Toyota’s vehicle recalls: responses, problems and concerns 

Introduction
Between October 2009 and July 2010, Toyota Motor Corporation recalled 8.5 million cars and trucks. The design and quality problems that caused the recalls, and expenses related to the recalls, were obviously of great concern to the company. Repairing defects will cost several billion US dollars and it is not clear whether the company will suffer serious long-term effects due to the recalls. Its reputation for quality had become well established over several preceding decades, particularly in North America (its largest and most profitable market).
Media attention to its problems has now been somewhat lessened by the BP disaster. While recalls are relatively common in the automobile industry, Toyota’s problems gained widespread attention because of: 

(1) the number and size of the recalls; 

(2) the company’s longstanding reputation for producing high quality vehicles; 

(3) the company’s slow and inadequate responses to the problems; 

(4) concerns that Toyota’s commitment to quality may have been impaired by its rapid expansion and emphasis on profits.

Of the 8.5 million recalls, the majority were related to unintended acceleration problems (Nation, 2010), or failures to respond to pressure on the brakes. At least 52 deaths were linked to these problems (Thomas and Krisner, 2010). The unintended acceleration problem was largely solved by securing loose floor mats that could snag gas pedals. The problem of accelerators that could sometimes stick required a design change.
Separately, Toyota recalled some of the hybrid Prius automobiles because the company found a design problem with the brakes that could cause poor performance on slippery or uneven roads (Sobel and Simon, 2010). Other problems were claimed to be due to failures in the electronic control systems. Following a number of complaints regarding vehicles that sped up, another one came from a Prius owner who said his accelerator stuck while he was driving on a Southern California Freeway. Investigators from the US National Highway Traffic Safety Administration and from Toyota found no problems with the vehicle (Spagat and Thomas, 2010). In July 2010, it was disclosed that at least some of the reported cases of unintended acceleration were caused by driver error rather than defects in the Toyota control systems. In these cases, a preliminary investigation by a US government agency has indicated that onboard instruments showed that the drivers had their feet on the accelerators rather than on the brakes at the time of the crash. Figures or estimates of how many of the problems were due to driver error will not be available for some time (after further investigation and analysis). Some of the many recalls during the period were required because of a wide range of other problems.

Two other examples of the reasons for and scope of the recalls

In China in December of 2008, before some of the more massive recalls, Toyota recalled 120,000 Crown, Reiz, and Lexus cars produced there between 2005 and 2006. The Chinese Administration of Quality Supervision, Inspection and Quarantine said a manufacturing defect could cause the electric power-steering systems to fail (Toyota, 2008). On Friday, July 2, 2010, Toyota recalled a total of 270,000 Lexus and Crown vehicles, their luxury brands.
This recall affected their vehicles worldwide, and was to fix valve springs that could cause the vehicle to stall in traffic. Of this number 138,000 were in the United States; 91,903 in Japan; 15,000 in Europe; 10,000 in the Middle East; 6,000 in China; and 8,000 elsewhere. About 200 complaints had been received, but no accidents or injuries reported. This covered models produced between July 2005 and August 2008. On Monday, July 5, 2010, Toyota began recalling another 90,000 Lexus and Crown branded vehicles, though this time only in Japan (Kageyama, 2010).

Poor communications and slow responses

Of great concern to many Americans was Toyota’s slow, and in US culture inadequate, initial responses to reports of problems with the company’s vehicles. The company was fined a record $16.4 million by the US government for responding too slowly to the crisis. Even nine months after the recalls began, an analyst with Nomura Securities in Tokyo said the company is not doing a good job in communicating with the public about what it is doing to improve quality checks, and thus it is difficult for people to believe that the company is taking the customers’ view as it promised it would (Kageyama, 2010).
Outside observers, and eventually Toyota officials themselves, blamed poor communications upward for the slow response to problems. Managers in Japan responsible for overseeing American operations received many warnings from Toyota’s top US management about complaints. But they were slow, or failed entirely, to pass on these warnings to top management in Japan. An eventual response of top management in Japan was to remove one intermediate level of managers between top US and top Japanese management (Sobel, 2010), assumedly transferring the middle managers to other positions or allowing them to retire.
An additional problem may have been a feeling in some large Japanese companies that the Chief Executive Officer should not become directly involved in details of operations. Akio Toyoda had been appointed as CEO of Toyota in June of 2009, but until February 5, 2010 he had not made any public comments about the quality problems that had been occurring since before he took the top position, or even about the major recall of 2.3 million US cars on January 21, 2010 after he became CEO. He finally ‘emerged from seclusion’ on February 5, 2010 (Kageyama and Foster, 2010). Toyoda said: ‘I personally regret that we have caused worry for so many people’ and ‘I apologize from my heart.’ He said that the problem had created a ‘crisis situation’ for the company, but did not explain what had gone wrong (Sobel et al., 2010). In Japan, an apology goes a long way toward being forgiven, but in the US people are generally more concerned about what will be done to correct the problem. Even in Japan his message is not getting through. Complaints about confusion are coming from even ‘ultra-loyal Japanese suppliers’
(Sobel and Reed, 2010).
It has also been suggested that the people who run Toyota had been ‘unable to comprehend that its cars could be less than perfect.’ Its marketing group continued to refuse to accept that its cars might have problems, though some accounts indicate that acceleration problems may have come to light as early as 2002. This lack of awareness of the problems, especially by top management, may have been what led the company to continue selling cars with faulty accelerators and brakes (Pilling, 2010).

