AbstractSince2007, however, Toyota has experienced a series of car model recalls that haveescalated into a major crisis where several of their top-selling models (e.g.,Camry, Prius, Corolla) have been fagged with serious potential defects(unexpected acceleration problem, software glitches, steering malfunction,brake system defects).In late2009 Toyota became the subject of media and U.S. government scrutiny aftermultiple deaths and injuries were attributed to accidents resulting from theunintended and uncontrolled acceleration of its cars. DespiteToyota’s voluntary recall of 4.
2 million vehicles for floor mats that could jamthe accelerator pedal and a later recall to increase the space between the gaspedal and the floor, the company insisted there was no underlying defect anddefended itself against media reports and regulatory statements that saidotherwise. As the crisis escalated, Toyota was further criticized for itsunwillingness to share information from its data recorders about possible problemswith electronic throttle controls and sticky accelerator pedals, as well asbraking problems with the Prius. Todate, the 2010 recall crisis has affected about 8 million cars and repair costsare estimated to exceed $2billion. IntroductionOverthe past 30 years, Toyota Motor Corp. has not only been the envy of theautomotive industry but also been held in high esteem as a symbol ofmanufacturing and leadership excellence in the business world. Toyotarecall crisis recently is a hot corporate crisis event debated by researchersas well as market observers.
Besides, such crisis is largely unexpected, giventhe fact that Toyota is a famous and respectable consumers brand according toseveral consumer research and branding survey. Itis thus interesting to understand how the crisis formed, and how Toyota, as arespectable and reputable company face such crisis. Not only are that, Toyotais also chosen because it could be beneficial to understand the crisis ingreater details because as a famous and respected manufacturing company, it issurprise to see the role model, Toyota Motor Corporation that is widely researchedand learned by other manufacturing companies around the world, can suffer fromsuch serious corporate crisis as well, there will be a lot of lessons to belearned from a study on the Toyota recall crisis.
A crisis, typically considered to be anegative issue, can be a positive event in the life of a business firm, such asToyota, if the management involved seizes the opportunity to make appropriatechanges in its operations to facilitate continuing positive growth anddevelopment. However, this opportunity was not initially addressed by Toyota ina meaningful way, and the crisis continued to evolve through subsequent stages,bringing a vast array of negative international criticism. Therefore, it was concluded that Toyotais now in a very difficult position in the chronic crisis stage due to thefailure of its management to facilitate a timely response to the malfunctionsof its vehicles.Thepresent crisis deals with several different malfunctions that were identified,apparently by customers, in various Toyota brands, but publically ignored byToyota’s management.
Therefore, the pre?crisis stage was not appropriately dealtwith by Toyota, and the firm was thrust into an acute crisis that has nowevolved into a chronic crisis.This paper aims to provide an in?depth analysis of the impact of the tsunamion Toyota’s supply chain and how the company manages the recovery of the globalrecall.BackgroundToyota Motor Corporation, Japanese parentcompany of the Toyota Group. Prior to the crisis, Toyota is afamous and fast growing automotive company around the world. The brand name ofit became thelargest automobile manufacturer in the world for thefirst time in 2008.
Most of its nearly 600 subsidiary companies are involved inthe production of automobiles, automobile parts, and commercial and industrialvehicles. Headquarters are in Toyota City, an industrial city east of Nagoya, Japan.ToyotaMotor Corporation was Japan’s largestcar company and the world’s third largest by the year 2000. The company wasproducing almost five million units annually in the late 1990s and controlled9.8 percent of the global market for automobiles. Although its profits declinedsubstantially during the global economic downturn of the early 1990s, Toyotaresponded by cutting costs and moving production to overseas markets. Thecompany represented one of the true success stories in the history ofmanufacturing.
Toyota today manufactures a diverse line-up of vehicles all over theglobe. As an innovative leader, Toyota is well-known for its managementphilosophy and the world’s first mass-market hybrids.Toyotais often considered as the benchmark or the very best manufacturing practicesand quality to be copied, followed or learned by other manufacturing companies(Klefsjö, 2006). This is not something hard to observed, as there are a lot ofbooks written about Toyota and the success stories of Toyota.
