February 6, 2010

AFP Asks: ‘Is US bullying Toyota on recall?’ Rest of Media Indifferent

APvidTeaseToyotaFix020410AFPlogo

In a post late Thursday afternoon (at NewBusters; at BizzyBlog), I noted that the half of the teases (6 of 12) for the Associated Press’s short videos in business stories at its web site were about Toyota, specifically its recent product quality issues and falling sales.

In that post, I noted a conflict of interest in the relationship between the U.S. government and Toyota, and wondered when someone in the press would bring the matter up:

To the extent the government is leaning hard on the company, somebody in the press should be questioning whether the motivations are purely related to safety or whether they also involve generating as much negative publicity as possible about the principal foreign-based competitor of government-controlled General Motors and Chrysler.

I didn’t realize at the time that one wire service, AFP, actually had actually brought up the matter, complete with quite a provocative headline, Thursday morning.

Here are key paragraphs from Mira Oberman’s AFP story (bolds are mine):

Is US bullying Toyota on recall?
Thu Feb 4, 8:50 am ET

The US transportation chief’s public rebukes of Toyota’s handling of a massive safety recall have raised eyebrows, given the US government’s major stake in rivals General Motors and Chrysler.

“The optics are terrible because — and this is what happens when a government owns a company – the two companies that are going to gain the most out of this are General Motors and Chrysler,” said Peter Morici, a professor at the University of Maryland’s business school.

“But their behavior is consistent with the general policy of the US government, whether it’s dealing with coffeemakers or cars.”

Safety officials understand that product design mistakes are inevitable and will work to help companies correct the problem and alert consumers. But they will not tolerate a slow or weak response, Morici told AFP.

…. David Champion, director of automobile testing for Consumer Reports magazine, said the reaction to the recall was overblown.

“When you look at the statistics we are putting an awful lot of effort on a very small risk,” he said.

“There has been something like 2,000 complaints of unintended acceleration in some 20 million Toyota vehicles — it’s almost like trying to find a needle in a haystack.”

Champion lamented as “unfortunate” that it took the death of an off-duty California state trooper and three members of his family to prompt Toyota to issue a mass recall in September to address the problem.

But he said a congressional investigation was an “overreaction” and noted that the “sticky” pedal problem that caused Toyota to halt production and sales of eight models last month was not linked to any accidents or injuries.

One can quibble with elements of AFP’s report, but the most important point here is that we have a wire service committing real journalism by raising what should be an obvious issue that some on the left have been trying to portray as conspiracy-mongering.

In certain cases, those who are doing so are really good at telling us that “appearances” are important. This is why they tend to oppose those who have management backgrounds in a given industry getting involved in regulating it, even though such people will often have vastly superior ideas for improving safety, efficiency and compliance than someone light on experience and heavy on hostility.

But there’s more than an “appearance” of a conflict of interest with the government and Toyota; there’s a very real one, as Morici’s statement that “the two companies that are going to gain the most out of this are General Motors and Chrysler” makes clear. Morici’s claim that “the optics are terrible” should really be phrased as, “The facts and circumstances are terrible.”

While it may appear that Uncle Sam’s conduct is judicious throughout this process, that appearance won’t disperse the cloud of suspicion that hangs over the “negotiations” — and it shouldn’t. If the government hadn’t decided to become the controlling owner of two auto companies, the worst suspicion would be that it’s picking on a foreign-based competitor of a large U.S. industry. Now the suspicion is that it’s trying to hurt the strongest foreign-based competitor of two companies it controls and from which it hopes (someday) to recover tens of billions of dollars it has thrown at them. No amount of outwardly professional behavior will negate the existence of that inherent multibillion-dollar conflict.

Think of the government’s safety enforcers as the equivalent of financial auditors. No one would accept the idea of a CPA firm’s supposedly independent auditors directly owing shares of companies they audit, which is why it’s a prohibited behavior. Auditors with such interests might protest that their objectivity isn’t affected, but appearances trump those representations, period. Judicious CPAs also try to avoid having material ownership interests in competitors of companies they audit.

Similarly, we shouldn’t blandly accept the idea that government’s safety people, whose bosses have controlling interests in two competitors who “owe” them tens of billions, aren’t going to let those situations affect their judgments as to how hard to push safety issues at a competitor. The fact that a consumer watchdog group that has tended to favor regulation in so many areas thinks that Uncle Sam has overreacted is not a trifling matter (though to be fair, Consumer Reports, having rated Toyotas so highly for so many years, has a bit of an appearance problem of its own).

Despite the drop-dead obvious conflict-of-interest problem, only AFP has prominently raised it. A search at the Associated Press on “Toyota” early Saturday morning returned 63 stories. No listed headline brings up the issue. The same search at the New York Times also came back with no directly relevant headlines.

In at least one instance I found, the AP veered into barely concealed boosterism. The third paragraph of an unbylined January 27 item entitled “GM offers incentives to lure fearful Toyota owners” read like a high-pitched dealer advertisement instead of a news report:

The Detroit automaker is offering offer zero percent financing for 60 months on most models. It also will offer $1,000 to Toyota owners toward a down payment on a GM vehicle and up to $1,000 to help to pay off current leases early. The offers run through the end of February.

The AP article did not even mention that the government controls GM, let alone note what is clearly an appearance of coordination, regardless of whether such coordination is actually occurring.

Cross-posted at NewsBusters.org.

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1 Comment

  1. I think the rating Toyotas highly doesn’t matter much. The rating was based on the quality of the product, not an affirmation that they think the folks at Toyota are personally saints.

    The calling the government “overreacting” in light of CR’s favoring regulation so often is IMHO more telling because the regulation thing is much more ideologically and politically based. And the fact that CR would step back from something so deeply entrenched in their “philosophy,” so to speak, is as you say, not a trifling matter.

    Also, despite overall favoring overregulation, I’m sure this is not the first time CR claimed that some anti-business talking point was erroneous or overblown.

    Not that I am a big fan of CR, like most consumer ‘watchdog’ groups it tends toward being a liberal anti-capitalist advocacy fronts who far from protecting the consumer, support practices that lead to less safe products and less consumer choice. (For instance, our cars our less safe because of CAFE “standards”.) But a “miracle” is a miracle.

    Comment by zf — February 6, 2010 @ 3:44 am

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