Categories: Crisis management

3 February 2010

3 comments

Where was Mr Toyoda yesterday?

Made public yesterday, the last words from a family of four: “We’re in a Lexus. . . and we’re going north on 125 and our accelerator is stuck. . . we’re in trouble. . . there’s no brakes. . . we’re approaching the intersection. . . hold on. . . hold on and pray. . . pray.”

They died in August 2009. This weekend Toyota will start work on 2.3 million recalled cars in the US by inserting a stainless steel bar under the accelerator pedal to stop it sticking (though the cars in that recall do not include the type the family was driving). However, the company will also recall millions more cars in which there’s a threat that the mat could trap the accelerator.

Many people – including some accident investigators and Steve Wozniak, the co-founder of Apple – doubt that Toyota is addressing the real problem. They claim that it lies in the car’s software governing the electronic throttle control rather than with the pedals and mats.

There’s been 26 reported incidences in Europe. But news that Toyota first dismissed cases of accelerators sticking as a quality rather than a safety issue has damaged trust here. Meanwhile, the US media and the internet are full of stories of cars driving over cliffs. It’s a PR nightmare.

We know from experience that perception and fear are not easy forces to combat. Especially when at least four lives have been lost and customers are fearful for their own safety (Toyota used the adjective “rare” carefully to keep the level of risk in perspective).

But it is no wonder that the fallout from this episode has hit Toyota’s sales hard. Some Toyota owners are now too scared to drive their cars. Lawsuits are stacking up.

So Toyota had no alternative but to put the full weight of its brand’s reputation behind fixing the safety and the perception problem.

To its credit, in October 2009 the company’s president Mr Toyoda — grandson of the company’s founder — expressed his sorrow over the deaths and he apologised for the company’s performance in the US. He candidly admitted that Toyota was shamefully unprepared for the global economic crisis that has devastated the auto industry, and is a step away from “capitulation to irrelevance or death.”

However, yesterday, the same Mr Toyoda did not lead Toyota’s press conference in Japan which was called to set out the company’s global recall policy. That was a mistake. His absence was an embarrassing PR distraction, as highlighted in The Times today.

Therefore, it is difficult to challenge the view, expressed in the same article, of Ed Merner, president of Atlantis Investment Research in Tokyo:

“The whole thing has been very badly done. They hid from the problem for a long time. They didn’t attack it with full energy and they didn’t react with full energy. It’s crazy that they spend so much on advertising and now they are letting all the goodwill get washed away.”

Toyota better have some clear answers when they come to Washington later this month for their Congressional hearings into the crisis. And Mr Toyoda would be well advised to come in person to face the grilling.

Nevertheless, I rate the chances as high that done right Toyota can fix, reform and move on from this dual crisis of recalls and recession just as many other carmakers have done in the past.

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3 responses to “Where was Mr Toyoda yesterday?”

  1. Peter Walker says:

    Interesting Paul, that you, the FT, Times and even Golin Harris jumps in and has a pop at Toyoda. Some cool cultural and sensible consideration might not go amiss:

    1. Toyoda admitted that the firm unprepared for the recession – what manufacturer was – and automotive production still outstrips the capacity of the market to absorb the product – ask Prof Garyl Rhys at Cardiff Uni. Japanese culture – Toyota ain’t Ford and culturally Toyoda would only appear as a front man to abase himself – fall on his sword if you will.

    2. Apart from the former Apple founders suggestion that this is software and not hardware – the villain of the piece seems to be a components manufacturer in Eastern Europe – there’s a better, and more relevent trail for the news hounds to follow on the whole issue of assembly manufacture and quality assurance along the procurement chain – ask anyone sourcing widgets from China, ask Mercedes about the electrical systems in SL and SLK cars. I know I own one and not even the dealers were prepared to come clean on a fault that threatened to release the airbag as I was driving around the south coast – easier to replace the system and say nothing. Only later did I discover the battle going on over quality control with Chinese suppliers

    3. Surely the key issue is whether the recall and subsequent action was handled well, badly or what. Just think if this had been tyres rather than a component the ‘must have a villain’ brigade would have chasing down a component manufacturer.’

    I suggest and in the interests of evaluating brand integrity, reputation management and public relations management we avoid a rush to judgement and make pronouncements based on outcomes not out put.

    Peter

  2. Paul Seaman says:

    Peter, I acknowledge the cultural sensitivities – but that works both ways. CEOs are meant to lead from the front in such crises in the US and Europe. Wouldn’t it have been great had Toyoda said straight to the world what you just said above about the real issues Toyota faces? I remain a fan of Toyota and Toyoda.

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