Transcript Accelerating Into Trouble:

Accelerating Into Trouble:
An Analysis of Toyota Motor Company
and its Recent Recalls
Overview
•The multiple recalls of 2009 and 2010
concerning Sudden Unintended Acceleration
involved over 10 million vehicles and resulted in
tremendous financial losses for Toyota.
•Toyota’s reputation of quality and dependability
was eventually questioned as the company was
found to have prior knowledge of the issue,
consistently communicated conflicting messages
and was slow to act in finding a solution to the
problem.
A Tradition of Success
•Over the past 25 years, Toyota has had a steady
increase in both sales and market share within the
automotive industry.
•By the beginning of the 1990s, Toyota commanded an
overwhelming 43% of the Japanese car market, and in
the United States it sold more than one million cars and
trucks for the first time in its history.
•In 2000, Toyota introduced its first hybrid model, the
Prius, continuing the company’s success into the new
millennium and accounting for 75% of hybrids sold in
the U.S.
A Tradition of Success
•In 2009, Toyota was the first company in 75
years to pass General Motors and become the
world’s largest car manufacturer.
•As of 2009, Toyota held over 16% of the U.S.
market share, its largest and most profitable
market.
Sudden Unintended Acceleration (SUA)
•Defined as “the unintended, unexpected,
uncontrolled acceleration of a vehicle from a
stationary position, low initial speed or at cruising
speed, often accompanied by an apparent loss of
braking effectiveness” by the National Highway Traffic
Safety Administration (NHTSA) in 1989
•Was the cause of similar recalls by Audi in the 1980’s
•Despite the research invested in this topic over time,
it still remains unclear whether problems are caused
by driver error, mechanical or electrical problems with
automobiles, or some combination of these factors
The Tipping Point
Source: Channel 10 News, San Diego, California
Off-duty California Highway Patrol
officer Mark Saylor was driving with
three family members in a Lexus
ES350 when it suddenly accelerated
out of control, hits another car,
tumbled down an embankment and
caught fire. While the car was
careening down the highway at
speeds estimated to exceed 100
mph, one of the occupants called
911 and reported that the car had
"no brakes." All four people were
killed in the ensuing crash.
Chronology of the Toyota SUA Case:
August 2009-August 2010
August 28, 2009: Lexus crashed in San Diego, CA and kills all four
occupants. The 911 call recorded the passengers claiming to have
“no brakes.”
September 14, 2009: Preliminary reports indicated the Lexus may
have had the wrong floor mats installed.
September 29, 2009: Toyota announced recall on 4.1 million
vehicles for floor mats and advised owners to put mats in the
trunk.
October 30, 2009: Toyota began sending letters to U.S. owners
notifying them of an unspecified upcoming recall to fix the
unintended acceleration issue. In the letters Toyota said "no defect
exists."
Chronology of the Toyota SUA Case:
August 2009-August 2010
November 2, 2009: NHTSA took the highly unusual step of publicly
rebuking Toyota, calling statements made in the October 30th letter
to owners "inaccurate" and "misleading.“
November 8, 2009: The Los Angeles Times claims reports in an
article that Toyota had ignored over 1,200 complaints of
unintended acceleration over the past eight years.
December 5, 2009: Following an op-ed piece in the Los Angeles
Times, Toyota wrote a letter to the paper reiterating its stance that
the floor mats were the root cause of most unintended
acceleration claims that would be published December 9th.
December 26, 2009: A Toyota Avalon crashed into a lake in
Southlake, Texas after accelerating out of control. All four
occupants died. Floor mats were ruled out as a cause because they
were found in the trunk of the car.
Chronology of the Toyota SUA Case:
August 2009-August 2010
January 11, 2010: Toyota announced its brake override software
fix, where the brake overtakes the accelerator if both are pressed,
will be made global by 2011.
January 21, 2010: Toyota recalled another 2.3 million Toyota-brand
vehicles because of a problem with the gas pedal.
January 26, 2010: Toyota announced it is immediately halting the
sale of all models affected by the January 21 pedal recall, and that
it will shut down assembly lines for those models at five North
American plants for one week beginning February 1st "to assess
and coordinate activities."
January 27, 2010: The Wall Street Journal estimated that Toyota
dealers could lose as much as $1.5 million in profit every week of
the sales freeze.60 Toyota shares dropped more than 10% over the
day and a half after the freeze was announced
Chronology of the Toyota SUA Case:
August 2009-August 2010
February 1, 2010: Toyota announced it had developed a plan to fix
the accelerator pedals and that parts were being shipped to
dealers so they can carry out the repairs. This occurs five months
after the crash in San Diego.
February 5, 2010: Toyota President and CEO Akio Toyoda
apologized for the car recalls and promised to beef up quality
control. “I apologize from the bottom of my heart for all the
concern that we have given to so many customers,” said Toyoda.
February 23, 2010: Jim Lentz, the top U.S. executive for Toyota,
testified before a House committee on Energy and Commerce
stating the company is still investigating whether electronics of the
gas pedal system may be at fault.
Chronology of the Toyota SUA Case:
August 2009-August 2010
February 24, 2010: Toyota President Akio Toyoda apologized
during a congressional hearing for the Committee on Oversight
and Government Reform. He pledged Toyota’s full cooperation
with U.S. government officials investigating safety problems. He
claims electronics are not to blame.
April 5, 2010: The U.S. government accused Toyota of hiding
“dangerous defects” and sought a record $16.4 million fine.
April 8, 2010: Toyota announced it will not contest the pending
fine presented by the U.S. government and agreed to pay.
August 4, 2010: Toyota announced it had returned to a profit of
$2.2 billion in the April-to-June quarter because of strong sales in
emerging markets and aggressive cost-cutting.
