators, and other newly uncovered details from the crisis enveloping Toyota, reveal a growing rift between the Japanese auto maker and NHTSA, one of its top regulators. Regulators came to doubt Toyota's commitment to addressing safety defects, according to interviews with federal officials and industry executives, and accounts of Toyota and NHTSA interactions the past year.

The heart of Toyota's problem: Its secretive corporate culture in Japan clashed with U.S. requirements that auto makers disclose safety threats, people familiar with the matter say. The relationship soured even though Toyota had hired two former NHTSA officials to manage its ties with the agency.

Toyota's troubles spread Tuesday when it recalled all Priuses to address a braking problem, even as executives suggested the step was unnecessary.

Toyota acknowledges the rift with regulators. "Believe me, we have changed our mind-set," said Shinichi Sasaki, Toyota's quality chief, referring to a heated December confrontation in Tokyo with NHTSA officials over floor mats. "We don't believe this is going to be a problem in the future. We are completely on the same page with NHTSA."

Toyota's woes have roots in 2002's redesigned Camry sedan, which featured a new type of gas pedal. Instead of physically connecting to the engine with a mechanical cable, the new pedal used electronic sensors to send signals to a computer controlling the engine. The same technology migrated to cars including Toyota's luxury Lexus ES sedan. The main advantage is fuel efficiency.

Vote: Do you believe Toyota's gas pedal fix will solve the problem?

But by early 2004, NHTSA was getting complaints that the Camry and ES sometimes sped up without the driver hitting the gas. It launched its first acceleration probe, focusing on 37 complaints, 30 of which involved accidents, according to a NHTSA document filled out by Scott Yon, an agency investigator, dated March 3, 2004.

Mr. Yon and another NHTSA official, Jeffrey Quandt, discussed the case several times over the next 20 days with Toyota, according to a deposition by a Toyota official filed in a Michigan lawsuit related to one of the fatal crashes. In that accident, a 2005 Camry allegedly raced out of control for a quarter-mile, and sped up to 80 miles an hour from 25, before crashing and killing its driver.

By month's end, Mr. Yon updated his NHTSA case file with a memo. It said NHTSA had decided to limit the probe to incidents involving brief bursts of acceleration, and would exclude so-called "long duration" incidents in which cars allegedly continued racing down the road after a driver hit the brakes.

The reason: Investigators decided it would be more effective to isolate any possible defect by zeroing in on shorter incidents, a Transportation Department official said. The shorter incidents looked more like "pure cases of engine surging due to a possible defect," the official said. Longer incidents were excluded because they showed more signs of driver error such as mistaking the accelerator for the brake.

Messrs. Quandt and Yon didn't respond to requests for comment.

Of the 37 incidents, 27 were categorized as long-duration and not investigated. On July 22, 2004, the probe was closed because NHTSA had found no pattern of safety problems.

Complaints kept rolling in. In 2005 and 2006, NHTSA got hundreds of reports of unintended acceleration involving Toyotas, according to Safety Research & Strategies, a consumer-safety research firm. On two occasions, Toyota filed responses arguing that no defect or trends could be found in the complaints.

In a Nov. 15, 2005, letter to Mr. Quandt, Christopher Tinto, a Toyota liaison with the safety agency, asked NHTSA to drop a preliminary probe into sudden acceleration by the Camry and Lexus ES, saying "there is no factor or trend indicating that a vehicle or component defect exists." He used similar language in a June, 11, 2007, letter responding to a subsequent probe.

In March 2007, the agency opened a new probe, focusing on whether the gas pedal in the Lexus ES350 sedan could get caught beneath heavy rubber floor mats sold as accessories. It looked at five crashes, including four multivehicle accidents.

NHTSA sent surveys to 1,986 owners of ES350s. Six-hundred responded, and 59 said they had experienced unintended acceleration. Thirty-five attributed the surge to a floor mat pressing down on the gas pedal. The rest either didn't specify or cited other possible explanations.

NHTSA officials worked on the probe with their main contact at Toyota, Christopher Santucci. The NHTSA team knew Mr. Santucci: He had worked there from 2001 to 2003. Mr. Santucci's supervisor at Toyota, Mr. Tinto, had worked at NHTSA in the past, too. Messrs. Santucci and Tinto didn't respond to requests for comment.

At one point, Mr. Santucci brought a Lexus ES350 to a parking lot outside Washington, D.C., for testing. Messrs. Yon and Quandt raced across the lot, hitting 60 mph before jamming on the brakes to measure the force needed to stop.

It's common for NHTSA to work cooperatively with all auto makers in this way. NHTSA can do its own testing, but it generally relies on manufacturers to supply technical data. Its Office of Defects Investigation has only 57 employees to deal with some 35,000 complaints a year.

Car makers "are almost self-regulated," said an auto-industry chief executive who has worked with NHTSA. Without makers' help, there's "no way for NHTSA to look into all these issues." To spur cooperation, the agency has the power to force recalls and fine companies for providing misleading information or not providing safety information in a timely fashion.

Toyota for years has been one of the most difficult auto makers for regulators to deal with because it is resistant to being told what to do, said Joan Claybrook, a former NHTSA administrator who later became president of consumer-advocacy group Public Citizen until stepping down last year. But she also blamed the agency's collaborative approach for undermining its role. "They have tremendous power and authority but they don't tend to use it."

A Transportation Department spokeswoman disputes that, saying: "NHTSA has the most active defect investigation program in the world. In the last three years alone [it] resulted in 524 recalls involving 23.5 million vehicles."

By August 2007, NHTSA wanted Toyota to issue a Lexus and Camry recall to remove the floor mats Toyota blamed for the acceleration problems. "Toyota assured us that this would solve the problem," said Nicole Nason, then NHTSA's administrator.

In their probe, NHTSA investigators asked Toyota, "Are you sure it's not the gas pedal?" Ms. Nason said. "They assured us it's just the floor mat."

Toyota to Recall Hybrids World-Wide

Toyota says that, at that time, it had no indication of problems with the pedal design.

Toyota ended up recalling Camrys and ES350s from 2007 and 2008 model years. Owners were told to bring the cars to dealerships to get new mats. The action involved 55,000 cars.

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