Go to the Globe and Mail homepage

Jump to main navigationJump to main content

AdChoices

Entry archive:

Televisions at a Tokyo electronics store were all tuned to Toyota Motor Corp President Akio Toyoda’s meeting with Toyota employees. (Toru Hanai/Toru Hanai/Reuters)
Televisions at a Tokyo electronics store were all tuned to Toyota Motor Corp President Akio Toyoda’s meeting with Toyota employees. (Toru Hanai/Toru Hanai/Reuters)

Driving It Home

Crisis management not Toyota's strong suit Add to ...

Well, it looks like Toyota Motor is having great difficulty putting a lid on this stink.

The stink, of course, is Toyota's ongoing problem involving brakes and accelerators. As Jeff Kingston noted recently in the Wall Street Journal, in Japan there is a proverb: "If it stinks, put a lid on it."

But as Toyota has learned, this was exactly the wrong approach here. Toyota, as Kingston writes, initially denied, minimized and mitigated the problems it was facing.

"President Akio Toyoda, grandson of the founder, was MIA for two weeks and the company has appeared less than forthcoming about critical safety issues, risking the trust of its customers world-wide."

No more. This week Akio Toyoda testified before U.S. lawmakers, specifically referring to the causes of the recall:

"I would like to point out here that Toyota's priority has traditionally been the following: First safety; second, quality; and, third, volume. These priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before, and our basic stance to listen to customers' voices to make better products has weakened somewhat.

"We pursued growth over the speed at which we were able to develop our people and our organization, and we should sincerely be mindful of that. I regret that this has resulted in the safety issues described in the recalls we face today, and I am deeply sorry for any accidents that Toyota drivers have experienced."

So by Toyoda's own words, the stink is out there and he, on behalf of the company, is taking full responsibility for the clean-up.

Frankly, it's hard to imagine what else Toyoda could have done this week. The question is, has this public-relations nightmare seriously and permanently sullied a brand that had until recently been synonymous with quality and reliability?

We can't know that for some time. But is obvious that crisis management does not seem to be Toyota's strong suit. This is as much a cultural issue as anything, notes Kingston, director of Asian Studies at Temple University Japan. His book Contemporary Japan: History, Politics and Social Change is due out in September.

"Over the past two decades, I cannot think of one instance where a Japanese company has done a good job managing a crisis. The pattern is all too familiar, typically involving slow initial response, minimizing the problem, foot dragging on the product recall, poor communication with the public about the problem and too little compassion and concern for consumers adversely affected by the product," he notes.

Japanese companies in Japan don't pay much of a price for negligence and that's part of the problem, he adds. In Japan, compensation for product liability claims is mostly derisory or non-existent. In a nutshell, "producer interests trump consumer safety," in Japan, he says.

The cultural element here is huge and it impacts on crisis mismanagement.

"The shame and embarrassment of owning up to product defects in a nation obsessed with craftsmanship and quality raises the bar on disclosure and assuming responsibility. And a high-status company like Toyota has much to lose since its corporate face is at stake.

The shame of producing defective cars is supposed to be other firms' problems, not Toyota's, and the ongoing PR disaster reveals just how unprepared the company is for crisis management and how embarrassed it is.

In addition, "employees' identities are closely tied to their company's image, and loyalty to the firm overrides concerns about consumers," notes Kingston, adding that "a culture of deference inside corporations...makes it hard for those lower in the hierarchy to question their superiors or inform them about problems."

Kingston says this crisis offers an opportunity to reform Toyota's corporate culture and improve quality assurance.

"This can be done by becoming more focused on the customer, using two-way flow of information and feedback; improving corporate governance by appointing independent outside directors; and making risk management more than an afterthought."

In this, Toyoda used the right words in his testimony, saying he has "personally placed the highest priority on improving quality over quantity, and I have shared that direction with our stakeholders."

He said that recall decisions had been made by the Customer Quality Engineering Division in Japan. But going forward, "When recall decisions are made, a step will be added in the process to ensure that management will make a responsible decision from the perspective of 'customer safety first.'"

Toyota, then, is working on a system in which customers' voices around the world reach Toyota's senior management in a timely manner. Regions will have more local authority, too. This should, if done right, address the cultural issue around "those lower in the hierarchy" questioning superiors or informing them about problems.

Toyota also plans to be more open to outside experts and to establish a so-called "Automotive Center of Quality Excellence" and create the new position of Product Safety Executive."

None of these moves will recoup the $2-billion (U.S.)-plus this recall crisis is expected to cost Toyota in direct costs for repairs and upgrades to existing models. And none will help Toyota much in mitigating the costs Toyota faces in class-action lawsuits.

But in the long run, the moves Toyoda announced may restore the company's reputation and ensure a healthy future.

And keep in mind, Toyota sets out on this new course from a pretty good place. Toyota finished as the third-highest ranked auto maker in Consumer Reports magazine's annual Automaker Report Cards survey, despite the company's recent recall problems. Honda Motor and Subaru of America tied as the top auto makers in this year's survey, announced this week.

Moreover, Toyota's popular Prius took top honours in the Green Car category despite a recent recall for troubles with its braking system's software. Yes, over the past few months, more than eight million Toyota vehicles have been recalled worldwide due to a variety of acceleration and braking problems.

However, David Champion, senior director of the magazine's auto test division, said recalls are "good thing" if managed in a timely and effective manner. He added, that "Toyota, they still make the most reliable cars, according to our surveys, followed by Honda."

So the root causes of that stink at Toyota can be cleaned up and there is much the auto maker has to work with to get the job done.

Report Typo/Error

Follow on Twitter: @catocarguy

 

Next story

loading

Trending

loading

Most popular videos »

More from The Globe and Mail

Most popular