However,is somewhat a big shock to the world, as Toyota is supposed to be a companyproducing the very best quality vehicles, at the highest standards and supposedto be the role models to be learned by other automotive manufacturers, could endup in an unforeseen situation (crisis).Asa result of the crisis, Toyota suffered badly, and apparently, consumers arelosing faith on the once great automotive company. How the crisis was managedby Toyota, the global recall and argument arising due to the crisis will bediscussed in greater depth in the next few following sections.AnalysisMichaelCusumano (2011: 35) observes: “It may well be that Toyota managers as well asstaff engineers believed their company had already reached such a high level ofperfection that there was nothing much to worry about”. However, crisis is nota new subject in any business management, and even the top and leadingcompanies may be faced with various forms of crisis at any time that maydiminish its reputation, and as well result in great financial loss. AsToyota Motor Corporation tends to advance in manufacture of automobiles, it iscertain that new innovations are administered on regularly basis in themanufacture of their automobiles and certain materials been used in themanufacture may pass subsequent test in the factory before reaching theconsumer.
Moreover,with continuous usage by the consumer, the automobile might give technical problem(s)due to the new invention that only passed the subsequent test stage.Peopledo instinctively understand that crisis will occur due to many different typesof unforeseen circumstances, majorly natural disasters or man-made errors. Itis very hard to predict natural disaster nor can it be easily avoidable, but itis possible to mitigate crisis due to human errors.
Inthe recent years, it can be seen that man-made crisis is becoming an importantissue to be discussed due to the increase frequency of the occurrences of thesecrisis, as well as the increasingly high damages done to the organizationsinvolved and to the society. However, all makes and models ofautomobiles are at times found to have issues from time to time. The only waythat these issues can be put in perspective, however, is to compare them tocompetitive makes and models.
In the real sense of it, there isno manufacturing company that will boast of attaining perfection as there isalways something new to learn on daily basis. Moreover, no manufacturingcompany’s management will relax because of her stand in the manufacturingworld.Since the establishment of theToyota Motor Corporation, the management and all its staff has always strivefor quality and to maintain their high flagged reputation in the production of automobiles.
Were there serious qualityissues with Toyota?The media fueled the notion that Toyota automobileshad serious defects; the actual data did not support this notion. A definitivejoint study by the National Highway Safety Administration and NASA found no electronic flaws in Toyotavehicles that would cause dangerous self-acceleration issues. In a 2010 postfor Business Week, Jeffrey Liker, an expert that has followed Toyota for over27 years, debunked the issues with the floor mats andsticky gas pedals. For 2012, Toyotatopped the Insurance Institute of HighwaySafety’s list with 15 models in 2012. The National Highway Traffic SafetyAdministration gave the 2012 Toyota Camry a 5-star rating.
This is not to saythat individual vehicles did not have flaws that caused problems. Anyelectro-mechanical device made by man can malfunction. There seems to be nodefinitive data that shows that there was a systematic problem with Toyotavehicles. (Ira K,2012 p5)FindingsAccording to KatsutoshiSakata r&d (2011) in a new report, Toyota’s lead executive for quality “Mostof the recalls stemmed not from the way Toyota built cars, but from the way itengineered them”. Toyota’s recentefforts to become the top selling automaker in the global market place mighthave led to some unfavorable changes in its supply chain management practices,as well as tarnishing some of the core values of the “Toyota Way”, which werepartially responsible for the massive recall. Toyota’s handling of the recallalso reflected the unique “Japanese way” of managing crisis. Decisions made by management.ToyotaInvites experts outsiders to boost quality controls at the recall-batteredautomaker under a program that began in March 20120 to review defect measures.
(2010 p1)Dueon the intensity of the crisis, the Toyota management agreed to pay $1.2billion in a deferred prosecution agreement with DOJ and accept a safetymonitor for failing to disclose to regulators and indeed misleading them aboutaccelerators that became stuck on certain types of floor mats or because ofcertain elements in the accelerator itself. (Ben W. Heineman, Jr. 2014,p5) Impact of the Tsunami on Toyotasupply chain The Toyota management decided to suspendmuch of its production at plants across Japan due to the reoccurring Tsunamiwhich led to a shortage of parts across Japan while some of their manufacturersextended stoppages due to damage to factories. (Reuters 2016 p1). Moreover, this hascaused the affected Toyota companies to lose their consumers to otherunaffected companies across same country face with this disaster.
