This morning, Toyota is to display a small hybrid car priced less than $20,000 that is expected to get more than 50 m.p.g. – and could prove to be the most pivotal vehicle unveiled at this year’s Detroit auto show.

It’s unclear whether the new subcompact car will be sold under the Toyota, Scion or even an expanded Prius brand. But it shows that Toyota sees hybrid technology as more marketable than plug-in electric vehicles for the foreseeable future, as do many experts.

“This makes a lot of sense. People will only embrace new technology if it is easier to use or cheaper,” said David Champion, director of automotive testing for Consumer Reports.

Although Toyota raised its share of the U.S. market to 17% from 16.7% in 2008, the nation’s second-largest automaker has hit its share of speed bumps as it enters 2010.

The company’s largest U.S. recall, covering 3.8 million Toyota and Lexus vehicles, was triggered by reports of unintended acceleration that may have contributed to more than 20 fatalities.

It raised questions about Toyota’s once-unshakable reputation for quality. The recall also caused President Akio Toyoda to make a public and emotional apology to families who lost loved ones in fatal accidents.

Toyota expects to lose more than $2 billion for the year ending March 31, despite posting a $242-million profit between July and September. In March, the automaker will close the New United Motors Manufacturing Inc. joint venture in Fremont, Calif., which it said was no longer economically viable after partner General Motors withdrew last summer.

Still the leader

But competitors hoping these developments add up to Toyota’s demise might be sorely disappointed.

“They’ve got the highest consideration rating of any manufacturer, but being the leader has created a huge bull’s-eye on their back,” said Stephanie Brinley, an industry analyst with AutoPacific Group in Troy.

Just last week, Toyota maintained its industry-leading ranking in Consumer Reports’ annual brand perception survey of 1,750 people in early December. Toyota registered a ranking of 196, followed by Ford at 141, Honda at 135 and Chevrolet at 124.

Still, Toyota has problem areas. Its Scion brand has stumbled in attracting younger buyers. Its reputation for dependability has been buffeted by criticism that too many of its vehicles are bland appliances.

“We have to listen to our customers and make better cars,” said President Toyoda in October.

Growth, building new plants in the U.S. and Canada and training new employees took priority over small things like the richness of interior materials or the feel of certain instrument controls.

“The attention to detail Toyota used to put into their products was really remarkable,” said Consumer Reports’ Champion. “Toward the middle of the last decade we saw some cracks in their armor.”

Learning from mistakes

History suggests Toyota doesn’t make the same mistakes twice. After last year’s recall and the decision to close NUMMI, leaders have set three objectives, according to its top North American executive Yoshi Inaba, who is to speak Tuesday at the 2010 Automotive News World Congress in Detroit.

“We must strengthen our genji genbutsu or our practice of going and seeing problems,” Inaba said. “We must establish more regional decision-making. And we must recreate a passion for our products.”

Solving the passion problem will take time. Toyota, Lexus and Scion will introduce 10 redesigned or freshened models over the next 12 months, Don Esmond, senior vice president of Toyota Motor Sales, said last week. A new Sienna minivan reaches showrooms next month.

“It’s a more evolutionary styling change, a bit like they’ve done with the Prius,” Champion said.

Karl Brauer, editor-in-chief of the consumer automotive Web site Edmunds.com, estimates it will take at least three years for Toyota to alter perceptions about the styling and performance of its models.

“It will take serious self-analysis and willingness to change on their part,” Brauer said. “They much prefer to make cars that are comfortable easygoing conveyances.”

But for now, Toyota is doubling down on its hybrid bet when many competitors are pumping big money into plug-in electric cars. That may prove to be a risk worth taking.

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