It turns out that Banks aren’t the only entities who have managed to corrupt the political process and end up hurting themselves and the public as a result. The world’s largest automaker has managed to make a mockery of the regulatory process as well.
Toyota North America hired several employees directly from the National Highway Traffic Safety Administration (NHTSA). These former government employees helped to end NHTSA probes into unintended acceleration occurring in some of the same vehicles that are now being massively recalled and which are apparently responsible for causing deaths. The probes were ended in 2002-03, and the employees consistently lobbied against any expanded inquiry into these issues over the past decade.
The irony is that Toyota’s regulatory lobbying effort was in pursuit of short-term gains that ended up causing long-term damage to their reputation. As with banking, special treatment given to firms at their own request has been damaging — even fatal, to their own existence. In Toyota’s case, it has led to the tarnishing of their once impeccable reputation, and regrettably to the deaths of 19 of their customers.
Other impact: Toyota has managed to charge a premium for their vehicles, due in large part to high resale value and a general perception of quality. That has now been significantly damaged, but by how much and for how long is unknown at the moment. I swung by a Honda dealer yesterday to see what fallout, if any, there has been. The biggest was that the wholesalers have been dropping bids on trade-in Toyotas quite significantly — $2000-3000 dollars at the least. (So much for that high resale value).
Other issues that come to mind include:
• Revolving door: How was someone able to leave a regulatory agency and go straight into a corporate / lobbying job of that regulated company? Shouldn’t there be a 5 year period in between?
• How often does excessive short-term focus hurt even well run corporations?
• How is it even legal to lobby regulators? Shouldn’t they be off limits to this, like courtroom trials? What’s next, lobbying judges with booze and hookers?
“Christopher Tinto, vice president of regulatory affairs in Toyota’s Washington office, and Christopher Santucci, who works for Tinto, helped persuade the National Highway Traffic Safety Administration to end probes including those of 2002-2003 Toyota Camrys and Solaras, court documents show. Both men joined Toyota directly from NHTSA, Tinto in 1994 and Santucci in 2003 . . .
In one example of the Toyota aides’ role, Santucci testified in a Michigan lawsuit that the company and NHTSA discussed limiting an examination of unintended acceleration complaints to incidents lasting less than a second.”
This is yet another example of corporations petitioning the government for special treatment — getting precisely what they requested — then impaling themselves on the favor. In the automaker’s case, the damage is limited to 19 deaths, hurting resale value of their vehicles, and damaging a hard won reputation.
The good news a) Toyota doesn’t need a bailout; and 2) they didn’t cripple the world’s economy . . .
Regulators Hired by Toyota Helped Halt Investigations
Bloomberg, Feb. 12 2010