Brief Overview of Toyota Recall
- Pendal entrapment recall
when the accelerator was pushed down to the floor, it is trap and caught in a misplaced or unsecured floor mat. One of the incident drew public media attention on August 2009
(Toyota response) - suspended sales of all vehicles affected by the pendal
- Sticky Pedal recall
structural problem in the the accelerator, cause the pedal to be hard to push down and slow in return to resting position. There was also reports where the pedal get stuck in the depressed position.
(Toyota reaction) - suspended sales of all vehicles affected by the sticky pedal, and shut down five US plants until they finally announced a temporary fix, by adding a steel reinforcement bar to reduce any excess friction that cause the pedal to stick
- Prius recall
failure of braking capability while traveling on uneven surface experience by drivers, since the system switches on the ABS during the rough roads, it causes the driver to panic more as he/she feel the speed is not decelerating
Five Major Recall and Other issues that lead to the Crisis
Analysis of Conflict Resolution
WHAT ARE THE CONFLICTS?
- Public views on Toyota's responsiblities and reactions towards the customer complaints and demand was very different from the response Akio Toyoda, CEO and Jim Lentz, US President Chief Operating Officer
- The quality of product that users/customers expected from a worldwide well known company of Toyota brand was not up to standards
- American rivals (US congress, Competitors) took this opportunity to bash Japanese based company, this is evidence in 2009, as Ford recall, did not create such commotion
- Internal Conflicts among leaders, Toyoda family and non family management "Some people just got too big-headed and focused too excessively on profit," Mr. Toyoda stated on other management member that thrived to meet production volume instead of quality
Methods of Resolving Conflicts (slow start of Toyota)
- At the beginning, the company lack immediate response which lead to Toyota’s market capitalization dropped $21 billion in January 2010, as the public has expected uncertainty about the number of cars affected by the recalls to further depress the firm’s stock. Many people felt that Toyota was more passive conflict resolution at the time
- Toyota continue to use its traditional method of searching the source of the problem when it was a small company, however the globalized company with many thousand of suppliers, this cause alot difficulty and more time
- The company made an effort to publish a full page ad through media, and public announcement indirectly apologizing the quality issues
- Even though Toyota made a strong effort in resolving its conflict and reestablish its image, US media continue to question the company ability to manage crisis and find a solution for the mechanic issues, some media stated that Toyota miss its Tynenol Moment refering to the success of Johnson & Johnson Tynenol recall in 1982
From A. M. Tybout & M. Roehm - Four Step Framework
1. Assess the incident
- many reports of Toyota manufactured vehicle have pedal and brakes related issues
- raised concern from buyers/users due to uncertainty of the product (car)
- the public relationship worsen as Toyota take a slow and less transparent approach in investigation
2. Acknowledge the Problem
- Temporary shut down the manufacturing plant that uses problematic supplies
- Understand the issue with over focus on production to meet the demand as stated by Akio Toyoda "We focused too narrowly on technical issues without taking full account of how our customers use our vehicles"
- Immediate investigation of the mechanic issues
3. Formulate a Response
- strategically plan out recall procedure and cost of repairing the pedal/full recall of the model
- design commercial, advertisement, and other external news to keep the public inform on the company direction (ex. US newspaper article titled "Toyota's pledge to you" in 2010, Feb), promising high quality and safety oriented product
4. Implement the response
- Akio Toyota accepted the invitation to publicly answer the concern of the US region,
“Given the seriousness of the issue, there is only one person who can answer questions from the U.S. Congress as a representative of the company, namely CEO Toyoda" as stated by one of newspaper (Mainichi S. 2010) - recall the car, and re-emphasize on safety and quality of car in the future
- Through Akio Toyoda, the company will try to tell the public that Toyota will again emphasis first safety, second quality then third volume in the future to come.
Alternatives
- If Toyota was more responsive, as the Harvard Business Review, Toyota Recalls: hitting the skids state "If Toyota had learned that its initial slow response was the reason why the recall issue had become an increasing problem", the company would have avoided alot conflicts and public challenges
- If the company presented an immediate response, it would have shown Toyota was more determine to emphasis concerns on the user's safety before the profit
- If they avoided negoitiated recall, the company might have help improved its the public relationship
Analysis of Image Restoration
Trigger Point of the Toyota’s Cars Recall Crisis
Ø A fatal crash of a Lexus car in USA Aug 28, 2009 due to the gas pedal was stuck aroused the public concern on the “unintended acceleration” problems of Toyota
Ø Massive recalls total of 8.5 millions cars worldwide, including 6 millions in the U.S. Toyota
Result: threatening Toyota
Similar example: Cadbury when Dairy Milk was found having salmonella in 2006. (Cadbury’s mission was to build the wholesomeness, family and community.)
