Image: Akio Toyoda, Elon Musk
Koji Sasahara  /  AP
The usually grim-faced Toyota President Akio Toyoda, right, was all smiles Friday, trumpeting a newfound friendship with U.S. luxury electric carmaker Tesla.
updated 11/12/2010 9:45:31 AM ET 2010-11-12T14:45:31

The usually grim-faced Toyota President Akio Toyoda was all smiles Friday, trumpeting a newfound friendship with U.S. luxury electric carmaker Tesla.

Toyoda received as a gift from Tesla Motors Chief Executive Elon Musk a red roadster, that would sell for 19 million yen ($232,000) — 4 million yen ($49,000) more than usual because of a special paint job.

Toyoda's appearance struck a contrast to others in the past year that were dominated by apologies about Toyota's massive global recalls of some of its most popular cars.

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Shaking hands with Musk, Toyoda told reporters the Japanese automaker had much to learn from Tesla.

"The speedy decision-making that's part of its makeup is what we really want to absorb," he said at a Tokyo Lexus showroom. "Toyota began as a venture. I think this will give us an opportunity to bring back that spirit."

Over the past year, Toyota Motor Corp. — the world's biggest automaker — has recalled more than 11 million vehicles globally for faulty gas pedals, floor mats that can trap accelerators, defective braking and stalling engines.

It was also widely criticized as being too slow to respond to customer complaints, sometimes appearing reluctant to admit to its mistakes.

Its once-sterling image has been tarnished, especially in the U.S., where the bulk of the recalls came, and where it faces hundreds of lawsuits, some involving accidents suspected of being linked to quality lapses. Its U.S. sales lag despite generous incentives.

Toyoda, grandson of Toyota's founder, has endured harsh public criticism, including appearing before a congressional committee. He even wept in a meeting with American dealers.

While returning to profit in recent quarters, Toyota's performance is a shadow of its heyday.

Three years ago, sales were at a record 26 trillion yen ($317 billion). Now, it's expecting 19 trillion yen ($232 billion) in sales for this fiscal year ending March 2011. It had been on track to sell 10 million vehicles a year but is now expecting to sell about 7 million.

Some analysts say Toyota is taking the wrong approach in banking on an image perk with a niche player like Tesla, and suggest it should address the basic problem of quality control.

"The big problem is that Toyota has not stated an exit strategy on the recall fiasco," said Tatsumi Tanaka, a crisis management expert who heads Tokyo-based Risk Hedge. "This way, it will continue to have recall after recall, and the worries will never end."

Toyota should clearly outline how it is handling the recall crisis, how long the measures would take, and how exactly it hopes to fix the root cause of recurring quality problems.

Recalls should be a welcome sign an automaker is getting to the bottom of a problem, not as a sign of continuing problems, Tanaka said.

Tsuyoshi Mochimaru, analyst with Mitsubishi UFJ Securities Co., said electric vehicles comprise such a small portion of the market that the Tesla partnership can't be viewed as any plus.

"There is always that potential it will grow, but so far nobody knows what it means," said Mochimaru.

Tesla, based in Palo Alto, California, employs about 800 people and recently opened its first Asian showroom in Tokyo. Tesla is retooling a California plant that had been jointly run by Toyota and General Motors Co.

Toyota has bought $50 million worth of Tesla's stock, and signed a $60 million deal to develop an electric vehicle together.

Although the Tesla partnership was announced just five months ago, a "concept," or test, model of the electric RAV-4 sport utility vehicle is being shown at the Los Angeles Auto Show next week, Toyoda said.

Musk said he looked forward to learning the Toyota Way of manufacturing, which he said was "the best in the world."

"We have much more to learn than Toyota does," he said.

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