Question

Search the Web for articles about the Toyota recalls and investigations.

 How have the recalls that Toyota announced in early 2010 affected current public opinion about the company’s record for quality & reliability?

 How has Toyota changed its strategies toward value chain management as a result of these quality & safety problems.

 You are required to write a mini report about the above issues in an A4 paper not exceed three pages.

Answer 1

The Toyota recall crisis 2009-11

The crisis started with a tragic car accident caused when a dealer changed the floor mat in a sedan and swapped it with that of a SUV - this was improperly done and caused a fatal crash. This lead to an investigation by NHTSA and soon became a full blown PR disaster for Toyota as it was forced to recall about 7.5 million vehicles and then suspend sales of 8 of its best selling models leading to millions of dollars per day of lost revenue , not to mention the loss in reputation and brand value for a company that ,till then, was synonymous with quality , reliability and precision.

While the original accident seems to have been caused by incorrect placement of the mats, what happened from thereon is a case study on how not to manage a crisis.

Initially Toyota (post approximately a month after the accident) announced that the floor mats on many of its vehicles were faulty - the car owners were advised to remove the mat and keep it in the car trunk for recall by Toyota. The company also directed dealers to use zip ties to ensure that the floor mats did not interfere with the accelerator in any case. This was seen as too little by consumers . The chairman of Toyota issued public apology approximately 2 months after the accident to the families of the victim and to other customers affected by the recall.

This is the first BIG problem : Toyota failed to appreciate the magnitude of the crisis. They did not exhibit a humane face and did not live up to their brand image in dealing with the loss of life. The first public expression of regret came more than 2 months after the accident.

Shortly after , there were a series of articles published in newspapers that the problem of floor mats causing unintended acceleration was not a new one and in fact, Toyota was under investigation since 2 years by NHTSA (the auto/road safety watchdof of USA) for similar issues. This caused a public outcry against NHTSA which prompted them to act tough and enforce rules on Toyota.

Second BIG problem : Even at this juncture, Toyota could have come forward with a clear, articulate and transparent explanation of the problem and how the company is planning to fix the same. The company spokesperson issued a statement which was technical . Toyota also sent letters to owners which was vague and insisted that the cars themselves had zero defects . With the public opinion pressure building up on NHTSA , it cracked the whip and publicly rebuked the company which added to the PR crisis for Toyota.

Throughout November and December , the company continued to respond to reports by media accusing it of attempting to collude with NHTSA , hide the problem , ignore the problem etc.

Third BIG problem : Toyota, through these crucial months was seen as responding to each new bit of information. It was seen to be moving from one issue to another and not in control of anything. This is not a good move for any company during crisis. The best way to deal with a crisis is to face it head on and attempt to explain in a transparent manner what occured, why and how the company is planning to fix this. In toyota's case, it seems they were hoping that the crisis would go away. They seemed to be in denial.

Finally another tragic accident forced them to recall 2 million vehicles and soon after to suspend sales of eight of its best selling vehicles .

KEY ISSUES :

1. Toyota's reputation for quality , reliability and Japanese precision engineering took a beating

2. Toyota's handling of the crisis was disastrous :

a) they continuously denied that there is a problem

b) they seemed to be trying to hide, obfuscate details

c)no human face

d)seen as responding to a crisis rather than take charge of the situation and own it.

e) the crisis exposed the vulverability in Toyota's supply chain and hurt the brand as it hit hard at the core values of the brand which was quality and reliability.

TOYOTA's SUPPLY CHAIN management has been hailed as a case study in how to "Lean thinking" , manage inventories , ensure proper delivery at the correct time. The famous "Just In Time(JIT) technique was a TOYOTA output. Toyota has more than 200 suppliers who make the components, integrated systems that go into making a single car. At the centre of the whole supply chain, is the OEM - TOYOTA itself. Surrounding this is the first tier compoent suppliers who supply large integrated systems that go into the car - for example, the steering rack. Next to this, is the second tier supplier systems who supply the components to the first tier to make these integrated systems. All the designs and specifications are by Toyota and are manufactured by the suppliers . In the past , Toyota specifically and most Japanese companies worked purely with other group companies or companies based in Japan. This enabled them to closely monitor the quality and ensure zero defects manufacturing.

As the companies expanded to foreign geographies, a host of cost and political issues forced them to appoint local suppliers. The break neck speed of expansion meant that the company took its eye off the quality as it did not have enough staff to monitor all its suppliers. Secondly competition in the US market meant that the Toyota staff was more focussed on reducing costs. Thirdly , single sourcing of components to derive economies of scale added to the problem . To correct this, Toyota went back to appointing 3 suppliers for every component and ensuring that there were enough quality control checks as well as continous monitoring of production lines at the component manufacturers by Toyota engineers to ensure that the JIT system holds up.