Driving Forces for Toyota
1. Serious attack by U.S. Toyota Toyota
2. A lot of “joking” videos uploaded on YouTube, ironically joked at Toyota
3. NHTSA (The National Highway Traffic Safety Administration) investigations of Toyota
4. Such corporate scandal widespread among the stakeholders including the citizens, the government and the regulators, the media, industry competitors, so on.
What did Toyota do to cope with the Crisis to Restore its Image
Aim: to prevent severe damage to the brand’s reputation and to regain the consumer trust
Ø Expressed Public Apology six months after the serious car accident happened triggering to the crisis
Ø Made use of the extensive media and online channels such as live television, and radio interviews, huge TV advertisement buys, full page advertisement in newspapers, video streaming on Youtube, it’s corporate website, a toll-free hotline, paid search advertisements on Google, regular recall updates for the Company’s 100,000 fans on Twitter and Facebook to communicate with stakeholders to for “Image (Brand) Restoration” (Fawell, 2010).
Ø Set up a committee to monitor the quality issues at a later stage
Ø Made use of her established corporate social responsibilities programs such as taking part of several charities to build the U.S.-Japan grassroots ties like the Center for International Exchange, (Kageyama, 2011) to rebuild her image of being “a good corporate citizen of the world” and “to contribute to economic and social development through corporate activities in the communities.” (Toyota Toyota
Stage / Time-line | Strategy | How to apply |
1st / When the fatal accident occurred | ü Denial | - Attributed the problem to ill-fitting floor matt (Feng, 2010) |
2nd / late Jan & early Feb 2010 | ü Public Apology (Mortification), Corrective Action ü Compensation ü Bolstering | - Toyota CEO Akio Toyoda publicly apologized and announced global task force for focus on quality issues - Cars Recall - Emphasized |
Why the Image Restoration Ineffective
1. Lack of Immediate Response and Sense of Urgency when Dealing with the Crisis
Ø The fatal car accident incident happened on Aug 28, 2009 , however, 1st recall on Nov 25, 2009 (3 months later). 2nd recall on Jan 21, 2010 (another 2 months later). 3rd recall on Jan 29, 2010 , 4th recall on Feb 9, 2010 and 5th recall on Feb 12, 2010 . The lack of immediate response and sense of urgency perceived by the public totally ruins Toyota
Ø The CEO, Akio Toyoda only showed on TV for “Toyota Feb 5, 2010 for public apology and announced a global quality task force to work on quality problems (Feng, 2010). And thereafter, he had not been heard since the public apology.
Ø Perceived by the Public for its long-delayed and less-than-reassuring response at the first place (Feng, 2010).
2. Deny the Quality Problem at the early stage
Ø Not quickly addressed the fault and flaws. Deny the quality problem. For example, Toyota
Ø No clear direction and instructions to the public/stakeholders on how to solve the problem. The five U.S. Toyota Toyota U.S.
3. Unclear/Contradictory messages distrust the stakeholders
Ø The Toyota’s Motor Sales USA’s president-chief operating officer, Jim Lentz denied on the NBC’s “Today Show” on February 1, 2010 that Toyota had moved too slowly in managing the crisis while admitting that the Company had know about the problem since October 2009. He told the public that “this will be under control”.
Ø On February 5, 2010, the CEO, Akio Toyoda made the public apology expressing his being deeply sorry for the problem and promised to set up a task force to address the quality issue. But when pressed in an English statement, Toyoda just said “Believe me, Toyota
4. Cultural Issue
Ø Japanese’s Saving Face culture (unwilling to disclose unpleasant things) lead to denial. “If it stinks, put a lid on it.”
Ø Japanese culture emphasize on absolute loyalty and obedience. Authority only comes from top-down. With such hierarchical organization structure, even the junior staff who are usually the one who spot early signs of crisis are unable to voice out the problems. As a result, it will be unresolved until it turns to crisis. (Hemus, 2010)
“What If” Toyota
Ø Responded to the Problem instantly after the crisis broke out à show the sense of urgency to the problem and sympathy to the concerned parties
Ø Did not deny and discharge the responsibility at the very first beginning à The Public would perceive that Toyota
Ø Identified the problem and make quick decision by showing genuine care/concern to the stakeholders and what sort of immediate action will be taken to protect the well-being such as to announce car recall at once -à Corporate Authenticity is of prior important for managing crisis successfully (Greyser, 2009)
Ø A Strong Leader who could walk the talk and clear the uncertainty of the public towards the crisis by showing correct and sincere information. à A persuasive and inspiring leader can gain the trust of his followers (Gergen, 2003).
