Posted tagged ‘Toyota recalls’

The Week in Ethics: The Role of Leaders in Toyota’s Rebuilding Trust

October 31, 2010

Update: December 27, 2012, Toyota agreed to a $1.1 billion settlement in lawsuits related to sudden acceleration.

More than a year has passed since Toyota’s unintended acceleration problem became a crisis after a tragic accident forced the company to begin to address the issue publicly. Toyota has done a number of things to correct the problem and deal with the bigger picture of quality, however, the role of its leaders in helping rebuild trust and reputation is also critically important.

In the last 13 months, Toyota has issued more than 12 million recall notices globally to fix unintended acceleration and other quality issues identified. In February 2010, CEO Akio Toyoda announced he was creating a Global Quality Special Task Force to tighten the system of delivering quality.  A month later Toyota launched a North American Quality Task Force to work with the Global effort as part of improving the flow of information.

Creating these task forces raise expectations. To further restoring trust in the brand, the public needs to hear from Toyota’s leaders what is being done and how that ensures potential defect information will be handled differently.  These periodic progress updates, which employees should also know, can be on their websites, in formal remarks, and given to the media. Toyota has established leadership in its lean manufacturing, so perhaps it can establish and talk about best practices in dealing with quality issues globally to protect customers.

October 26, 2010 Consumer Reports reinstated their “recommended” label for eight Toyota models that were recalled and fixed.   Also that day, Consumer Reports released their reliability report and, based on owner responses to the survey questionnaire, Toyota models were considered among the most reliable of all automotive brands. The sample of owners in the survey who were Toyota owners liked their vehicles. That is validating. However, if Toyota were to become known in the industry for being very proactive in getting and applying feedback received from the Customer Call Center and dealers about potential problems, its reputation would precede it.

Toyota’s quality issues transcended the universe of their customers and exploded onto front pages of newspapers around the world for a prolonged period. Toyota’s definition of stakeholders has forever  expanded; how they communicate with the larger public is part of rebuilding trust.

Ads help but, when you are trying to rebuild trust, precision in language is critical to avoid distraction from skeptics.

The ad said, “At Toyota we care about your safety which is why we’re investing $1 million every hour to improve our technology and your safety.” In response to critics’ challenges, Toyota acknowledged the money was the global Research and Development budget, much of which was spent on quality and safety technologies.

Last week, new allegations surfaced in a federal lawsuit against Toyota filed in U.S. District Court in Santa Ana, California alleging  that Toyota bought back vehicles from owners complaining of sudden acceleration and required them to sign confidentiality agreements that prevented their discussing it. The over 1,000-page complaint amends a multi-party suit against the automaker filed several months ago. Toyota responded denying confidentiality agreements were requested. The statement said Toyota looked forward to defending itself in court and affirmed the speed and thoroughness with which it investigates complaints.

Included in the new complaint is information about a company memo that discussed efforts to minimize the outcome of the crisis and instructs employees to mark emails about sudden acceleration as “secret,” remove attachments, and tells them not to include executive names. The memo could be a rogue effort by someone who still doesn’t understand the rules for rebuilding trust, or it could be a sanctioned way of constricting information. Either way it plays to Toyota’s greatest liability in building back trust — the sense that as a Japanese company, sharing information has limits and transparency isn’t a priority.

Leaders in Japan, in the United States, and in markets around the world, set the tone for the culture, and how the public understands what a company stands for. Toyota’s leaders have seemed low profile since the media and Congressional investigation frenzy in February 2010. As a world leader Toyota has a statesman role. Mistakes were made, mistakes were corrected, a process is ongoing and a public larger than customers has a stake in understanding who Toyota’s leaders are, what they are doing, and why it matters. That, plus process changes, goes a long way to rebuilding trust.

