Transport Committee on March 16th, 2010

[The Chair, Conservative, Merv Tweed]

Good morning, everyone.

Welcome to the third meeting of the Standing Committee on Transport, Infrastructure and Communities. Pursuant to Standing Order 108(2), we are studying the recall of vehicles manufactured by the Toyota Motor Corporation.

Joining us today, from Toyota Canada we have Mr. Tomihara, president and chief executive officer, and Stephen Beatty, managing director. From Toyota Motor North America we have Yoshi Inaba, president and chief operating officer. From Toyota Motor Manufacturing Canada we have Ray Tanguay, president.

We welcome you to our committee and thank you for your attendance here.

For the advice of the committee members, we have a collective committee of industry and transport. I understand there will be some need for translation, so I ask the committee for their indulgence. I will judge the time accordingly so that people aren't necessarily caught halfway through a translation getting an answer and waiting for a response.

Mr. Volpe, do you have an opening comment?

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

I want to thank you for making that observation.

On behalf of all the members of the Liberal caucus, on both the industry and manufacturing sides, I want to thank our guests for coming forward, particularly Mr. Yoshi Inaba, who has made a special effort to come here.

I realize there are going to be translators as part of this discussion, and I want to make sure they get adequate opportunity to address issues. If we are pushed by the clock to do it that may be a little difficult. So I thank you for indicating that you want to demonstrate flexibility.

I fully expect that we'll have the full amount of time allocated to all questioners for this. It will be fair to questioners as well as respondents.

So thank you very much for doing that.

[The Chair, Conservative, Merv Tweed]

Thank you.

With that, I'll ask for opening comments. Then we'll move to questions of the committee.

Mr. Tomihara, I presume you're going to make the statement. Please begin.

[Yoichi Tomihara, President and Chief Executive Officer, Toyota Canada Inc.]

Thank you.

Thank you for inviting me here to Canada to the committee today to respond to the Toyota recalls.

Over the past few months many Canadians have wondered whether Toyota vehicles are safe, and we regret that this has caused our customers both anxiety and inconvenience. We intend to address these concerns today as a Canadian company.

We sell more Canadian-built vehicles in Canada than any other company. In fact, over half of the vehicles we sell here are Canadian built. We therefore welcome this opportunity to explain why Toyota vehicles are safe and continue to be among the safest and highest quality in the world.

I know this because as a senior Toyota executive I have been exposed to many experiences around the world. A decade ago I developed an early appreciation for Canada's unique market differences, having worked to bring Canadian drivers the Toyota Echo hatchback, a model unique to this Canadian market.

As the president and chief executive officer of Toyota Canada my mandate is to ensure that our Canadian operations adhere to Canadian goals and regulations and Toyota's global core values. A Canadian perspective is really important when explaining the recall, all issues related to this campaign, and what we will be doing in the future to minimize the possibility of such issues reoccurring.

We also welcome this opportunity to provide some suggestions to the members of this committee on ways the industry, regulators, and other stakeholders can work together to ensure the safety of all vehicles on Canadian roads.

Appearing with me today is Mr. Yoshi Inaba, president and CEO of Toyota Motor North America; Mr. Ray Tanguay, president of Toyota Motor Manufacturing Canada; and Mr. Stephen Beatty, managing director of Toyota Canada Inc.

Mr. Inaba, please.

[Yoshi Inaba, President and Chief Operating Officer, Toyota Motor North America]

Mr. Chairman, thank you for your request to appear here today. I welcome the opportunity to come to Canada, and I have the utmost respect for the Canadian parliamentary system.

I always enjoy my visits to Canada because Toyota has such a rich tradition in this country. Toyota started selling vehicles here over 45 years ago and built its first greenfield parts manufacturing facility for North America in British Columbia over 25 years ago. That was followed by a full vehicle assembly plant a few years later. In addition, Canada is currently the only country outside of Japan to build Lexus vehicles. So I have a special place in my heart for the hundreds of Toyota and Lexus leaders, thousands of sales and manufacturing associates, and of course millions of customers here in Canada.