Ø Communicated proactively and continuously as adequate as possible to the public and media à A transparent and honest communication can build the integrity of the Organization and transparent and sincere communication is likely to build up the trust with stakeholders
Ø Had already formed a crisis management team if possible before the crisis outbreak à a well-prepared crisis management plan can help to restore the organizational capacity, minimize the loss and explore the future opportunities.
Analysis of Persuasion
For the apology, sincerity is important. People should apologize for their behaviors and accept responsibility for their work ( Thompson, p 128) .Concerning the apologies given by these two presidents; most of respondents in above mentioned survey had emotion of “skepticism” after watching the video. They suspected what the presidents promised in the video about how to improve the safety, quality of the motors manufactured by Toyota although these two presidents always repeated stated Toyota’s car are safe. The Americans found that the apologies had inadequate sincerity.
Furthermore, some other factors also affected the persuasion while expressing the message to the public. Cialdini (2001) stated that liking, reciprocity, authority, consistency, social proof and scarcity are six principles of persuasion. In the apology statements given by these two presidents of Toyota, the first three principles are adopted for the analysis of persuasion in the statement of apologies.
The application of reciprocity is “give what you want to receive” In the case of Toyota apology, the presidents of Toyota wanted to regain trust form the customers and wanted them to buy the Toyota’s vehicle again. On the other hand, the customers wanted to get more information about the quality of the products of Toyota. It is an exchange process and they have expectation on others. Lot of interaction and communication should be established between the customers and Toyota in order to achieve the exchange as well as the reciprocity process. However, in the video we found that the apology either given by Mr. Toyoda or Mr. Lentz was one-way. No interaction was made with other people. It seemed that these two presidents just made their own presentation and tried to give the message to the public directly. It would be better if some audiences had been invited to talk with the presidents to share information and clarify some misunderstandings.
Analysis of Organizational Culture & Knowledge Management
We main review the opening statements given by the Toyota & CEO Toyota Motor Corporation Aiko Toyoda in the Congressional hearing on 24/2/2010 and the public statement given by Jim Lentz, President of Toyota Motor Sales, USA. to assess whether they could persuade Americans to accept their apologies and make use of the apologies to be a beginning to regain trust from customers.
A series of media studies had been conducted among Americans who ranked the video apologies regarding the recall of many Toyota models. We used a study conducted by MediaCurves.com. during March 1-2, 2010, to obtain views’ perceptions of an apology by Akio Toyoda and Jim Lentz. Some of the findings are shown below:-
Do you think that the apology to Toyota owners was sincere?
Lentz Apology | Toyoda Apology | |
Yes | 77% | 67% |
No | 23% | 33% |
Which of the following emotions did you feel while viewing the video? Please select all that apply.
Lentz Apology | Toyoda Apology | |
Anger | 9% | 9% |
Inspiration | 17% | 20% |
Sadness | 31% | 22% |
Skepticism | 46% | 54% |
Confusion | 4% | 11% |
Disturbing | 11% | 11% |
Embarrassment | 14% | 10% |
Pride | 12% | 10% |
Happiness | 10% | 8% |
Please rate the person in the video on the following attributes where 1 represents “Not at all strong in this attribute” and 7 represents “Extremely strong in this attribute.”
Jim Lentz | Akio Toyoda | |
Likeability | 4.6 | 4.1 |
Believability | 4.8 | 4.2 |
Sincerity | 4.9 | 4.4 |
(Source: MediaCurves.com-A Service of HCD Research Inc.
According to the study, we find that the respondents rate these two presidents in the attributes of “Likeability”, “Believability” and “Sincerity” was not high. Although more than 67% of the respondents replied that these two presidents’ apologies to Toyota owners were sincere, their strongest emotion was still “skepticism”. Some comments made by the respondents showed anger to Toyota. Some of their written replies were cited in the following.
I think he appears sincere, but I have serious reservations about a company who ignored all of those warnings. Is he sincere because his name and company are now tarnished? Or is he sincere because people died from Toyota's actions?
I didn't hear him apologies to the death victims
Toyota ought to be ashamed! The very first accident involving a sticking gas pedal should have sent up a red flag to Toyota. The second accident caused by this same problem should have bolted them into action, but it did not. Shame on you Toyota! No more people should have died due to a fault in your cars.
The inadequate sincerity which could be reflected in three areas in our analysis. The first is that the apology came too late. Or we may say that the official explanation by the CEO of Toyota appeared after 1,100 complaints on the Prius brakes in Feb. of 2009. Also after the report made by the National Highway Traffic Safety Administration which received complaints on 34 fatalities and 6 nonfatal injuries connected to the problem since 2,000.