For previous articles on Toyota in this column see Five Ways to Rebuild Trust, Reputation and Image, Focus on Process not People, and Ethics of Greed

Gael O’Brien,              October 31, 2010

The Week in Ethics


The Week in Ethics: Toyota and the Ethics of Greed

March 4, 2010

U.S. Sen. Jay Rockefeller, D-WV, said this week that he had once worked hard to have Toyota locate an engine plant in his state because he knew it was a company built on the philosophy of quality first. “If they designed and built the safest and most reliable cars possible, then sales and profits would follow,” the senator said. “Now it is clear that somewhere along the way public safety took a back seat and corporate profits drove the company’s decisions.” Rockefeller made this comment in opening remarks as chairman of the Commerce, Science and Transportation Committee, which marked the third separate congressional hearing Toyota has faced to date.

In previous columns, I’ve talked about ways Toyota could begin rebuilding trust, dealing with challenges in reputation and image, and restoring what was lost in a process-only focus. Sen. Rockefeller’s comments, and Toyota’s own admission of losing sight of its mission, propel the Japanese auto giant into a growing category of corporate losers – those who shift focus to go after more growth and more profits, at the cost of what gave them a great reputation in the first place. Toyota, once the world’s most profitable automaker, suffered its first losses in its past two fiscal years; the turning away from a quality to a profit focus only created far more problems.

The idea that “Greed isn’t as good as we thought” is one of 10 ideas that will reshape the business world in the next decade, according to a recent Financial Times article. The author points to Bill Allen, legendary leader at Boeing, who inspired the organization to eat, breathe and sleep aeronautics and led them to market dominance and profits. Successor Phil Conduit’s focus on using measurements like unit cost, return on investment and shareholder return didn’t pay off: Boeing had scandals and lost its market leadership. Other companies mentioned — Citigroup, ICI, Enron and Lehman Bros – offer additional examples to future leaders of the quicksand of a profit-at-any-cost approach.

Toyota had a failure of ethical leadership. Delivering to the values of high quality standards and safety is ethics in action.

Ethics is at the heart of creating customer loyalty, creating an engaged workforce, and providing the reality behind the differentiating qualities that marketers use to describe a brand. Failing to build the highest quality product is, in fact, unethical. For Toyota and every other company, ethics and success in business are inextricably entwined. This lesson is proving very painful and costly to have to re-learn.

Gael O’Brien, March 4, 2010

The Week in Ethics

The Week in Ethics: Toyota’s Focus on Process not People

February 25, 2010

Akio Toyoda testifies before Congress

There is a saying “you get what you focus on.” Jim Lentz, the president of Toyota Motor Sales U.S.A., said yesterday in the House Energy and Commerce Committee hearings that “We lost sight of our customers.”

Toyota documents from July 2009 released this week by a Congressional committee include an internal memo citing company success in saving more than $235 million by negotiating a limited recall, delaying implementation of a federal safety rule, and delaying or mitigating other safety regulations, among other things. The focus to limit or avoid recalls was achieved. The problem now is the consequences of the focus.

That Pyrrhic victory, appallingly in its strategic short-sidedness, will probably cost Toyota many times that $235 million savings when all the additional recalls, potential suits, fees to manage the ensuing crisis, and sales and shares losses are calculated. The distraction to their business the last several weeks has been seismic. With congressional investigations, a Securities and Exchange Commission subpoena, rumors of investigations by Japanese regulators and ongoing requests for documents, Toyota is under an international microscope of accountability.

It has been quite a week for public apologies. Pundits can debate whether Tiger Woods’ press conference with hand picked media unable to ask questions was better than the one today by Akio Toyoda, the president and CEO of Toyota, before the House Committee on Oversight and Government Reform. Toyoda made clear that his name is on every car, that when the cars are damaged, “it is as if I am as well” and he gave his personal commitment that Toyota will work “vigorously and unceasingly to restore the trust of customers.” However, for both Woods and Toyoda the apology comes very late in the game, and the road back has incalculable miles to travel.

The reality is that companies lose their way just like people do, not surprising considering it is people who run companies. Toyoda testified that the company’s priorities of safety, quality and volume became confused. As they grew rapidly in the last few years, volume apparently was the driver. Toyoda announced the company is changing how it manages quality control, reinstating the concept of “customer safety first,” plans to improve its internal and external communication around safety, and will create a new position of Chief Quality Officer for North America.

