As the impact of Toyota Motor Corp.’s massive vehicle recalls to make free repairs unfolds on the world’s automobile markets, at issue are not only the irregularities found with the Toyota models concerned but also the company’s very systems for handling complaints and managing crises. Consumers are also having doubts about Toyota’s corporate culture itself. Toyota has increased its global vehicle sales over the years based on customer satisfaction with product quality and quick-response service. The recalls indicate that these controls were imperfect.
Why did this occur? Some reports cite problems with electronic controls, but this must be further investigated. Unlike with accidents reported in the United States, no complaints have been made about models that use accelerator pedals made in Japan. This indicates there may be problems with the quality control system at Toyota plants outside Japan.
As automakers expand production around the world, parts procurement from local suppliers becomes more important. This requires establishment of systems to maintain quality for locally made products. As automakers try to use the same components on two or more models to achieve economy of scale, a single defect can affect many models.
Toyota’s fast international expansion in recent years is believed to have made it difficult to maintain proper quality control systems in its global operations. Toyota was the world’s fourth-largest automaker in new vehicle sales in 1998 (4,446,000 units). By 2008 the doubling of its sales to 8,972,000 units had made it the world’s No. 1 vehicle maker.
Meanwhile, Toyota overlooked a subtle change in American people’s attitude toward the automaker’s business activity. U.S. consumers welcomed Toyota products for their excellent quality from the 1980s to the 1990s. Toyota’s production method, notably the kanban (just-in-time procurement), won praise as a model system. Toyota’s Prius hybrid vehicle, released in 1997, caught on well with U.S. consumers as an innovative, environmentally friendly model amid global warming and rising oil prices. Now a problem has been found with this vehicle.
The U.S. automobile industry underwent a turbulent year in 2009. General Motors and Chrysler, two of the “Big Three” American automakers, filed for Chapter 11 bankruptcy protection and unemployment soared. People felt less tolerant than before toward foreign-capital companies.
To make matters worse, communication between the Japanese and U.S. governments became bumpy over the planned relocation of the U.S. Marines’ Futenma Air Station on Okinawa following the transfer of power from the pro-Washington Liberal Democratic Party to the Democratic Party of Japan.
Reflecting the political mood between the two Pacific allies, American people’s feelings toward Japanese companies is not necessarily favorable at present, and Toyota could easily be made a scapegoat for people’s frustration.
Three different U.S. congressional committees are about to hold public hearings on Toyota safety problems. Congress once held public hearings on rollover accidents involving Ford vehicles fitted with tires made by Firestone, a unit of Bridgestone Corp. of Japan. Congressional hearings on product safety are sometimes prolonged as U.S. lawmakers take the occasion to impress voters with their personal involvement.
Unless confusion over the recalls is cleared up soon, the resulting harm to Toyota’s public image could seriously curtail the sales of Toyota vehicles in the U.S. auto market. Toyota must be ready to cope with not only recall-related expenses and the negative effects of reduced sales for a while but also with increasing expenses from lawsuits.
Following the announcement of the massive recalls in the U.S., class-action suits have been filed by vehicle owners and other parties concerned about alleged declines in the value of Toyota models on the used-car market.
Toyota must also be aware of pertinent U.S. laws that allow complainants to seek product liability not only for accidents that have actually occurred but also for those that might occur.
Nonetheless, Toyota has a chance to restore consumer confidence by pursuing a higher level of quality. This is unlikely to happen quickly, but Toyota could re-establish itself as an even stronger business concern than before if it thoroughly clarifies the root cause of the latest crisis and shifts its business focus to safety from growth.
Toyota had a bitter experience in the 1950s just after it began exporting vehicles to the U.S. market. It suspended sales of its flagship luxury sedan Toyopet Crown following reports of stalled vehicles on expressways. The lesson compelled Toyota to redouble efforts to improve product quality, paving the way for the company to become the world’s No. 1 automaker.
Toyota President Akio Toyoda pledged at a Feb. 17 news conference that the automaker will return to the basics of the “Toyota Way” and meet consumers’ trust rather than rush to boost sales.
On Wednesday, Toyoda is scheduled to testify before the U.S. House Oversight and Government Reform Committee, which is investigating the Toyota recalls. This could be a great opportunity for Toyoda to impress the American people with his good faith in addressing safety concerns and regaining their confidence in Toyota vehicles.
Yozo Hasegawa, formerly a reporter for the Nihon Keizai Shimbun, is a professor at Teikyo University.
By subscribing, you can help us get the story right.