Toyota Recall Raises Question about Conflict of Interest

Recently I had Cody Willard of the Fox Business Network on my program and we discussed the incredible expansion of the federal government for several years and the fact that the end is no where in sight. Willard attributes the problem to the "Republican" and "Democrat" financial machine that pays for an ever expansive government. In addition of leading to questionable priorities, expansive government can also lead to some very serious questions about conflict of interest. He points to the recent recall of automobiles on the behalf of several automobile companies.

Willard noted that, what was historically done for safety reasons (recalls) leads one to think could be done for business reasons. Think about it, if the US owns a company (it is majority owner of GM), recalls could be a very powerful tool to undermine the competition. In recent weeks there has been a huge increase in the number of cars being recalled. More importantly, the government has brought an unusual level of attention to these some what common events.

The big story has been Toyota with recalls covering numerous models. This is a huge blow on a company that has had a reputation of providing great value through reasonable pricing and high quality. Another company that has seen a more limited recall is Toyota's chief competitor, Honda. Than there is Volvo's SUV problem. The list of companies in a recall covers a huge number of makes and models and there appears to be no end in sight.

Willard is not the only one noting the hype behind the recalls in general and Toyota in particular. Indiana Governor Mitch Daniels has spoken out about the subject as well. "Let's recall. Let's fix it - the cars," Daniels said. "If a fine is in order, then fine, but they have gone so far beyond that. It's very very suspicious in view of the government conflict of interest." He goes on to note, "This is why you don't want government in the car business, for instance. There you have a company doing more than others have done with regard to a recall. There were 600 recalls last year alone and they didn't go so hysterical as this," Daniels said. "These congressmen running this committee (investigating the Toyota recall) have their own agenda and it is a discriminating agenda in this case. They didn't do this the last several hundred recalls."

WHTR in Indianaoplis is now reporting that Daniels is part of "a bipartisan group of other governors around the nation have joined together to send a letter to the Obama administration, complaining about the handling of the Toyota recall investigation... The governor said the letter was written up without influence from Toyota."

Our federal government has very limited and specific powers, when they do not exercise them properly or if they go beyond that role, the impact can be damaging to everyone in the economy. The people who could suffer from a government abusing its recall powers are the consumers who want safe, but affordable, cars.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Toyota: The Rising Sun Continues

Japan is known as the "land of the rising sun" and its chief auto maker, Toyota, continues its towering rise. This morning I was watching the Today Show and it was announced that the car maker has surpassed GM as the largest automobile producer in the world this past quarter. This is something that everyone in business and politics has been expecting for years. That time has come.

A half a century ago, there were a "Big Three" -- GM, Ford, and Chrysler -- that dominated the marketplace and no one imagined Toyota (or any other foreign auto maker) eclipsing any of them. Admittedly it is only one quarter, GM is still number one over all, but the slide for US car builders is expected to continue.

Why the decline of US auto makers? The cause is multi-fold:

* US auto makers are not nearly as nimble as their Japanese competitors. They are typically behind the curve and limping behind Japan when it comes to change.

* Japan has taken a surprisingly safe approach to auto making that gives the consumer assurances of the quality of product. It sounds "boring", but Japan's predictability in style and substance (e.g., engineering) has made it the up and coming "king of the road."

* The devastating impact of Big Labor. Unions have hampered these companies with salary and benefit packages that make it impossible for US companies to successfully compete. This is likely the number one reason.

The above are just a few examples, but Japan will continue to torment US auto makers and I expect its prominence to becomes permanent. That is destined to happen if the US doesn't do the things necessary to be competitive.