Thoughts on Toyota's recall

Above is an image explaining Toyota's permanent solution to its problematic runaway cars. The part is currently being shipping to all Toyota dealers in markets affected (North America, Europe, China, South Africa, Middle East, Latin America) by the recall as we speak. Just when you thought that Toyota can finally put that episode behind it and work on repairing its damaged brand reputation, we now hear news that the Japan Ministry of Transportation has ordered Toyota to investigate into complaints of brake failure in the third generation Prius. A total of 18 brake related complaints have so far been logged to US NHTSA. One driver reported injuries on her neck when she collided with another vehicle after brakes in her 3rd generation Prius failed. While in Japan, at least one death was reported when a Prius crashed into another vehicle at a busy intersection, again due to brake failure.

Ford, GM, Chrysler and Hyundai were quick to prey on Big-T by rolling out promotional incentives specifically tailored to attract Toyota owners. And now the Obama administration along with other me-too politicians like US Transportation Secretary Ray LaHood and one-time Presidential candidate Ralph Nader joining the chorus to demand actions from Toyota. Ray LaHood have told the media that he will be calling TMC President Akio Toyoda to emphasise how seriously the Obama administration is viewing the problem of sudden accelerating Toyota vehicles.

The American media in particular have been having a field day tearing Toyota apart. But we have seen this pattern before, the US media likes to prey on the top guy, over-glorifying the No.2 foreign guy. Two years ago, GM was at the receiving end of sensationalised American press while Toyota was raised on the pedestal. Now that Toyota has dethroned GM, Toyota is now at the opposite end of things while I am slowly seeing more and more repeat stories of VW's intention to unseat Toyota by 2018.

But let's step back a moment. If the US government is so concerned about American safety, what took them so long to act on the Ford Explorer-Firestone (Bridgestone) fiasco? Back in 1970s, NHTSA said that it found no strong evidence to force Ford to recall the Pinto, despite many death and fire due to a design flaw that allowed the Pinto's fuel tank to burst into flames in relatively minor accidents. Then there is the very dangerous handling Chevrolet Corvair which resulted in many fatal accidents, and again NHTSA remained mum about it. Remember that this was the same government who dished out incentives for people to buy gargantuan SUVs, and those in the know are very well aware of the safety reputation of these cars in reality. See, the recent actions by the Obama administration are mere works of political opportunists. Obama's administration was heavily criticised because the cash-for-clunkers scheme benefited Japanese and Korean brands more than Detroit-3. And the closing down of the former Big-3's plants did not help win votes from UAW aligned bodies. When Japan issued a similar cash-for-clunkers scheme, obviously American car brands were snubbed. As for Ralph Nader, well...it's Ralph Nader and for some reason he hates car companies to the core. That reason alone is easy to see why he never got elected as president to the country who invented steel and mass produced cars. Some of his arguments are valid, but in the grand scheme of things,...why pick only on car companies? Tobacco companies, American weapon manufacturers do just as much harm if not more.

The faulty gas pedal at fault in the affected Toyota cars were made by CTS, an Indiana based auto parts supplier. Toyota initially pinned the blame on CTS, an act which totally goes against any management or PR school teachings, let alone the famed Toyota Way. But Toyota was quick to put down these bad PR when TMC's VP Shinichi Sasaki said that Toyota shares the blame with CTS. What many do not realise is that CTS makes the same parts for Ford as well. In fact, Ford was conducting its own investigation was considering pre-emptive recalls, but later confirmed that CTS pedal assemblies installed Ford vehicles were not affected. A couple of months back we hear that TMC targets to cut parts procurement cost by 30% by 2013, and I am sure there were already many drastic cost cutting efforts before this. I know it is difficult to compare but put the pieces together, I am sure you will form some ideas on your own.

Many so called analysts have been downgrading Toyota stocks, and said that Toyota's reputation is in shambles. But TMC does not think so, in fact the company has even raised its financial forecast. Much as we like to pick on the Big-T, but Toyota's strength is not to be undermined, even under such circumstances. The company's ability to manage the logistics of this global recall is a strong testament that this company has laid a very strong foundation and it is going to take more than a major bad PR to put it down. Toyota dealers in America are already putting in place a Toyota Production System style production line style workflow in dealerships to manage the influx of cars coming in to inspection. There aren't many car companies who can manage this crisis. When all this is over, someone should document and write a book on this episode so we all can learn from it. I am sure this will be a management case study for many business schools in the future.

Toyota's problem are not unique, they are common symptoms of companies who expanded too much too fast, bloated with egoistic middle management who became too distant from the customers. Many consultants and industry watchers have previously warned the company that it is stretching itself too thin in chasing very optimistic results. In doing so, it has veered too far off course from the company's founding principles. Something which Akio Toyoda is very well aware of.

But before you call me a fanboy, I do not believe that Toyota is infallible, as posted here.



Related link : Drumming up support for Akio Toyoda.