Having said that, I think it is very important that I clarify my role here in Canada and North America. My role, as president and chief operating officer for Toyota Motor North America, is separate from the operations of Toyota Canada. Although I'm responsible for all consolidated operations in North America and broadly for business development in this region, Toyota Canada operates as a separate joint venture licensed to distribute vehicles in Canada. In that respect, responsibility for the Toyota and Lexus vehicles on the road and compliance by Toyota Canada with the laws and regulations of Canada, including the Motor Vehicle Safety Act, rest with Mr. Tomihara and Mr. Beatty.

So please do not take my inability to respond directly to many of your questions as a sign of disrespect. Redirecting your questions to Mr. Tomihara or Mr. Beatty will reflect my effort to ensure that you get the best, most direct response to your questions from the Toyota executive best equipped to respond and reflects my limited knowledge of the day-to-day business activities that take place in Canada. While my ability to contribute to today's discussion may be limited, I'm happy to be here to support Toyota Canada, its leaders, and its customers.

Mr. Chairman, Mr. Tanguay will now provide some additional comments about Toyota's manufacturing in Canada.

Thank you.

[Ray Tanguay, President, Toyota Motor Manufacturing Canada Inc.]

Thank you, Mr. Chairman, for giving me the opportunity to speak before this committee.

As President of Toyota Motor Manufacturing Canada Inc., I am responsible for our manufacturing operations in Ontario. This includes plants in Cambridge and in Woodstock, Ontario.

Since 1988, our Cambridge facility has grown from 50,000 to more than 270,000 vehicles, including the Corolla, the Matrix, and the Lexus RX350. The Woodstock facility opened in 2008 and produced the RAV4. It is the first new automobile assembly plant opened in Canada since the 1980s. I am proud to say that in just six days, on March 22, we will start a second shift, increasing our capacity to more than 150,000 vehicles annually. To support the launch of this second shift, more than 800 new team members have been hired over the last few months. Between our locations, TMMC will be able to produce more than 420,000 units annually. Our direct employment will be almost 7,000 team members. In addition, TMMC does business with more than 78 suppliers in Canada, providing thousands of additional employment opportunities for Canadians.

As approximately 55% of the vehicles we manufacture are exported, we contribute in a major way to improving Canada's balance of trade.

Once again, thank you for this opportunity to appear before the committee.

I will now give the floor to Mr. Beatty, who will talk about the calls. Thank you.

[Stephen Beatty, Managing Director, Toyota Canada Inc.]

Mr. Chairman, thank you for convening today's hearing.

In a perfect world there would be no need for recalls, and that of course at Toyota is always our goal, but we know we also can't assume a perfect world. To that end, Toyota has developed a unique product servicing approach. We call it “Early Detection Early Resolution” or EDER. This process actively looks for issues not just related to safety but covering all aspects of the Toyota ownership experience.

Here in Canada we have enhanced our EDER system by establishing data-sharing agreements with all of our dealerships coast to coast. This single, tightly integrated, industry-leading system means that we can review and query all unusual service patterns, and an additional system automatically alerts us to unusual warranty activity. Together, these systems allow us to quickly detect potential problems in our vehicles. Second, Toyota has field engineers in North America who go on site to investigate issues, whether they're raised by our customers, by our own investigations, or by regulators like Transport Canada. Toyota also stations a dedicated team of field engineers in Canada during the winter months who can quickly identify any potential issues related to our unique climate. Third, our EDER process requires that when an issue is identified, we take action.

There are many factors that can give rise to a product incident. These include product defects, but also other factors over which automakers have no direct control. Vehicle modifications, including installation of after-market equipment, environmental issues, and human factors, can and do lead to incidents. That's why it is so important for our EDER teams to get to root causes.

What our teams learn, we share with other Toyota operations. But it's important to remember that Toyota vehicles built for Canada are selected specifically for this market, and many have unique features and specifications. That fact is central to understanding the difference in the all-weather floor mat recalls in Canada and the United States.

