Friday, 25 February 2011

Toyota Recall: 'can we fix it?'

For a while, Toyota had it all. It was the automotive equivalent of the prom queen: the Japanese automaker was loved by investors, crooned over by the media and – most importantly – trusted by consumers.

And then it all went wrong. Allegations about dodgy accelerator pedals saw it compelled to announce a massive recall in late 2009 and early 2010. Most of the fall out occurred in the US. But recalls in China, Europe and Japan had the rest of the world raising eyebrows too.

A year on and it seems Toyota is still not out of the woods. Yesterday, the doyen of ‘kaizen’, or ‘continuous improvement’, announced yet another recall. A further 2.2 million Toyota and Lexus (a Toyota subsidiary) models are to be withdrawn from the roads in the US. 

The obvious question is ‘where did it all go wrong?' Excessive growth, concludes Stephen Gardner in Ethical Corporation’s special Briefing on Classic Corporate (Ir)responsibility Case Studies. Toyota’s international growth has been nothing short of spectacular in recent years (Revenue shot up 41.5% between 2005 and 2008). But at what cost? Answer: quality oversight. In short, the rush for market share won out against “Toyota’s traditional, methodical” approach. 

Perhaps the more pertinent question, however, is ‘where to go from here?’ The European Academy of Business in Society’s director-general Simon Pickard provides some helpful hints: acknowledge your faults, implement ‘clear and transparent’ systems of redress, accept customer criticism, cooperate with regulators and increase quality assurance.

Toyota was guilty of being slow in coming forward. While the company was going global, the company’s management was busy staying local. So when crisis struck, Toyota’s hierarchical decision-making structure reduced its agility to respond. As for its transparency, a hearing by the US lower house judged the company’s initial responses as “ambiguous”.

To Toyota’s credit, it’s since gone all out to turn the situation around. The tone started from the top. Company president Akio Toyoda went on record with a comprehensive mea culpa. “We pursued growth over the speed at which we were able to develop our people and our organisation.” That’s some confession. To follow it up, he ordered a “top-to-bottom review” of its global quality assurance processes. New safety initiatives are also being rolled out.

Toyota also has revved up its communications - another all-important step in crisis situations. Advertising campaigns, media interviews, free phone customer service numbers and dedicated websites – all have been used to reassure customers and send the message out that the company's cars are (or soon will be) safe.

Reputations famously take a lifetime to build and only a few minutes to lose. Toyota remains in a PR mess. How it acts now and in the coming months will be critical to winning back consumer confidence. Its response measures so far look sound. In the long run, they should - to borrow from author H.G. Wells – prevent the crisis of today becoming the joke of tomorrow.

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