Repercussions
Media Response
•When reporting of the August car crash in California
showed a potential link with Toyota, the media
became heavily involved. One study found that 106
of 108 observed media mentions of Toyota during
the August 2009-February 2010 period were
negative in attitude toward the company.
•The coverage focused on:
•Toyota was withholding information concerning
accelerator glitches
•There still was no definite cause for the events.
•Toyotas stance was consistently changing.
Repercussions
Consumer Response
•Buyers who purchased models that would be
recalled later on the same day wanted money back.
•During the month of February, over 1,500
complaints of unintended acceleration were
reported to the NHTSA.
Economic Impact
•Toyota dealers were projected to lose as much as
$2.47 billion in combined monthly revenue from the
halt in sales.
•Toyota's U.S. market share fell by 16% to its lowest
level since January 2006, and its monthly sales
dropped below 100,000 vehicles for the first time in
more than a decade.
Repercussions
Government Criticism and Hearings
•U.S. Transportation Secretary Ray LaHood announced two
major investigations to “resolve the issue of sudden
acceleration.”
•On February 23 and 24, President and CEO of Toyota
Motor Sales, U.S.A., Inc., Jim Lentz and President and CEO
Akio Toyoda testified at Congressional hearings aimed at
solving the problem of unintended acceleration.
•This resulted in a crucial blow to Toyota’s recovery efforts,
and according to Rep. Bart Gordon of Tennessee, “raised
more questions than answers.”
•A survey taken after the hearings revealed that 47% of
respondents felt worse about Toyota’s image after the
hearings.
Internal Discord
Soon after the recalls, an e-mail written by Irv Miller, then
Toyota’s Vice-President for Public Affairs, surfaced on April 8th,
2010 that revealed Toyota had communication and
transparency problems both externally and internally.
•The e-mail revealed a tussle within Toyota’s corporate
leadership over whether or not to inform the public over
more fundamental flaws in the pedal mechanism –
problems that had not at the time been fully understood
by Toyota’s engineers and to which there was no clear
“fix” available.
•Before January, Toyota had only acknowledged publicly
that accelerator pedals could become stuck by becoming
entangled in loose floor-mats.
Responses of Toyota
Denial and Deception
•Toyota’s claims that floor mats were the sole cause of
the unintended acceleration were disproven after the
Texas crash and Mr. Miller’s e-mail surfaced.
•Media reports uncovered information that Toyota
was not releasing, displaying a major void in
transparency.
Action Promised but Not Delivered
•Toyota continually apologized for the effects of the
recall, but never took action.
•A comprehensive plan to fix the pedals was
announced on February 1, five months after the crash
in California.
Responses of Toyota
A Clearer Picture
•A plan was developed to ensure the public that Toyota was
committed to safety after the February 1 announcement of
the comprehensive pedal fix.
•President Toyoda wrote an editorial for The Washington
Post that explained the “top-to-bottom review of global
operations.”
Marketing Actions
•Toyoda launched a set of television ads to air in the U.S.
concerning the recall.
•The “blueprint for fixes” was announced through print ads
and personalized letters to Toyota owners
•A web page was created on Toyota.com dedicated to recall
information.
Application of the Page Principles
1. Tell the truth
Initially, Toyota withheld information and misled consumers
concerning information about the recalls. The true extent of how
much was left unsaid my never have surfaced if it wasn’t
discovered by mass media, which led many stakeholders to
question the integrity of the company.
2. Prove it with action
Toyota expressed strong remorse for the trouble caused by their
recalls through numerous apologies, but they never offered a
solution. Toyota would have greatly benefitted by seeking a
solution amidst the apologies.
3. Listen to the customer
It’s vital for Toyota to listen to their customers for obvious
reasons. Their success as a company on that mutual relationship,
and their expectations must be identified and fulfilled.
Application of the Page Principles
4. Manage for tomorrow
Toyota did both a commendable and condemnable job in regards
to managing for tomorrow. While they rebounded well with public
relations efforts, the short-term gain may be overshadowed by
long-term problems ahead caused by clumsy communications at
the inception of the crisis.
5. Conduct public relations as if the whole company depends on it
Public relations is not to be used strictly in times of emergency,
and Toyota, like many other automotive companies, realize this
now more than ever. A solid public relations presence will be
crucial in ensuring Toyota doesn’t take steps backward in the wake
of its recalls.
Application of the Page Principles
6. A company’s true character is expressed by its people
For nearly six months after the California accident, Toyota’s top
management was nowhere to be found. In this study, character
and integrity determined what course of action was taken and
what would become of those actions.
7. Remain calm, patient and good-humored
Toyota did an excellent job at remaining calm during the beginning
stages of the crisis. However, this patience eventually turned into
inaction and launched the situation into a crisis.
Discussion Questions
1. Can simply seeking to embody the principles of
The Toyota Way navigate the company back on the
path of success?
2. Why is it to the company’s advantage to take a
proactive approach to issues impacting the
company?
Discussion Questions
3. What proactive measures could Toyota have taken
leading up to 2009 that would have allowed them to
prepare for the events that took place?
4. What would be some necessary steps on strategic
management plan for Toyota in the wake of the
recalls?
5. How did the Japanese corporate culture come
into play in the delayed action?
Discussion Questions
6. Will Toyota be able to improve its
response in the future despite the cultural
barriers?
7. How could it have helped Toyota in taking
decisive and timely action in accepting the
company’s responsibility in the issue and
finding a proven solution for SUA?
Toyota has, for the past few years, has been expanding its business
rapidly. Quite frankly, I fear the pace at which we have grown may
have been too quick. 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…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 will do everything in
my power to ensure that such a tragedy never happens again.
- Akio Toyoda, statement during Congressional hearing on Feb. 24, 2010