TOYOTA’S RIPPLE EFFECTS

February 22, 2010 at 12:00a.m.

In crisis, company has fallback in China, elsewhere

TOKYO (AP) — Toyota is stricken by massive recalls in the U.S. and stalled sales at home, but it is not without a lifeline — big, fast- growing markets such as China and Southeast Asia where drivers seem unfazed by what is troubling consumers in the West.

The world’s No. 1 automaker could certainly do with a cushion if it’s going to keep its pole position in the auto world. Recalls totaling 8.5 million vehicles globally for faulty brakes, floor mats that can entangle the gas pedal and sticking accelerators have battered its once stellar reputation.

Toyota’s share of the United States market is already nose- diving and a return to profit after big losses from the global recession is imperiled by an estimated $2 billion in recall costs and lost sales.

The backlash in the U.S., its biggest market, has been swift and merciless. Drivers feel betrayed after being lured by Toyota’s promises of unmatchable quality and safety.

But in developing countries, where the scale of recalls was small, it doesn’t face such high expectations. Auto-safety problems tend to draw less attention in nations where consumer-protection agencies are a relatively recent innovation and compete with more pressing concerns such as ensuring basics such as clean water and uncontaminated food.

Chinese consumers are all too familiar with quality problems, thanks to a slew of scandals involving everything from tainted milk and medicine to crumbling buildings and roads. The government’s difficulties in preventing such troubles has left many somewhat philosophical about the challenges involved.

Beijing construction worker Zhao Zushen drives a Volkswagen. But if anything, Toyota’s problems have left him even more confident about the quality of its cars.

“Every car has problems. Japanese carmakers are very meticulous about details and quality, so this ordeal will only make them more careful in the future,” Zhao said.

In India, where Toyota has high hopes for the launch early next year of the Etios compact, the recall crisis has barely registered. That partly reflects Toyota’s still low profile there.

The most ubiquitous cars on the streets of the financial capital Mumbai today are decades-old, shuddering Fiat Premier Padmini black-and-yellow taxi cabs, whose brakes seem almost an afterthought. Still, no one complains. Commuters in suits squeeze in four at a time for shared cab rides to the local commuter train station. Most people seem happy enough not to have to wait in line for the bus.

Attitudes such as that, especially in China — which last year overtook the U.S. as the world’s biggest auto market with vehicle sales surging 45 percent to 13.6 million — could be Toyota’s salvation.

The Japanese automaker was slow to commit heavily to China and other big emerging markets. But just as for General Motors Co. and other rivals, growth in such regions is helping to offset weakness in its traditional strongholds.

Toyota’s sales in the U.S., Europe and Japan accounted for less than two-thirds of the total in 2008, down from more than 80 percent a decade earlier. China is its biggest overseas market, with sales hitting 709,000 last year, but the company is also seeing double-digit growth in countries from Brazil to Thailand.

“While everyone talks about China, if you add them up: Indonesia, Thailand, Brazil, South Africa — there is a lot of growth,” said Christopher Richter, an auto analyst with CLSA Asia Pacific Markets in Tokyo.

In Thailand, Toyota’s biggest Southeast Asian market and a major export base, loyalty to the brand seems as strong as ever. The automaker’s Thai vehicle sales jumped by half in January from a year earlier.

Toyota is reaching out to Indian consumers with a four-month promotional tour of 10 cities launched last month.

Even as Toyota benefits from enormous growth in developing markets, it also faces tough and intensifying competition in China and elsewhere from global and aspiring local rivals.

Still, its strong position across the developing world, compared with its biggest Japanese competitors, means that overall it is benefiting more from the boom in sales to emerging markets, said Koji Endo, managing director at Advanced Research Japan in Tokyo.