Perception Is Reality Toyota recalled more than 9,400 early-model 2007 FJ Cruisers for potential tire defects. GM's Pontiac Grand Prix rated first for best full-size car in J. D. Power and Associates' Initial Quality Survey this year. Date posted: 09-07-2006 Perception is reality in the car business. And it takes a long time to change perceptions. Witness the tale of two companies — Toyota and General Motors. Despite recalls and public relations woes, Toyota's image of bulletproof quality persists, and sales and market share rise. Despite concrete evidence to the contrary, GM's reputation for inferior quality remains, while sales and market share decline. In recent months, Toyota has recalled nearly 3 million vehicles in the U.S. alone, and has millions of other recalls worldwide. The list of recalled vehicles is growing to include its highly touted Prius hybrid and its spanking-new FJ Cruiser. Several of these recalls aren't for minor kinks, but serious issues that could be dangerous to consumers. Investigations by the U.S. National Highway Traffic Safety Administration on older Tundras and Sienna minivans have been upgraded as well. In addition to massive recalls outside the U.S., Japanese prosecutors are looking into an alleged delay by Toyota executives in recalling a vehicle in Japan that is sold as the 4Runner in the U.S. The investigation, which is reminiscent of one that led to major problems for Mitsubishi, centers around Toyota executives' failure to recall the vehicle although the company knew as early as 1996 that it was defective. In New York, Toyota has just settled another public relations nightmare — a sexual harassment suit filed by one of its female employees, who has publicly detailed her allegations. The terms of the settlement have not been revealed, but the suit will inevitably cost Toyota millions of dollars. Toyota's recalls and public relations woes have many Detroit auto executives secretly smirking — or, at the very least, wondering if its once-sterling reputation will be tarnished. One pondered out loud if Toyota might lose female buyers, who flock to the brand for its quality, but might be turned away by news of the sexual harassment suit. Indeed, some experts think Toyota's image is in danger. In late July, Fitch Ratings said the increasing number of recalls could mar the company's brand image. But Toyota's ever-increasing sales and market share suggest the public perception persists that the Japanese automaker produces bulletproof quality. Why? Perhaps it is because Toyota has built years of goodwill. And it takes a long time to change the perception and for perceptions to reflect reality. Just ask General Motors. Shifting perception is its most formidable challenge. Evidence is mounting that GM quality is improving. A University of Michigan analysis of customer attitudes found that General Motors has been doing a better job of impressing buyers. Quality surveys, such as J. D. Power and Associates Initial Quality Survey (quality in the first 30 days of ownership) and Dependability Survey (over years of ownership) show GM improving, especially with the Buick and Cadillac brands. Nevertheless, the perception that GM's quality lags behind Toyota's by quantum amounts persists. Indeed, Toyota and its Lexus luxury division, in particular, outrank even GM's best in the same surveys, though not by as massive amounts as the public apparently thinks. And the University of Michigan analysis of customer attitudes showed Toyota outdoing GM. The disconnects are that Toyota has built years of goodwill while GM has collected decades of ill will. Just read the letters to the editors in newspapers and magazines, the mailbag of any automotive journalist or the chat rooms on the Internet. Until its recent spate of recalls, Toyota had consistent quality across the board of products and plants for many years running, whereas GM had bright spots with some models and plants and quite the opposite with others. In the end, the only score that matters is sales. That's where the public votes with its cash. And that's where the evidence of public perception is clear. In July, Toyota's three brands — Toyota, Lexus and Scion — surpassed those of the Ford group, moving Toyota into 2nd place and closing in on GM. Industry journal Automotive News reported GM sales dropped 22.5 percent in July while Toyota set a new record. (Ford was down 34.3 percent.) For August, both Toyota and GM sales were up, by 17 percent and 3.9 percent, respectively. Now let's see what perceptions do over the next 12 months.