Last fall, Toyota in the United States recalled a number of models to address potential issues involving all-weather floor mats entrapping accelerator pedals. When that issue arose in the United States, Toyota embarked on an intense investigation to determine whether Canadian all-weather floor mats raised similar issues in the affected models. We determined that because the all-weather floor mats sold by Toyota Canada are of a different design and material from those in the United States, we did not have the same issue.

So, you might ask, why did we issue the recall? It's because we knew that telling our customers there was no need to worry was simply not good enough, not when their confidence in their vehicle was at stake. That's why, following discussions with Transport Canada, Toyota announced in Canada a separate, voluntary safety improvement campaign in November to cover the same models that were affected by the recalls in the United States. In addition, our investigation concluded that there was in fact one Canadian mat that was of concern, and as a result, we initiated a unique Canadian safety recall on the all-weather floor mat in the newly introduced Toyota Venza.

While Toyota was identifying and resolving the floor mat issue, we became aware of a handful of customer concerns that could not be explained by the all-weather floor mats. We discovered that in rare instances, a combination of wear and condensation could make certain accelerator pedals harder to press, slower to return to the idle position, or in the worst case stick in a partially depressed position—I should stress, not at a full-throttle condition. The chronology of the action we took in this respect is located at tab 7 in the binders we have supplied.

In light of the floor mat and pedal issues, Toyota has renewed its focus on quality. Toyota Motor Corporation's president, Akio Toyoda, has announced a six-point global program, which we have outlined at tab 8 in your binder. Toyota Canada is currently in discussion with Toyota Motor Corporation on how best to coordinate Canadian quality initiatives as part of this program. But rest assured, Canadian issues will be part of that global process.

The floor mat and pedal issues are unrelated, but mechanical in nature. Nonetheless, some have speculated that the real cause of acceleration complaints results from defects in the electronic throttle control system or ETCS. We want to put those questions to rest.

Every Toyota and Lexus vehicle that features our electronic throttle control system is equipped with a multiple fail-safe mechanism, which in the event of a malfunction reduces engine speed rather than allowing the vehicle to accelerate unintentionally. I want to be absolutely clear about this. As a result of our extensive testing, we do not believe that unintended acceleration has ever occurred because of a defect in our ETCS.

Toyota has conducted testing of the electronic throttle control system using the European standard for EMI testing in automobiles, ECE-R10. Our electronic throttle control system is tested to twice the European standard. The robustness of the fail-safe mechanisms in the ETCS in our vehicles has been confirmed by Exponent, a world-leading engineering firm that has conducted its own independent tests. While Exponent's work is not finished, we will release all of their findings when they are complete.

In addition to the fail-safe mechanisms designed into our ETCS, Toyota's braking systems are engineered to overpower the engine. We just finished a nationwide ride-and-drive program to demonstrate this fact. One enhancement you've heard about, which we've been introducing across our product line, is the brake override system, which reduces engine speed to near idle when the brake pedal is applied while the accelerator pedal is also depressed. By the end of this year, all new Toyota and Lexus models will be equipped with brake override from the factory. Meanwhile, as part of our safety improvement programs related to all-weather floor mats, we are incorporating the brake override system in a number of the models included in our campaigns. A summary of these recalls is provided to the committee members at tab 12. What's important is that we've identified the problem, implemented a solution, and with an over 60% completion rate today on the sticking pedal, we are well on our way to completing the remedies.

Finally, every new Toyota and Lexus vehicle in Canada is equipped with an event data recorder. Toyota Canada has provided Transport Canada with an event data recorder reader and an offer for training to help in its investigations. It's important to understand that there is no requirement for vehicles to be equipped with an EDR in North America. There is, however, a NHTSA ruling requiring any company equipping its vehicles with an EDR to make a readout tool commercially available by 2012. Through deployment of EDR and readout tools for our vehicles, we're providing this technology well in advance of 2012.

