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Unsubstantiated Public Attacks: Learning from the Toyota Recall Crisis

When faced with serious recalls in late 2009 and early 2010, Toyota had important strategy decisions to make. Though they knew that there were not any engineering flaws (as NASA confirmed in 2011), Toyota decided to take the blame. Instead of pointing fingers, the Japanese automobile manufacturer dealt with the crisis in a way that made them stronger as a brand. What can other companies learn from Toyota’s PR nightmare?

Between October 2009 and March 2010 Toyota appeared in the headlines for all the wrong reasons—unstoppable runaway cars, serious safety defects kept hidden from the public, and failure to even admit internally that there might be serious electrical problems causing unintended acceleration. These relentless attacks came from the U.S. mainstream media on TV, radio, and the internet and from the United States Congress. Almost nothing being claimed was true. As we learned one year later from a government-contracted NASA study, there is zero evidence of electronic problems causing unintended acceleration. And outside of a handful of cases, due to inappropriately stacking floor mats, the only definable cause was drivers hitting the gas pedal when they meant to hit the brakes. What do you do as CEO when you know the attacks are damaging your company’s reputation, you know they are based on pure fiction, and the attacks are occurring outside your native country?

While your inclination might be to come out with guns blazing and go on the counterattack, Toyota took a very different approach. In response, they:

  1. Refused to fight anyone under the policy of blaming nobody but themselves.
  2. Apologized to customers every chance they got.
  3. Immediately went to work solving every problem they could and fixed recalled cars in record time with a record percentage of vehicles repaired.
  4. Opened the checkbook to subsidize dealers, paid for outside engineering and advisory groups to try to find any problems they could find, and invested in a massive overhaul of the company’s infrastructure for safety and quality.
  5. Tasked everybody in the company to carefully reflect on their contribution to quality and safety and find ways to bring their processes to a higher level of performance.

In a November 2010 interview with Liker, Akio Toyoda described his thoughts while preparing for his appearance in front of Congress:

“When I appeared in front of the (U.S.) media in February for the first time because of the recall I was very harshly attacked, I was almost like a sand bag… I thought that if they call me stupid or slow, okay I will take it. But if they call me or Toyota a liar, or hiding something, I decided I would stand up and refute that…We knew the reality, we knew the facts, but I knew that nobody at the time had an ear to listen to our argument and therefore I decided I would never blame others. I would never point fingers at somebody else.”

We believe Akio Toyoda correctly predicted that the U.S. media and members of congress had already concluded that Toyota was guilty on all charges! Nothing he said would change their minds, especially in a foreign country in which Toyota was badly beating the local competition in the midst of the worst recession in decades. On the other hand, in the heat of the negative publicity, surveys of Toyota’s current customers showed that they were convinced Toyota was innocent and very focused on safety.1 Any defense of Toyota would be interpreted by the critics as “defensive”—a guilty party trying to talk their way out of it—and Toyota customers seemed largely convinced Toyota was innocent. An aggressive counterattack would have been pure waste.

But here was a unique opportunity provided by the media and congress to communicate Toyota’s core values to the hundreds of thousands of team members and partners who could actually do something productive. Akio Toyoda wanted to model the behavior he expected of them—do not react defensively, use the energy to look inward and find something you can control and improve. It was time for intensive reflection leading to concrete actions so the company could emerge stronger.

Toyota was just beginning to emerge from the recession, and instead of closing plants and laying off people, had used that crisis as an opportunity to improve safety, quality, productivity, and develop its employees. Once again, Toyota would use the next crisis to fuel the company to improve at an accelerated rate—a rate impossible when the company was busy making and selling cars and basking in the glory of being the number one most successful automotive company. If the organization was focused externally on placing blame this opportunity would indeed be wasted.

The general conclusions of the key parts of Toyota involved in the recall crisis were remarkably similar:

  1. It takes too long from when a customer complains to respond with positive action
  2. The general response to the customer complaints is a purely technical evaluation without considering their subjective viewpoint, level of understanding, or use of the car. For example, when there were complaints about floor mats interfering with the brake pedal the response was to investigate any design defects that would cause Toyota vehicles to be unusually susceptible to this rather than studying use of the cars and realizing in the U.S. customers do not like to take the time to remove the carpet mat and install the all weather rubber mat properly. One could blame the customer for that misuse (contrary to Toyota’s values) or try to take actions to prevent pedal entrapment even when the customer does not properly install the mat.

Digging deeper, the root cause of this gap in responsiveness was that so many decisions were still centralized in Japan, even decisions about the U.S. that involved how Americans used cars, perceived cars, and what they cared about.

There were many deep and serious countermeasures put in place as a result of the reflection and root cause analysis, as summarized in Toyota Under Fire (Chapter 4). Every part of the company responded positively with deep reflection and improvement. Improvements included installing Chief Quality Officers native to the region who were managing officers of the company, promoting regional executives to positions formerly held by Japanese members, promoting several Americans to chief engineer, adding time to the development process to focus on quality, reassigning 1000 engineers to focus on quality, establishing a group of highly trained technicians and engineers (SMART) who would go out to personally investigate the car a customer was complaining about, and the list goes on and on. Toyota will emerge a stronger company for the long term only because of the decades of investing in developing leaders and a culture of team members skilled in continuous improvement and willing to openly surface problems and take corrective action.

1 Christine Hall, “BizPulse Results Mimics Rice University Toyota Study,” Houston Business Journal, March 9, 2010; http://www.bizjournals.com/houston/stories/2010/03/08/daily19.html#ixzz0vTUTWr5u.

About Jeffrey K. Liker and Timothy N. Ogden

Jeffrey K. Liker and Timothy N. Ogden are the authors of Toyota Under Fire: How Toyota Faced the Challenges of the Recall and the Recession to Come Out Stronger (McGraw-Hill / 2011). www.toyotaunderfire.com