Toyota is learning a very painful lesson. There is no one that American media, political leaders, and plaintiffs’ lawyers like to kick around more than a successful corporation. And if it is a large foreign corporation successfully doing business in the U.S., kicking with steel-toed boots is simply too alluring to resist.
This is not to suggest that Toyota’s troubles will cripple it. It is a successful company that will get through its present problems.
However, the recent events will tarnish the company’s reputation. Customers have threatened to park their Toyotas demanding that dealers do something to fix the problems. Any front-end collision involving a Toyota in the next decade is liable to be blamed on unintended acceleration regardless of the real cause. Even late night TV comics are unjustly making fun of Toyota’s engineering prowess.
Toyota’s recent high profile recall problems are examples of a lesson that too many dealers learned recently – franchisor problems can become major trouble for dealers. When your franchisor catches cold, your dealership may be faced with a potentially fatal pulmonary emergency.
So what do you do? Here are some suggestions.
Make Sure Your Insurance is Solid.
Highly publicized problems lead to lawsuits. At present, the suits surrounding Toyota’s alleged unintended acceleration problems are directed at Toyota. However, as the number of accidents involving inattentive Toyota drivers that can be blamed on unintended acceleration mount up, Toyota dealers could very well be subjected to lawsuits for simply selling Toyota vehicles. This can be happen to any dealership whose franchisor has recalls or safety campaigns, and they all do.
If you are a franchised dealer, you are entitled to indemnification from your franchisor for product lawsuits. However, some things can lead to a manufacturer’s refusal to fully indemnify – allegations that you did faulty work on a vehicle or that you altered the vehicle are examples.
Make sure that your insurance coverage is solid. Does your policy create an unbroken chain of liability coverage for vehicle sales over the last several years? Is your liability coverage for future vehicle sales solid? Are there any gaps that can be closed with endorsements to your current policy? Are the limits of coverage sufficient to protect your assets? Talk to your insurance consultant if you have any concerns.
Watch for Subpoenas
A dealer should always track subpoenas served on the dealership. They may be a sign of coming problems. A subpoena for a deal file in an accident case could be a precursor of a coming product lawsuit. A subpoena from a state or local government agency could signal a looming investigation. If you receive a subpoena that concerns you, discuss it with your attorney to determine whether action beyond simple compliance is warranted.
Train Personnel
You don’t want publicity that a recall is handled poorly. Don’t just assume that your personnel know how to handle recalls. If there is a service campaign or a recall, make sure that your service department and parts department are ready to handle the additional load. Have the necessary parts, and make sure that your technicians are trained to do the work. Ask whether the parts department stocks parts or assemblies subject to recall. Ask whether the new car department has grounded affected inventory until recall repairs are completed. Train the used car department to find whether inventory vehicles have open recalls and have the repairs done. While sales of used cars are not covered by the federal recall law, knowingly selling a used car with an open recall, especially if it’s the dealership’s franchised brand, could lead to liability in the event of an accident.
Customer Handling
Your personnel make a living serving your customers. But recalls may lead to unique problems, especially where safety is involved as it often is. Customers can display a range of emotions from fear to anger to simple concern. Train personnel to respond appropriately to customers’ emotional states.
Sales Impact
Negative publicity can hurt sales. Prepare a marketing plan to attract buyers regardless of the negative publicity. Train sales employees to handle recall-related objections. Be prepared to help employees who suffer financially through the difficult time.
Public Comment
When your franchisor has a high profile problem, media often contact local dealer personnel for comment. Comments that embarrass the franchisor are news. Attacking your franchisor, questioning its motives or performance, issuing concerns about its management, and making similar negative comments hurt your franchisor’s image and do your dealership no good. Make sure that you have a policy for dealing with inquiries from the media. All inquiries should go to the dealer or to a selected senior official in the dealership. When speaking to media indicate confidence in the ability of your franchisor to respond to problems and in its products. Know and understand your franchisor’s position about the issues it faces.
Don’t let reckless charges go unanswered
Recognize that there is a recall industry made up of lawyers who sue manufacturers and the engineers and other professional witnesses they hire. The recall industry often generates public statements that are unsupported and even reckless in an attempt to attract clients who can become plaintiffs. Those should not go unchallenged. When you see those in local media, get involved and respond. The reputation of the vehicles you sell is at stake.
April 2010