Before closing, Mr. Chairman, let me address some of the issues that arose in committee last Thursday. At that time, Transport Canada identified that they had received 17 complaints about all acceleration issues in all Toyota vehicles from 2006 to last fall. Of course, one event of unintended acceleration is one too many, but we don't have 17 unintended acceleration events. These are speed control complaints and include issues such as vehicle hesitation, vehicle component failures where the fail-safe mechanisms worked, and, in some cases, misperception about normal operational surges in the electronic throttle control system. In fact, when you look through those 17 complaints, there's only one event in the 17 that can be described as a sustained sudden acceleration event. This was in a 1996 Camry without electronic throttle control. It has a cable throttle system. One of the benefits of the electronic throttle control is the elimination of binding in the mechanical cable system.

It's important to underline, of course, that a complaint isn't the same thing as a finding of defect. In fact, a complaint is the starting point for an investigation, and action is taken where a safety defect is found. Transport Canada noted that Toyota's 17 complaints represented a low volume that is not out of line with the complaints registered against other major auto makers. Please remember that both Toyota and Transport Canada are legally obligated to act when a safety defect exists. It's not in the interests of Toyota Canada, our dealers, or our customers to fail to deal with known problems. We act if evidence of a defect exists.

To ensure public confidence, we've also enlisted the help of outside experts to test and confirm our investigations and processes. We take the safety of our customers and their confidence in our vehicles very seriously. We believe we're at the forefront of the Canadian industry in this regard.

Mr. Chairman, I'd also like to bring your attention to tab 13 in the binder, where we've listed some public policy recommendations for consideration by the committee. I'd certainly like to discuss these in greater detail during the Q and A, if time permits.

On that note, Mr. Chairman, I'll turn it back to you for the questions and answers.

[The Chair, Conservative, Merv Tweed]

Thank you very much.

Mr. Volpe, you have seven minutes.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Bonjour. Good morning. Ohayou gozaimasu. I hope I pronounced that correctly. My parents always taught me that it's good manners to wish everybody a good welcome in the language in which they feel most comfortable.

Gentlemen, thank you for coming before the committee.

I guess all of us are concerned that businesses continue to protect and promote their interest. Cynical people think that's spin. I think that's a healthy approach to garnering profits. The second part of that, of course, is that there's an appropriate investment in engineering soundness to ensure safety. I think that's what the committee is concerned about.

I know, Mr. Inaba, you're quite familiar with the concerns that have emerged in the United States that perhaps somewhere along the line the balance between lives and profits has been approached a little bit too closely. We are concerned about accountability and transparency, both from the producer side and from the government side. As Mr. Beatty just pointed out, there's a very close connection between the two. It's not a partisan issue; it's a consumer-driven issue.

The reason we wanted to speak to you, Mr. Inaba, is to get an understanding of whether there is a corporate definition for safety-related defects, and I guess you would be in a better position to address that than your Canadian counterparts. Do you have such a definition?

[Yoshi Inaba]

First of all, nothing is more important to Toyota than the safety and the reliability of the product to our customers, and we have held a long-term policy that when it comes to defects or recalls, cost is not the consideration. I will give you a reason for that.

The committee that determines the recall is deliberately separated from a top management decision. In other words, what we call the general manager level will make a decision on recalls, and then that will be approved by the immediate boss who is a managing officer, but the decision stops there. There is no top management decision involved in view of cost and therefore profit.

So it has been our policy and guiding principle that, again, I have to say, safety of our customers is of utmost importance.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Nobody wants to question the sincerity of safety, but I think what parliamentarians would like to know is that when those managers make a decision, they must do it on the basis of data collected with the experience of those vehicles worldwide.

As you will recall, you were asked for such data, a compilation of data, by the congressional hearings in the United States. Today we're learning that apparently Toyota does or is going to use event data recorders to compile that information.

Is it your understanding that Toyota will make those decisions on the basis of worldwide event data recorded?

