⚡ Get All Content for 20% Off ⚡

The Toyota Effect: Unlikely Winners and Losers How is the automaker's global recall affecting other businesses?

By Geoff Williams

entrepreneur daily

Toyota , which stands to lose at least $2 billion due to problems with accelerator pedals sticking and floor mats that can become entangled with the gas pedal, isn't the only one suffering from this corporate disaster. The automaker's global recall is affecting other businesses, whether negatively or positively. Either way, this recall of over 9 million cars, including the 437,000 Prius and Lexus models that were just added the list, is creating a chain reaction. Here's a look at some of the major winners and losers.

Loser: Toyota Dealerships. Consider all the Toyota dealerships that will have a worse 2010 than expected -- and it's not like 2010 was necessarily looking great for auto dealerships anyway. With the brand melting in the spotlight and pilloried by late-night comedians like Jay Leno ("It was a beautiful day in Los Angeles. It was so nice that a lot of people walked to work--at least the Toyota owners"), these dealerships are the businesses most obviously and directly affected.

Of course, they may feel the effect way beyond 2010. Online, the evidence that Toyota's reputation has suffered is indisputable. Before January 21, the buzz around Toyota's brand was 81 percent, according to the marketing agency Zeta Interactive , and now it's 70 percent, behind several competitors: Kia, GMC, Chevrolet and Subaru. In January, if you did a search on Toyota, the five most popular words you would find attached to it was "value," "strong" and "like." Now, it's "recall," "recall list" and "halts sales."

Loser: Toyota Parts Suppliers. When orders for Toyotas inevitably drop, any company that supplies parts to Toyota--or cars made under its corporate umbrella, including Lexus and Prius--will take a financial hit.

Winner: Lawyers. "We'll see a lot of direct lawsuits," predicts Bunim. "[Several] deaths have allegedly been attributed to the problem, and some people will try to tie property and vehicle damage to this defect."

Attorneys, in fact, are gearing up for a prosperous 2010. "A few law firms have already put up Web sites. There's one that has the URL of ToyotaLexusRecall.com," says Bunim, "and it's basically just telling people, 'Hey, if you want to sue Toyota, hire us.'"

Loser: Online Car Businesses. Toyota's problems are also affecting companies such as LeaseTrader.com , an online auto lease transfer marketplace (as in: you want out of your lease, they'll try to help you get out; if you want to take over a short-term lease with lower than normal rates, they'll help you get in).

The recall isn't sending shockwaves through LeaseTrader.com, but the executives have certainly noticed the issues. "We placed a temporary hold on all transfers involving the Toyota vehicle models involved in the recall," says John Sternal, vice president of marketing communications.

Sternal says the Toyota vehicle recall affects about 7.4 percent of their marketplace inventory, and they've received about 20 calls in the last week from people who were going to take over a Toyota lease but have now requested another car.

Still, Sternal isn't worried. "We're keeping a close eye on what's going on," says Sternal, "but I don't think there will be a severe negative effect on us. Toyota has built up a really good brand reputation, and while some people will put them under the microscope for the near future, we're still confident that the public will be confident with Toyota."

Winner: Insurance Companies. The legal profession isn't the only one that will benefit from litigious consumers, says Bunim. He predicts irritable auto insurance companies will want to be reimbursed by the beleaguered car company if they think they paid out for an accident Toyota should taken the fall for.

Loser: Toyota Warranty Business. Another peripheral industry soon to lose money in the wake of the Toyota's debacle: any business related to Toyota warranties, says Mark J. Bunim, an attorney, insurance expert, and chairperson and managing partner of Case Closure, LLC , which specializes in mediating between two parties that want to compromise before going to court. "Who will want to give an extended warranty on a Toyota?" asks Bunim. "Even if the car is fixed, people in the industry will have doubts about these models' ability to function effectively."

Winner: Rental Companies. Rental companies also stand to profit--at least in the short term--from Toyota's problems, says Bunim, since plenty of cars are going to be stranded at dealerships, waiting to be fixed.

When will the ripple effect end? Nobody can say, of course, but Bunim admits that down the road, perhaps in months or years to come, he is half-expecting to mediate between some angry, sue-happy consumers and one very big, humbled car company.


Geoff Williams is a frequent contributor to AOL Small Business. He is also the co-author of the new book Living Well with Bad Credit .

Geoff Williams has written for numerous publications, including Entrepreneur, Consumer Reports, LIFE and Entertainment Weekly. He also is the author of Living Well with Bad Credit.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

The Remote Side Hustle a 43-Year-Old Musician Works on for 1 Hour a Day Earns Nearly $3,000 a Month: 'All From the Comfort of Home'

Sam Ziegler wanted to supplement his income as a professional drummer — then his tech skills and desire to help people came together.

Business News

Costco CFO Reveals Uncertain Fate of $1.50 Hot Dog and Soda Combo

CFO Richard Galanti reveals that the price will stay the same — but only "for a while."

Business News

The Most Unexpectedly Popular Side Hustle of the Decade Has Low Startup Costs and High Markups

A new report shows that vending machines are a popular investment — and the industry is set to grow up to $3 billion by 2031.

Marketing

Ever Wonder Why Certain Websites Rank Higher Than Yours? This SEO Expert Reveals The Secret to Dominating Search Results

It's often the smart use of SEO, now supercharged with AI, particularly in keyword optimization.

Business News

AI Is Impacting Jobs. Here Are the Gigs Affected the Most, According to an Analysis of 5 Million Upwork Postings

The researcher said in the report that freelance jobs were analyzed first because that market will likely see AI's immediate impact.

Leadership

Former Interrogator Shares 5 Behaviors Liars Exhibit and How to Handle Them

Five deceptive behaviors to look for and how to respond to those behaviors when you encounter them.