Germans remained indifferent about Toyota's woes

In the recent Geneva Motor Show, executives from BMW and Mercedes were asked if Toyota's Lexus recall issues would lead to Mercedes-Benz and BMW trying to grab sales from Lexus in the United States.

“I will not, and I mean that seriously. It's not what we do. At the end of the day they are still a good company."
Ian Robertson, BMW's sales and marketing chief.

"That's not the way we do business." Joachim Schmidt, Mercedes head of sales and marketing.

Adopting predatory tactics could sometimes backfire, and car companies with a long history in the industry knows this all too well. It appears that more "noob" companies in the global arena, or ones who seem to never learn from history are the ones adopting predatory marketing to capitalize on Toyota's woes.

Hyundai was one of the first to launch first strike when it announced USD 1,000 incentive for Toyota trade-ins. GM and Ford participated too. Hyundai embarked on a marketing blitz, which culminated in their 8 Super Bowl spots, many of them which kept banging on Hyundai's quality. But very soon after that Hyundai had to issue a recall involving 46,000 Sonatas in South Korea and 5,000 in USA (of which 1,300 have already been delivered). The recalls were caused by defective door locks. Between Dec '09 and Feb '10, the Korea Transportation Safety Authority recorded 123 complaints from the Sonata YF, 49 from gearbox and electrical, 45 from wheels and driving problems and 11 from engine while the remaining others were not revealed in detail. The YF generation Sonata was intended as a model that is supposed to radically push the company's brand image further upwards.

BMW had some major issues with the nikasil lined engine blocks in the 90s, while Mercedes had a very high profile issue with the W168 generation A-class that failed the Elk / Moose test. The W211 generation E-class and their derivatives also had issues with the Brake-by-wire controls which Mercedes found it to be so problematic (680,000 units recalled) that it was removed entirely from the later year models. Those who have been in the game long enough know that when others fall, it is best to keep quiet and learn from the mistakes of others. You never know when you'll be at the receiving end. It is a very simple philosophy that parents would teach their children, one that has real applications in the business world as well.

Hyundai is a new kid in the top-5 car makers club and is understandably very eager and ambitious. But its antics are viewed by the old boys as that of a noob. Quality consultants have expressed their concerns that Hyundai's effort to ramp up quality is by increasing quality inspection gates. Which of course goes against Toyota's principle's of quality. Increasing inspection gates reduces a plants throughput, increases per unit cost and does not solve the root cause of the quality issue in the first place. It is a countermeasure, not a solution. Even if one choose to discount Toyota's long renowned expertise in quality due to their recent problems, W. Edward Deming, the man who thought GM (which didn't listen) and Ford as well as post-war Japan (both which listened) on quality would have agreed that quality cannot be inspected, it has to be built in.

Hyundai's effort to close the quality gap is taking up a lot of time as well as costing significantly more, and is only viable in the short term due to favourable currency exchange rates. Hyundai is also expanding itself very rapidly, not too dissimilar from Toyota in the 90s, although the company still have a far narrower product range compared to Toyota. But we have seen how Toyota tripped itself over by stretching themselves too far. The irony is that Toyota's drop in quality can be traced right up to the point when the company started shouting quality in its commercials, in the late 90s. Ideals on product quality is best left to be spread by owners and the general public, exactly the way Toyota sold its quality values in the old days. Lexus's tagline of "The Relentless Pursuit of Perfection" might seem hollow now. As Lexus sales volume increases to match that of established players from Europe, Toyota is finding it hard to keep to their promise of pursuit of perfection.

Of course the Germans harbour intentions to grab sales from Toyota's Lexus! You can bet your pint of Paulaner. But they don't shout their intentions blatantly in their promotions. They use indirect means, like increasing ad expenditure and improving brand presence, which is the strategy used by VW of America. Never will they offer incentives / promotions specifically only to Toyota owners. That only serves to devalue their brand. A cheap trick. The Germans know this part of the game well, but it appears to be lost to the Koreans. There is a German word for taking pleasure at the misfortune of others, Schadenfreude. It's in their vocab. And it is a big no no in German corporate culture.