[Yoshi Inaba]

First of all, I think by the end of this year—virtually even today—most of the vehicles will be equipped with event data recorders. The question is the reader. It's a very very technical area. I don't know the details of it, but the reader is the issue. We have now made available some of the readers. We have increased the number of readers, and they are actually also being delivered to Transport Canada. We have also delivered three units to NHTSA. By the end of April, we are going to make 100 units of readers available and will then keep increasing the number.

At the same time also, just for your information, prior to a legal requirement in 2012 by the United States, we will be making the reader commercially available by the middle of next year. It is in our interest to know what happened to the vehicle when an accident or some irregularity occurs. We are ready to make the reader commercially available so that anybody can look into that. Of course, it is a vehicle owner's right to protect that information, so with the consent of the owners, we can make that information available to anybody who requires it.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Currently you have the results of events that have been recorded in Ireland, Europe, and the United States. There have been some in Canada, notwithstanding an effort by some to suggest that it isn't really a significant number. It really is quite a significant number. Transport Canada provided this committee with a document that revealed some 125 incidents involving surges and unintended acceleration. Better than 75%, closer to 80%, of those occurred in the last five years. This is in the context of what Mr. Beatty refers to as proactive compliance with legislation in Canada.

Mr. Inaba, I know that you will want to address the issue of whether Toyota is coming to this solution--the solution is just a gathering of information--rather late and as a result of the issues that have been raised in the United States. I'm not here to discredit your company. I'm here to see whether you have complied with Canadian legislation and whether the Canadian government has been diligent in enforcing legislation to provide security. You probably will be able to tell this committee how many civil action, class action cases your company is dealing with today in Canada as a counterbalance to what Mr. Beatty says about proactive activity.

[Yoshi Inaba]

I don't know the details of the situation in Canada. I'd rather have Mr. Beatty answer that. Before that, I'd like to say that we see the importance of that kind of information--EDR--and therefore we decided to come forward with many more readers, as many as possible, so that we can share that information with authorities. It is our interest to know more about the incidents and therefore to come up with a quick remedy, if it is necessary.

[The Chair, Conservative, Merv Tweed]

I have to ask Mr. Beatty to make a brief comment. Then I'll go to Mr. Laframboise.

[Stephen Beatty]

Thank you, Mr. Chairman.

I just want to explain very briefly that if you look at the complaints in the Transport Canada database, many of those references to surging reflect normal operation of the vehicle, because with the electronic throttle control, revving of the engine changes, depending on vehicle requirements. I'd be happy to get into that in more detail later.

There is one issue that I really want to highlight. That is, that a lot of the focus of attention has been on an event data recorder, which typically would trigger a data capture under very hard braking or if the air bags were deployed. That is not the only place you get data from a car.

I believe, Mr. Chairman, that from your own experience you'd know that our technicians are equipped with tools that can look at the service history of the vehicle and at many of the things that have happened over the last number of cycles of the car. When a vehicle is brought into a shop, we are able to identify whether errors have occurred in the system. That data is captured in the service order history I referred to in my presentation.

[The Chair, Conservative, Merv Tweed]

Thank you.

We'll go to Monsieur Laframboise.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Thank you, Mr. Chairman.

I also thank you gentlemen, for having accepted our invitation.

I had the opportunity of questioning Transport Canada representatives and I told them that I had the impression that Canada was always lagging behind the United States in matters of safety. Their appearance before the committee did not convince me otherwise.

Mr. Beatty, in your presentation you talked at some length about the 17 complaints, only one of which was related to the accelerator. However, Transport Canada representatives also told us that according to them there had never been any accelerator problems in the past. This did not seem to be a high priority. However, Mr. Lehouillier told us that he was very surprised to learn that Toyota Canada had received five complaints concerning the accelerators, as Transport Canada had received no data transfers with regard to these complaints.

This worries me, and I have some serious questions as to the importance granted to safety in Canada by those concerned, as compared to what people do not want the United States to know. Why did Toyota Canada receive five complaints concerning the accelerators and not immediately share the information with Transport Canada?

[Stephen Beatty]

Thank you.

