Toyota executive urged managers to 'come clean'

Toyota's attempt to rebound from a worldwide recall crisis took a double hit this week as Chinese regulators opened an inquiry into uncertified car parts and as an internal e-mail begging management to ''come clean" came to light.

The investigation in China could be damaging for Toyota as the company tries to compensate for its image problems in the US and to expand into the world's largest car market. The Japanese company can ill-afford setbacks in China, where it was slow to enter the market and where rivals, such as Volkswagen, have a far deeper foothold.

Inspectors in China are understood to have searched two Toyota spare-part storage facilities run by the company's Chinese joint venture and found what they said were more than 1700 components that had not received the official certification for sale. Toyota faces fines or temporary restrictions on its activities if the allegations prove true. The emergence of an internal memo this week also reminded Toyota that its safety recall crisis is far from over. The e-mail, sent from one senior American Toyota executive to his Japanese superiors in mid-January, pleads with Japanese management. ''The time to hide on this one is over," the e-mail said. ''We need to come clean."

The e-mail follows a decision by US safety regulators this week to impose on Toyota the maximum possible fine of $16.4-million. That judgment, punishing Toyota for its slow response to safety issues, could hurt the company as it prepares to fight potentially ruinous lawsuits.

Before the January e-mail, Toyota had acknowledged incidents in which accelerator pedals had become stuck in the depressed position. It admitted only that they were caused by loose floor mats becoming entangled in the pedal mechanism. However, the internal e-mails, now in the hands of US investigators, reveal a tussle within Toyota about whether to tell the public of more fundamental flaws in the working of the throttle problems that had not at the time been fully understood by Toyota's engineers and for which there was no clear ''fix".

Irv Miller, who has since retired but was then Toyota's vice- president for public affairs, sent the e-mail in response to comments by a Japanese colleague, Katsuhiko Koganei, a senior executive sent from Toyota's Japanese headquarters to co-ordinate with his US colleagues. Koganei had argued that Toyota ''should not mention about the mechanical failures of the pedal", because the fault's cause had not yet been identified and a statement by the company would unsettle motorists.

''We are not protecting our customers by keeping this quiet," Miller replied before using capital letters to emphasise his concern. ''I hate to break this to you but WE HAVE a tendency for MECHANICAL failure in accelerator pedals of a certain manufacturer on certain models."

The e-mail is among 70000 documents held by US government safety officials investigating Toyota's handling of its ''sticky" accelerator problems. The tone of Miller's comments hints at what Toyota insiders have said was a series of internal rows between the company's US and Japanese headquarters over how the issue should be handled.

Miller's January 16 e-mail expressed hope that a meeting between Toyota executives and regulators in Washington would reach a solution ''that does not put us out of business".

The paper trail under scrutiny by US regulators includes a letter sent in 2006 to Toyota's then president from the leader of one of its unions. The letter spoke of systemic ''safety sacrifices" made as the company had expanded.

Toyota refused to comment on internal communications, but said: ''We have publicly acknowledged on several occasions that the company did a poor job of communicating during the period preceding our recent recalls."