The second factor which affected the feeling of sincerity is that the people viewed the CEO made the apology because of facing lots of pressure from Japan and the US Government. We found the contents of the apology statement showed no concern about the victims and the death in the traffic accident which might be caused by the Toyota’s vehicles. Mr.Toyoda said that the Toyoda’s “priorities became confused “while in a massive growth period over the past decade at the expense of the consumers safety concerns. No direct response about the vehicles of Toyota was safe or not evens the US Transportation Security Ray LaHood bluntly declaring the recalled Toyotas were not safe when Mr. Toyoda gave his statement in the Congressional hearing.
The third area was that these two presidents insisted the problems were limited to loose flow mats and sticking accelerators and not on electronic glitch. The unintended accelerator problem has been linked to up to 30 deaths in the U.S. Until Feb.9, 2010, Toyota announced an additional recall of 437,000 Prius and other Toyota hybrid vehicles for brake failure. Toyota admitted it had a problem with the software controlling the anti-lock braking system of the 2010 model year. However, no resolution had been ready while Mr. Toyoda gave the statement in the Congressional hearing. No concrete plan as well the time table for improving the quality and safety of the Toyota’s vehicles were presented publicly at that moment.
i Liking
Liking is a powerful force. Creating and exploring common interests can
enhance the liking feeling which can be easier to influence people, win friends (Cialdini, 2001). Communicate with same language, needless to say, can shorten the distance between each other. However, in the apology statement given by Mr. Toyoda, speaking English became a gap for him to communicate with the Americans. And most of the time, he looked at the scripts instead of watching the cameras and the members of Congress. So some video viewers criticized Mr. Toyoda’s use of language and skills of presentation. Some comments are shown as below;-
RE: Toyoda Apology
Anyone can read off a piece of paper!
It may be the language and cultural barrier, but I would have liked the CEO, Mr. Toyota to have looked up from his prepared speech more often. If speaking English was a barrier, I would have preferred him to speak his own language from the heart and looked up at the camera and spoke directly to me, so to speak.
ii Reciprocity
iii Authority
In the statements of apologies, two presidents always said that the Toyota’s vehicles are safe and Mr. Toyoda even said that he put his name on the product of his company. However, they did not use some researches or studies shown to the public via media to prove that the vehicles of Toyota are safe and high quality. People are more willing to defer to experts. So the message supported by the experts will be more persuasive.
THE TYLENOL CRISIS, 1982
What happened?
In October of 1982, Tylenol, the leading pain-killer medicine in the United States at the time, faced a tremendous crisis when seven people in Chicago were reported dead after taking extra-strength Tylenol capsules. It was reported that an unknown suspect/s put 65 milligrams of deadly cyanide into Tylenol capsules, 10,000 more than what is necessary to kill a human.
The tampering occurred once the product reached the shelves. They were removed from the shelves, infected with cyanide and returned to the shelves.
What did Johnson & Johnson do?
Once the connection was made between the Tylenol capsules and the reported deaths, public announcements were made warning people about the consumption of the product.
Although Johnson & Johnson knew they were not responsible for the tampering of the product, they assumed responsibility by ensuring public safety first and recalled all of the capsules from the market.
Once the product was removed from the market, Johnson & Johnson had to come up with a campaign to re-introduce its product and restore confidence back to the consumer.
Tylenol reacted quickly and in a positice manner to the crisis stems from its company’s mission to maintain the safety of its public to maintain the company alive.
Analysis of Organizational Culture & Knowledge Management
The Toyota Way
"When my grandfather brought Toyota into the auto business in 1937, he created a set of principles that has always guided how we operate. We call it the Toyota Way, and its pillars are "respect for people" and "continuous improvement." I believe in these core principles. And I am convinced that the only way for Toyota to emerge stronger from this experience is to adhere more closely to them.” by Akio Toyoda, president, Toyota Motor Corporation.
In the business world, Toyota is most famous of its extremely strong corporate culture in continuous improvement – it is known as the ‘The Toyota Way’.
Some key aspects of the “The Toyota Way” are as below:
Continuous Improvement
- Kaizen (改善) – To improve business operations continuously, always driving for innovation and evolution
Continuously solving root problems, not the symptoms
- Genchi Genbutsu (現地現物) – Go and see to Deeply Understand. Decisions are made based on observed facts about the issue rather than on hunches, assumptions, or perceptions. The expectation is that no problem or issue will be addressed without the firm grasp of facts.
- Nemawashi (根回し) – Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly.
- Hansei (反省) –Become a learning organization through relentless reflection.