Mr. Chairman, that is a very important question, and it goes to the heart of when do you discover there is a defect? When a customer brings a vehicle to one of our dealerships they register a complaint with the dealership to say, “All right, I have experienced something. Please review the vehicle and understand what is happening.” If the service technician is not able to identify the problem or to fix it, a report is sent to Toyota Canada.

We put our own field technicians in place to try to investigate and understand what is happening. Our first case of a sticky pedal was in late October. At the time we didn't know what it was. What we were able to do was to very quickly not only work through our own internal investigation but to send that information to Toyota Motor Corporation for its review. In this process we investigate complaints. Some we determine are not product issues. Some ultimately lead to a vehicle recall.

Between the time of late October and January 21 we had five complaints. We took action to investigate the first time we had a problem, and as the complaints came in that led us to the conclusion based on our engineering studies that there was a problem, and we issued a recall.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Beatty, from October to January, that is, almost five months, you left vehicles in circulation that could endanger the safety of Canadian citizens. My most important question concerns why you did not immediately inform Transport Canada of the situation.

I see that in the documents you submitted—I read your tabs—you did not refer to these five complaints. I am led to believe that this was because you did not want to tip off the Americans, which worries me for the safety of our Quebec and Canadian men and women.

[Stephen Beatty]

No, there is no intent to hold back information from the regulators, and in fact any information that Transport Canada has ever asked for we have supplied to them. The issue is in that investigation phase when you have something you just simply don't understand. At that point it may or may not be a problem. It may be a report of something that is normal in the vehicle. It may not be. In this case we were investigating and putting engineering teams into the field to find out what was going on. As soon as we had determined there was a problem, we issued a recall.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Beatty, even in the document you gave us, on the matter of the acceleration problem you say that work has been done on only 60% of the vehicles whose accelerator pedals stick. You can probably assure us that the problem will be solved in only 60% of cases, and that is indeed the issue. I asked Transport Canada whether the department has the technology needed to determine what the problem is when the complaint is filed.

Currently, you cannot do so yourself since you are only going to solve 60% of the problem. You just told me that you needed five months to carry out analyses because you did not know... We now have technology that is more advanced than the safety capacity. We have a problem, Mr. Beatty.

Today, I want to ensure that this will never happen again and that the lives of Quebeckers and Canadians will never be endangered again. Your documents do not reassure me. It takes you some time before you recognize a situation, whereas you should be able to quickly indicate the problems that crop up in an open manner to the population.

It is all well and good that black boxes can be installed, but the technology is so advanced that we can no longer guarantee people's safety. That is what I understand after reading your documents. Please reassure me, Mr. Beatty,

[Stephen Beatty]

Thank you.

Mr. Chairman, the issue of the 60% relates to the fact that since we announced the recall, 60% of the vehicles have come into the dealerships and have had the remedy applied. We can only do that as quickly as customers bring their vehicles to our dealerships. Every customer has received a letter from us asking to bring their vehicle in, and our dealerships have the capacity to do this work. There is no backlog in terms of our own operations. In fact, the completion rate on this is one of the most rapid recall completions in Canadian history.

But, like you, I am concerned about any situation where we have any vehicle.... Even if this is a rare condition, we want those vehicles off the road into our dealerships and the pedals repaired to ensure the problem cannot happen again. I certainly would join you in asking anyone who has one of those vehicles to bring it in to a dealership as quickly as possible to have the remedy applied.

So far, we believe that a completion rate of over 60% is very rapid for repairs that began at the beginning of last month.

[The Chair, Conservative, Merv Tweed]

Thank you, Mr. Laframboise.

Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you, Mr. Beatty, for the comment. I want to confirm, then, that this is a difference that you've changed in writing Canadian customers, because I wrote Mr. Tomihara on November 25, asking for that same commitment, and I received a letter back from Toyota on December 1, saying that would not happen, that you would not be providing that. And you listed off the vehicles and what you're doing with Transport Canada, but you are confirming that every Canadian who has purchased a vehicle is now receiving a letter.