Lessons from the crisis 1. AcceptResponsibility. This is one area whereToyota seems to be doing a good job, albeit maybe a year or more too late.
2. Aggressivegrowth can create unmanageable risk. Toyota’s desire to supplant General Motorsas the world’s number-one car-maker pushed it to the outer limits of qualitycontrol.3. Getthe facts quickly and manage your risks aggressively. As a company with highreputation, Toyota quickly get the fact that its reputation is at stake, and therebymanage its risk of being defamed by recalling millions of its car in order topacify its consumers.
(Michael C. 2010 p5, 9,18)Proposed Solutions1. Toyota should find out the durablefix for sticky gas pedals for different models of its automobiles.2. The company should preferablyprovide a software upgradation in its different existing models of automobilesand also the new upcoming models.3.
Toyota should have functional riskmanagement team or crisis management team that will respond promptly to anyunforeseen incidence that may probe their reputation.4. The engineering team shouldcollaborate with engineers of other car makes to share ideas on how to improveon quarterly basis.5. The company can also bond with othercompanies who provide support for crisis management.
Recommendation on how to implementthe proposed solutionsTheabove proposed solutions can be implemented in following ways:1. The Toyota Motor Corporation shouldsetup small team to research and design the fixes for the issue. Team shouldinclude experienced engineers, who have helped previously in designing variousmodels at Toyota and the suppliers. Suppliers should work closely with the teamso that they are aware of the processes to follow while designing auto-parts.The company should ensure exhaustive and subsequent test for the fixes beforereleasing it to consumer market.2. The software is to empower thedrivers so that they have alternatives in situations of any failures in future.Some of automobile manufacturers are already using similar kind of software inelectronic throttle bodies.
Their purpose is to interrupt the flow of gasolineto engine when driver steps on pedal brakes while gas pedal is stuck. This willprevent fatality in case of similar manufacturing defects happen in future.Company can look to similar software already begin used by other majorautomakers in the world and then design customize for their automobiles.3. The software upgradation is betterthan providing repairs for the sticky gas pedal because automobiles havethousands of components and usually the problems occurs due to interactionbetween different components .These are quite difficult to identify duringtheir testing .So in case repairs are done to fix the issue by adding orremoving some component parts , car will also have the upgraded software systemwhich will allow to cut fuel supply if self-intended acceleration occurs againwith new repairs.
4. The company should elect someexperienced to meet with other car maker engineers to share ideas. By implementingthis, there will great improvement in the engineering team and will reducetechnical issues that may arise due to man-made errors resulting fromengineering defects.5. Crisis management team shouldinclude experts from all working domains of the company that is engineering,marketing, finance etc .The team members should be well trained to actdecisively and quickly.
Effective and timely actions are very important to recoverfrom crisis.During the recall crisis Toyotainteracted with public quite late while the social media was communicatingdaily with public on crisis follow up .This made the consumers doubt thecompany if it was really was concerned about their safety and also if companyhad any resolution for the crisis.While the company focuses onextensive market expansion globally and increasing production multiple times ,it should also give equal importance to policies and strategies it had beenfollowing since decades.’ Quality and reliability’ were the two key thingswhich had helped build Toyota in these many years but while it aimed to becometop automaker in the world , not much importance was given to them. During thegrowth of an organisation its supplier chain is very crucial as it’s needed tojoin hands with new suppliers in new locations.
Toyota should ensure thesuppliers are familiar with its processes and standards as defined in ‘ToyotaWay’. Conclusion Areview of Toyota Recall Crisis shows that crisis can happen even to the verybest and respectable quality conscious and famous company. In fact, it can beconcluded that successful company may be particularly vulnerable to sudden andunforeseen crisis, as people are already accustomed to success and profitability,with little awareness on the importance of contingency planning. Besides,it is also found that many of the key problems of Toyota happens due to thedesires and overemphasis to growth the company fast, to the extend the qualitymanagement and control of the firm is neglected.
Besides,when crisis started to occur, whereby weak signals can be detected that thesafety of certain Toyota car models are questionable, management did not takecorrective action, but instead focus on how to minimize the financial losses byplanning for a very limited vehicle recall. Both these events shows that theshort-term needs to increase profit by revenue growth or aggressive costsreduction can hurt any firm in the long run.