Concerns about Toyota’s commitment to quality: effects of rapid growth and stress on cost-cutting

Of even more concern to some is the surfacing of information that Toyota’s increasing emphasis on continually controlling/reducing costs, coupled with very poor upward communication, has actually threatened quality.
An independent study by J.D. Power and Associates in the United States, based on 82,000 responses regarding the number of problems new car owners found after having their cars for 90 days, indicated that Toyota owners now report more problems than Ford owners (Simon, 2010).
In 2006 Katsuaki Watanabe, then Toyota’s CEO, was increasingly worried that quality was slipping, that Toyota’s engineering practices and factories weren’t efficient enough, and that the company was losing its competitive edge. In the United States in 2005, Toyota had recalled more cars than it sold. Watanabe wanted radical change to reduce the number of components used in its cars, and to build new more efficient and more flexible plants. His objective was to cut costs by about $4,000 per vehicle. Additionally, he pushed rapid expansion overseas. The rapid growth, as Toyota attempted to overtake General Motors, also led to excess capacity and eventually to losses in the recession in 2009.
In his previous positions before becoming CEO, Mr Watanabe had introduced innovations that did make the company much more efficient (Shirouzu, 2006). Complete redesign did not prove to be attainable, and rapid growth was causing rapidly increasing quality problems. Part of Toyota’s present quality problem is believed to be due to the increased complexity and use of electronics, and the need to buy more components from outside suppliers. Engineers have become more specialized and fewer people understand how everything works together (Harding and Sobel, 2010).
One analyst has suggested that the company’s pressures on suppliers to keep costs low, and to keep the costs of its own labor down by using more part-time labor, have compromised quality (Pilling, 2010). An executive in a US supplier company said that Toyota required that his firm reduce prices by 10% for each new generation of parts. This led some analysts to conclude that scrimping by suppliers has caused quality problems for Toyota vehicles (Welch, 2010). In recent years, some Japanese workers have felt underpaid, overworked, and less loyal to their companies, thus contributing to production line problems. Part of the labor troubles in Toyota’s plants in China was due to the fact that their workers there felt they were underpaid relative to what workers at plants operated by other foreign companies were receiving. They also felt that their grievances were not being responded to within a reasonable amount of time. Of course, the local Japanese managers could not make any changes without approvals from Tokyo. These took a long time to obtain –
if they could be obtained at all.
In 2010, Toyota announced that they would reduce their labor force in Japan by 15%, on top of a previous 15% cut, in order to move more production to lower-cost overseas plants. This was a great change for a company that years ago wanted to keep as much of its production as possible in Japan to maintain employment in the country and to maintain strict quality control. Status in 2015 is that Toyota is continually troubled by quality issues and has recalled 637,000 cars because of airbag problems.

Concluding comments

Toyota should of course attempt to determine the underlying causes of continuing quality problems, and methods for fixing them. Toyota also needs to provide faster and more well thought-out responses to reports of potential quality problems. This involves improving internal communications, and improving communications with customers and the public as to the extent of problems and what is being done about them. It has even been even suggested that if the recalls are a result of serious problems in the company’s procurement policies, labor policies, and/or manufacturing policies, Toyota may need to overhaul its design, engineering and manufacturing systems (Welch, 2010).

Questions

1. What do you think the long-term effects of the recalls will be on Toyota?

2. What, if any, cultural issues appear to be involved in this case?

3. Why did Toyota’s American managers appear to have such trouble in getting action from Toyota’s top management in Japan?

4. Why was Toyota’s CEO so slow to talk to the public about the company’s problems?

5. What are the apparent views of Toyota’s top management with respect to social responsibility?