My problem is that all of this is about process or about developing people to execute the process. The culture and values are about doing the right thing according to the process. But, it isn’t about people. Where is the space created for the moral compass to override process when lives have been lost and customers complain about a problem like unintended acceleration that Toyota engineers can’t replicate? President Toyoda would be well served to admit into his inner circle someone who can speak to ethical considerations and pose tough questions that help illuminate Toyota’s choices in arriving at what they say they stand for. Earning back trust and reputation is so much more than good process.

Gael O’Brien, February 24, 2010

The Week in Ethics

The Week in Ethics: Reputation and Image at Toyota

February 15, 2010

Toyota’s challenges of the past several months are more than just a case study of what not to do if you want to avoid a crisis. How events have unfolded actually speak to the nature of corporate reputation, what is perceived, what is real, and how both get managed.

There is a distinction between image and reputation. Image is a perception. It is what is created based on how people react to information, but they may only have selected information. Reputation is defined by actions, what is done.

Toyota’s brand image has grown over the last nearly 75 years to be associated with durability, reliability, quality, efficient manufacturing, and creating value for the customer. Their reputation was built by producing cars that didn’t need constant repairs, held their value when sold and could be driven 200,000 miles or more. Clearly, not having a lot of recalls enhanced their image. Now there is question about whether Toyota knew about unintended acceleration problems and deliberately tried to keep the lid on safety problems to avoid recalls  finding other explanations like customer error rather than defects to explain customer complaints. This and its implications for customer safety will be among the issues addressed in Congressional hearings this month.

In making decisions about what the right thing is to do when problems surface, we have to know what is driving us. If it is saving face and avoiding embarrassment, then we can get caught up in rationalizations and explanations that avoid needing to be embarrassed; thus, image is served. If a company has values and principles that define it and it uses those guidelines to determine its response then it reinforces its reputation. The reality is that reputation is organic; it is earned or eroded every day by decisions and choices leaders and employees make.

In a previous column I addressed the ethical issues involved in Dimitrios Biller’s suit against Toyota. Biller, a former Toyota attorney who headed the national rollover practice, is suing the automaker for how he alleges it handled product liability cases he defended for them. Biller, whose credibility has been challenged, claims Toyota hid or destroyed evidence. Toyota is vigorously defending itself against Biller’s accusations.

The old saw that it takes years to build a reputation and seconds to lose it is true; however, what is more instructive is what we learn about a company and its leaders after a crisis or major setbacks occur and the company finds the road back. It is an inevitable journey because neither companies nor leaders are able to sustain a perfect record.  Just recently, for example, Johnson & Johnson, the gold standard for putting customer safety first, stumbled badly.

Last week in this column I suggested five ways Toyota could rebuild trust.  Managing image is about public relations decisions. Managing reputation is about leadership decisions that get to the core of what the company stands for and the actions that support that. Reputation is continually impacted by what those leading it and inhabiting it decide and do. For Toyota navigating the road back depends on what they do from here. On Friday, Toyota announced they were re-opening a review of unintended acceleration complaints of Tacoma pickup trucks that in 2008 the company had concluded were drivability issues not safety related. That is a start.

Gael O’Brien, February 14, 2010

The Week in Ethics

The Week in Ethics: Five Ways Toyota Can Take the Road Back to Trust

February 8, 2010

Update: March 19, 2014: U.S Attorney General Eric Holder announced a $1.2 billion criminal penalty is imposed on Toyota for “hiding safety defects from the public,” concluding a four-year investigation of Toyota’s handling of its unintended acceleration issue.

Trust and reputation decline in proportion to how big the gap is between cultivated corporate image and how a company actually behaves. For Toyota, the world’s largest automaker, the gap has widened with breath-taking speed since August 2009 when a Lexus ES crashed in San Diego County, California as a result of unintended acceleration killing the four passengers. Toyota may have been consumed internally with what to do about this problem, but externally, Toyota was criticized for dragging its feet and not protecting customers from unintended accelerations.

