Prius headlamp troubles could dim Toyota brand's reputation

Lawsuit, online complaints come as automaker launches new model

Jean Halliday
Advertising Age
June 30, 2009 - 1:57 pm ET

DETROIT -- Amid the launch of the third-generation Prius hybrid,
Toyota Motor Corp. is taking a beating online and in court by owners
who charge that some older models of the popular car have faulty
headlights that can cost more than $1,000 to replace.

Owners have complained to federal safety officials and in online chats
that Prius' upgraded optional lights, known as high-intensity
discharge headlamps, have a tendency to fail. U.S. federal safety
officials started looking into the matter in late April, and a lawsuit
was filed last month against Toyota on behalf of Prius owners. The
suit called the situation "a dangerous but undisclosed safety defect."

The complaints began online as early as August 2006, according to a
scan of chat rooms and owner forums by Advertising Age, an affiliate
of Automotive News. Owners are upset that their warranties don't cover
the HID bulbs, which can cost between $300 and $1,800 -- with labor --  
to replace all or part of the light system.

Feds query carmaker

An arm of the U.S. Transportation Department opened a "preliminary
evaluation" into the matter in late April after getting 338 complaints
and took the next step by asking Toyota about the matter in a letter
dated May 13, a spokesman for the carmaker said. Toyota is complying
with the request, he said.

Owners on the online forums encouraged other Prius owners experiencing
the headlamp problem to report it to the National Highway Traffic
Safety Administration, which did not return calls by deadline. If
NHTSA finds that the headlamps pose a safety threat, it can order
Toyota to recall them and replace them at no cost to Prius owners.

Toyota is cooperating with NHTSA and is required to provide the
information at the end of the month, the spokesman said.

He said Toyota is also looking into its other models equipped with
upper-end HID lights and referred owners to the customer-service line
at 800-331-4331. He added that some of the owners' complaints have
come after their warranty expired, which makes them responsible for
repairs.

A second Toyota spokesman said, "We have seen the complaints and are
looking into it."

Consumer lawsuit

Meanwhile, Toyota will need to respond soon to a lawsuit filed last
month by Girard Gibbs in U.S. District Court in Los Angeles on behalf
of a Putnam County, N.Y., Prius owner that seeks class-action status.
According to the complaint, "Toyota is concealing the problems from
owners" even though the automaker has "long been aware of Prius' HID
headlight problem," which the suit calls a "dangerous but undisclosed
safety defect."

Partner Eric Gibbs said his San Francisco firm has been contacted by
hundreds of people experiencing faulty HID headlights on the Prius. He
said the defect seems most prevalent in 2006 and 2007 models, although
the firm is also looking at 2008 and 2005 models.

Bryan Rupp, owner of a 2006-model Prius, wrote on an owner forum that
his dealer quoted him a price of $1,726 to replace both HID headlights
and two related computers.

"I talked to Toyota customer relations (800-331-4331) today and they
offered to pay for the parts, about $1,350, and asked me to pay the
labor cost of $400," he wrote. He complained that the company wanted
him to pay for it up front and reimburse him after four to six weeks.
He wrote: "I do not think I should pay a dime. This sounds like it
should be a recall."

In an interview, Rupp said he ultimately was reimbursed for the parts
portion of the repair but is still out about $450, the cost of labor
that Toyota would not cover.

The timing couldn't be worse for the car that has built Toyota's image
as the nation's most eco-friendly carmaker.

Toyota now is launching its third-generation Prius, a 2010 model, with
a glitzy, integrated ad campaign that includes a heavy national TV
rotation. Two launch TV spots from Publicis Groupe's Saatchi & Saatchi
Los Angeles, in Torrance, Calif., are running. They ranked first and
third in the top 10 most-liked and most-recalled new TV commercials in
May, according to Nielsen IAG Research.

Experts said the situation doesn't have the makings of a crisis for
Toyota, but indicated it could pose a problem because Prius is the one
model in Toyota's lineup apt to be sold to "sensitive people with a
clear sense of right and wrong and their obligation to society," said
Andy Fletcher, CEO of marketing communications firm Fletcher-Martin,
Atlanta. "This is the wrong group to mess with, particularly now."

Attracting potential buyers

Americans are evaluating all their brand choices during this recession
and are more apt to change brands, especially automobiles, given the
woes of General Motors and Chrysler Group LLC.

"The danger to Toyota is the effect on Prius owners and non-Toyota
owners, many of whom are starting to evaluate why they weren't a
Toyota owner before," Fletcher said.

Toyota has somewhat of a track record for dragging its heels on
similar issues, such as the engine sludge problem in the Camry earlier
this decade, said Peter DeLorenzo, founder of blog Autoextremist.com
and a former auto creative at several ad agencies.

"If Toyota moves quickly, the whole thing will blow over," he said.
But if not, there will be "ill will" among owners because
"word-of-mouth is still the most powerful form of advertising," he
said.

Todd Turner, president of consultant CarConcepts, recommended Toyota
issue a so-called technical service bulletin on the car's HID
headlamps and extend the car's warranty. That bulletin to owners would
instruct them to bring their cars into dealers so Toyota could replace
the parts and study them for a suspected problem.

"That's a smart way to turn it around" and keep owners happy, he said.
Otherwise, he said, Toyota could lose these owners forever.