Lessons from Toyota's meltdown
Once a by-word for manufacturing quality, Toyota has taken a beating over its repeated vehicle recalls. Neil Davey looks at how the company has reacted to see what we can learn from it.
The manufacturing mishaps that struck Toyota in recent months created a nightmare scenario. Several of its products had a potentially fatal flaws. Customers' lives were at risk and the firm was facing severe damage to its corporate reputation and brand.
June 2009 - New CEO Akio Toyoda says the company has "become too big and distant from its customers". Weeks later, a new Lexus is involved in a fatal accident – with a stuck accelerator identified as a possible cause.
Nov 2009 - Toyota recalls 4m vehicles in the US following concerns that the accelerators could get trapped by loose floormats.
Jan 2010 – Toyota informs US transport authorities that pedals may have a sticking effect. It announces further recalls and halts the sale of eight models.
Feb 2010 - 500,000 Prius and Lexus hybrid cars are recalled due to concerns over their braking. The company finally begins to publicly address the issues, inluding a televised news conference to apologise for the problems and promising that a taskforce featuring independent sources will review quality.
From a purely financial perspective, Toyota has estimated it will lose upwards of £1bn in costs and lost sales due to the recall. Sales in January reportedly dropped 16%.
Because quality and continuous improvement were so central to Toyota, the recent recalls could shake the bedrock of its brand. But marketing and branding experts point out that its slow public response to the problem added to the negative impact. Where managers should have sprung into action as soon as the first fatal accident occurred, it took seven months before Toyota acknowledged the problem in public.
"Toyota broke the cardinal rule in crisis management: assume the worst," says Judith Ingleton-Beer, CEO of IBA International. "Companies often don't realise they have a problem until it hits the media fan – and nowadays, Twitter, bloggers and YouTube beat most lumbering corporations to it. From a disgruntled employee to toxic waste – assume the worst.
"The fact that the media was able to get hold of this and force Toyota into a defensive position suggests that the company did not understand the scale of the problem or the potential size of the risk," adds Haynes.
To retain sonsumer confidence, product recalls have to be done with purpose, consistency and transparency, says Paul Charles, chief operating officer at Lewis PR: "If there is one key lesson to learn from this fiasco it is that brands need to apologise quickly and mean it. Consumers are growing increasingly perceptive and can smell a cover-up a mile away. Any delay in coming clean and expressing regret is rightly regarded as evidence of being out-of-touch, uncaring or incompetent.”
Continued...
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