Toyota initially denied the problem was a defect. Communication was too slow in coming, incomplete, and even conflicting. Confidence that they knew how to fix the problem was undermined by three recalls affecting more than 9 million vehicles globally in the last few months, stopping production of eight models, and continuing to produce the 2010 Prius but making a production change in it without recalling the Prius’ already on the road. (2/9/10 update: Toyota initiated global recall including 2010 Prius and Lexus models in U.S. ) In the void, both the U.S. Department of Transportation and the Japanese Government claimed credit for seeming to push Toyota to action.

To make matters worse, the National Highway Traffic Safety Administration (NHTSA) had been talking with Toyota about the complaints it had been receiving on runaway Toyotas since 2004. While Toyota learned about sticking accelerator pedals in vehicles in Europe in 2008, and installed redesigned pedals in new vehicles last summer, it didn’t recall affected vehicles on the road or recall U.S. vehicles for several more months. The automaker and NHTSA are subjects of hearings this month by two different Congressional Committees.

Toyota’s long professed commitment to customer safety was eroded by allowing a crisis to develop. Here are five suggestions for what Toyota can do to begin regaining trust.

Fixing quality but not reshaping the culture is only a partial solution. Akio Toyoda, the founder’s grandson became CEO last year and announced in his first press conference on the crisis February 5, 2010 he was creating a Global Quality Special Task Force.  The task force outlines a tightening of the system of delivering quality. But, Toyota also must look at its beliefs and constraints about saving face, transparency, the role of disagreements, how authority is challenged on behalf of safety, and even how the Toyota Way principles can be expanded so that the culture ensures that safety and quality are about the well being of its customers as well as lean processes.

Make values and slogans real. Toyota Motor Sales USA President Jim Lentz has said that the company’s goal is to be #1 in the hearts and minds of customers. Sounds good, but only if Toyota employees know what that means and what actions Toyoda will lead globally that leaders like Lentz will carry out in other countries for that intention to become real. If no one internally, right this minute, is thinking about how that can take root in the Toyota culture and creating an action plan, these are only empty words which will increase cynicism.

Re-establish an authentic connection with the customer. If that is what Lentz meant by his hearts and minds comment, then recognize that safety is an emotional issue as well as a design and engineering outcome. It is too soon to know how badly that dynamic was damaged when customers saw Toyota didn’t put their safety first in handling unintended acceleration. A video on the Toyota website has Lentz proudly saying that customers are back and have been very understanding and supportive. That PR positioning should not mislead any Toyota employee or dealer employee into thinking they don’t have a long road back to trust. And it is built or further eroded with each interaction. Those dealing on any level with customers have to be credible to earn credibility.

Encourage and seek out committed employees who challenge decisions by asking questions to help the organization do the right thing. This is particularly hard for a Japanese company. However, when you think about the magnitude of what Toyota will pay for the recalls, in potential market share losses and stock price decline, in potential lawsuit settlements or civil penalties over this, would Toyota rather have had a mirror held up with crucial questions asked by committed employees that might have resulted in different actions being taken or listen after the fact to leaders like Congressman Henry Waxman’s committee in the presence of international media? Dr. Gloria-Jeanne Davis was such an employee for Mitsubishi Motor Manufacturing of America hired after the sexual harassment lawsuits, but able to help the company prevent further problems. This requires reshaping the culture to hear and act on these voices.

Leaders can help establish credibility even in situations where all the answers aren’t known. But the almost invisible profile of Akio Toyoda in this global crisis did not help further trust or build credibility. Given Toyota’s success in the U.S., and how GM and Chrysler have stumbled, it is even more incumbent upon Toyota leadership here and in Japan to be mindful of how to build relationships of trust with stakeholders – which includes not just investors and customers, but local communities, local and international media, and federal and state regulators. Toyota knows this as well as anyone, but why their credibility has been eroded in this crisis comes down to behaviors and actions that didn’t increase trust. If they want to change the outcome, this is where they need to start.

Gael O’Brien,              February 7, 2010

The Week in Ethics


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