Toyota's problems with 8 popular models are likely to put a financial squeeze on the car-maker's dealers in Minnesota and the rest of nation.
Toyota announced late Tuesday it would halt sales of some of its top-selling models to fix gas pedals that could stick and cause unintended acceleration. Last week, Toyota issued a recall for the same eight models affecting 2.3 million vehicles.
The recall and halt in production affect some of Toyota's top-selling cars, such as the Corolla, and the Camry, the most popular car in the U.S. Most affected are 2008 or 2009 models, but older versions of some models are also involved. Cars made in Japan, including the Prius, do not have the problem.
Toyota is telling customers it's working quickly to fix the problem and will notify owners once a recall remedy has been put in place. The automaker says that drivers of the recalled cars do not need to do anything yet, unless they experience problems.
Meanwhile, the National Highway Traffic Safety Administration says that dealers have a legal obligation not to sell any vehicle identified as defective until the problem is addressed.
"They're not happy," said Scott Lambert of the Minnesota Automobile Dealers Association. He said Minnesota is home to 16 dealerships that sell Toyota products. According to Experian Automotive, a research firm, Toyota's share of the Minnesota new auto sales market was about 14 percent in 2009, based on car registrations.
Lambert said Toyota dealerships are probably pretty frustrated right now.
"They suddenly have a lot of their inventory that is frozen in place right now in a cold Minnesota day," Lambert said.
Doug Sprinthall, director of new car operations at Walser Automotive Group, a major Twin Cities Toyota dealer, said Toyota has kept its focus on safety in the whole process and says they followed the proper channels in reporting the gas pedal problem.
"It stinks, we're going to lose sales, and it'll be expensive, but really it's an example of the system working properly," Sprinthall said.
He said Walser is considering ramping up staffing in its repair shops for car owners affected by the recall. That rush of activity will stand in contrast to the lack of action on the sales lots.
"We're not going to be all that busy in the next week or two, but if you take the big picture view, this is all going to get worked out," he said.
Michelle Krebs of the car shopping Web site Edmunds.com expects dealers to have a lot of trouble in the short term.
"Dealers are not allowed to sell 8 of the best-selling models, including the number one car in the country, the Toyota Camry, so they will be squeezed right off the bat," Krebs said.
But Krebs said the long-term effects are harder to gauge. She said a lot depends on brand loyalty, and how well Toyota handles the problems.
"Toyota, in its early days of Lexus, had a recall right out of the shoot, and they handled it so well, and treated customers so well, that it actually worked to their advantage," she said. "They pampered the customers."
Toyota spokesman Brian Lyons said the automaker's priorities for dealing with the issues follow this order.
"We will focus on fixing vehicles owned by our customers, and as time allows and parts allow, we will fix vehicles currently on the dealers lots, so they can be sold, and lastly we can direct any remedy towards production, and that's assuming the production remedy is different from the recall remedy," Lyons said.
The company has also created a FAQ page to help customers understand the problem and the recall.
Duluth resident Pat Archer will be eager to see how things pan out. She bought a Toyota Corolla in August. She's 75, and doesn't drive much, but she can't do without the car, and that particular model will be subject to a recall.
"It's a very nice car, and I really like it, but if there's something wrong, I want to get it fixed," Archer said.
She's somewhat concerned about the safety of driving, but she trusts that Toyota will remedy the problem well, and the current problems are not souring her on the Toyota brand, which she's bought before.
"My other car I had perfectly wonderful luck with, and I never had any major, major problems with it," she said.
But some Twin Cities dealers are counting on customers shopping away from the Toyota brand. Colton Ray is the new car manager at Wayzata Nissan. He says foot traffic has doubled in the past couple of days, and a few customers have cited concerns about Toyota's problems as they turn to Nissan.
"We don't wish anything bad on Toyota, but we've definitely captured some business here and converted some loyal Toyota clientele to the Nissan product," Ray said.
Ray said in the past couple of days, that's meant two extra sales for him.