The strong Toyota production culture has sometime been described as “squeezing water from a dry towel”
Kaizen Mind – Codification or Personalization?
In the HBR article titled “What’s Your Strategy For Managing Knowledge?”, it mentioned two key strategies to transfer knowledge in an organization – Codification or Personalization.
In Toyota’s history, the culture, the wisdom and the knowledge of excellence & continuous improvement was not formally codified. It was simply handed down from employee to employee – and the company has made such person-to-person learning feasible because most of Toyota’s leaders had spent their entire careers at the company. The model for training was the master-apprentice relationship. This strategy works well in the past, however…
As Toyota expands globally, especially with its aggressive positioning in the United States, spreading the culture one-on-one with daily mentoring had become quite difficult with this rate of expansion. There simply were not enough “master trainers” who had been in the US plant of Toyota long enough (and be immersed in this Kaizen culture) available for all the new joiners.
“水能载舟，亦能覆舟”
Water can keep the boat floating, but it can also drown the boat
Apparently, it is this culture of continuous improvement that helps Toyota to become the world’s number one car maker, however, in our analysis, this is also that certain aspect of this very same culture that may have slowed down their response during this recall crisis…
Not surprisingly, Toyota’s typical approach to communications is extremely cautious, saying only the bare minimum that can be absolutely backed up by facts. This is viewed as a key weakness of Toyota in satisfying the media and the general public…
With what have been discussed above, it seems quite clear that certain aspects of this culture become Toyota’s weakness in facing this recall crisis:
Ø Overly centralized decision making & Attitude to continuously solving root problems:
· Slowed down the media response
Ø The pace of business expansion > the pace of human resource development
· The Kaizen mindset & Culture not fully embraced by every staff in Toyota US plants
What-If?
Ø Toyota more appropriately balance the centralization decision making culture with decentralization so that they can react faster to customer request in the U.S.?
Ø Toyota finds a better way to ‘codify’ certain aspects of their kaizen knowledge/culture so that the staff can be even more effectively prepared?
After all – Toyota is still Toyota
It is the strong entrenched culture that eventually will help Toyota to turn this crisis into its opportunity.
During the recent Japan earthquake, not many would doubt that Japan will bounce back, and bounce back quickly, even become stronger, given its extremely strong culture. This is essentially the same for Toyota.
With the double hits of global recession and the recall crisis form late 2008 to 2010, what Toyota did, instead of many other Detroit car makers did to shrink the workforce, was to reinforce The Toyota Way, the Kaizen mindset among its workforce. Given the drop in demand, there are reports showing that while Toyota was running only at 60 percent of their full capacity, it left 40% of the team members available for various kinds of training and kaizen.
Indeed, during the ‘darkest age’ of Toyota in 2009, and amidst the recall crisis, there was actually no sign of a slippage in quality: Toyota brands won 10 of the coveted J.D. Power initial quality awards for the best vehicles in a segment – a lot more than any other automaker. Meanwhile, the Toyota assembly plant in Higashi-Fuji, Japan, received the Platinum Plant Quality Award for producing vehicles yielding the fewest defects - 29 problems per 100 vehicles, comparing to an industry average of 108. In several consumer reports, three of the five most reliable brands (Toyota, Scion, and Lexus) are all “made by Toyota”.
Toyota bounces back!
During mid 2010, Toyota began to recover from the crisis. Market share, recognition for quality, and profitability began recovering quickly. There are more and more data came out suggesting that many of the accusations against Toyota had little basis in fact.
If the start of the crisis was the global recession as well as the Saylor accident in Aug 2009, the major breakthrough of the crisis is definitely February 8, 2011 - that's when the National Highway Transportation Safety Adminstration (NHTSA) released the details of a 10-month intensive study of Toyota led by the leading NASA engineers and scientists.
The U.S. Transportation Secretary Ray LaHood said. "We enlisted the best and brightest engineers to study Toyota's electronics systems, and the verdict is in. There is no electronic-based cause for unintended high-speed acceleration in Toyota." He further expressed his confidence in the safety of Toyota cars, that he had
recently recommended a Toyota vehicle, a Sienna minivan, to his own daughter. "We feel that Toyota vehicles are safe to drive." he said. The hardwork of Toyota started to payback.
In the first quarter of 2011, Toyota reported sales of 433,924 vehicles in the U.S., an increase of 12.5 percent over the same period in 2010.
After the crisis, Toyota is determined to comeback even more stronger.
This is Kaizen, this is The Toyota Way…
------- End ------
What IFFFFFFFFF - A Conspiracy Theory...
Who will be the biggest winner if Toyota get dragged down? 2009-2010: What a good timing!?
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