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Secretive Culture Led Toyota Astray

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Secretive Culture Led Toyota Astray

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.

Even as computers have revolutionized car safety, efficiency, and performance, they've made those same cars increasingly hard to fix, and robbed arm-chair mechanics of the thrills of tinkering in the garage. WSJ's Andy Jordan reports.

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.

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 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.

After the recall, reports continued trickling in that it may not have resolved the issue. One major case was 2008's spectacular fatal crash in Michigan. On April 19 that year, Guadalupe Alberto, 77 years old, was driving a 2005 Camry on Copeman Boulevard, a residential street in Flint. She was traveling about 25 mph when the car accelerated to 80, according a lawsuit against Toyota in Michigan. The car raced about a quarter mile before going airborne and colliding with a tree, killing Ms. Alberto, according to the suit, in Genesee County circuit court. The suit remains under way.

Floor mats couldn't have been the cause. Ms. Alberto had removed hers days before the accident, said one of the attorneys handling the case against Toyota. The accident was similar in some ways to the "long duration" type excluded from NHTSA's first probe in 2004.

A year later, NHTSA was asked to open a new probe by a Minnesota man who said his Lexus ES350 took off on a highway and raced for two miles before he regained control. Toyota filed a rebuttal, saying it believed a floor mat was the cause.

Separately, since December 2008 Toyota's European unit had been looking into a problem causing cars in Ireland and England to surge or fail to slow. After months of testing, Toyota found the culprit: a plastic part in the pedal mechanism also widely used in the U.S.

Toyota redesigned the pedals for new cars coming off the assembly line. But it didn't issue a recall in Europe or notify U.S. regulators. Nor did Toyota alert its U.S. unit to the situation in Europe, according to a person familiar with the matter.

Last month, Toyota's Mr. Sasaki said the company didn't alert U.S. regulators then because it didn't see in the U.S. specific consumer complaints about sticky pedals, although a few complaints started to come in by early autumn.

The Europe issue hasn't been linked to accidents and isn't related to sudden acceleration because it happens near idle speeds. Toyota says it's looking into other potential causes.

Toyota is still very much run by its Japan headquarters, despite being active in the U.S. since 1957. Top leadership doesn't include U.S. executives. The Toyota officials who run the recall process are in Japan.

For reasons like these, Toyota often reacted relatively slowly to safety issues raised by NHTSA, according to three people familiar with Toyota's inner workings.

"What has really happened is a breakdown in communications within Toyota" between its D.C. office and Japan headquarters, said one of these people. "The Washington office didn't have the information it needed to provide to the government."

In August 2009, another fatal accident in the U.S. put the problem in the spotlight. Mark Saylor, a California Highway Patrol officer, was driving a Lexus ES350 near San Diego when it accelerated to more than 100 mph. As the car careened out of control, one occupant called 911 to report the emergency. The call ended when the car crashed.

Everyone in the car died, including Mr. Saylor, his wife, daughter and brother-in-law. A tape of the 911 call drew attention to the acceleration issue.

The Lexus, a loaner from a dealer that Mr. Saylor was driving while his car was being serviced, did have the all-weather mats. And a previous driver of the loaner had told the dealer the mat had hit the pedal.

At NHTSA, patience was wearing thin. Its deputy, Ronald Medford, summoned Toyota officials to a Sept. 25 meeting in Washington, and told them they needed to act faster to more fully resolve the mat problem. Replacing mats wasn't enough, he said. Toyota also had to alter its gas pedals to make sure they couldn't get caught on mats.

On Oct. 5, Toyota recalled 3.8 million vehicles to fix the floor-mat issue, its largest ever recall.

But tensions kept rising. On Nov. 3, Toyota put out a statement saying NHTSA had concluded that "no defect exists" in the recalled vehicles. A day later, in an unusually public rebuke, NHTSA released its own statement calling Toyota's "inaccurate and misleading."

Around the same time, the two were at odds again over a completely different issue. Toyota recalled Tundra pickup trucks for a corrosion problem that could lead to the spare tire falling off. But the recall hadn't come as quickly as NHTSA wanted, according to people familiar with the matter. Toyota had also been reluctant to include corrosion issues affecting the fuel tank, one person said.

On Jan. 8, Toyota amended its original recall to include the fuel-tank corrosion issue. In a letter to NHTSA. it stressed that it didn't consider the issue "a safety related defect."

Amid the clashes, NHTSA's Mr. Medford and other officials flew to Japan. On Dec. 15 they stood before about 100 Toyota executives and engineers and explained Toyota's obligation to comply with the U.S.'s defect-recall process, a Transportation Department official said.

Later, Mr. Medford met with a smaller group of Toyota executives. According to the official, Mr. Medford told them bluntly: Toyota was taking too long to respond to safety issues. He reminded them that Toyota is obligated under U.S. law to find and report defects promptly.

Mr. Sasaki, Toyota's quality chief, said the meeting included a "debate" in which NHTSA objected to Toyota's view that users needed to install the mats properly. NHTSA's response, he said, was Toyota couldn't expect that from every consumer. "NHTSA people expressed disbelief over Toyota's view, and we received some harsh words from them," he said.

On Jan. 4, NHTSA's new chief, Mr. Strickland, was sworn in. His first crisis walked in the door Jan. 19, when two Toyota executives told him that Toyota's Japan headquarters had known there was a flaw in the pedals, according to a person familiar with the situation.

A few days later, Toyota had the details of a 2.3-millon-vehicle recall worked out. But there was a hitch: Toyota didn't have enough parts in hand to make repairs immediately.

At times, NHTSA gives car makers extra time to get replacement parts ready before recall notices go out. This time, it was too late. And regulators told Toyota it would have to stop selling cars. On Jan. 26, that's what Toyota did.



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