With over 8 million cars recalled worldwide, what appear to be big and systemic design flaws that will take significant work to completely overcome across virtually all their major product lines, and a bill to fix all of that running as high as $2 billion in some recent estimates, Toyota has definitely had better times than in the last several months.
Hundreds of class-action lawsuits from people allegedly badly injured or who have lost family members because of these problems are in the process of being filed. The U.S. Congress is holding continued very damaging hearings into Toyota’s knowledge of and process of dealing with complaints. In addition, criminal charge filings are apparently looming for Toyota as well.
In spite of all that, because of Toyota’s long past reputation for building some of the highest quality cars in the business, a much better mix of products than most of its competitors, and deeper pockets, it would seem that Toyota should be well-positioned to drive its way out of this particular road hazard in the long run.
February 2010’s sales figures for Toyota, for example, although not stellar, were only 9% down from February 2009, a month which should have seen the full impact of the hit on Toyota’s quality reputation. Toyota is also seeing its stock move back up slowly and is getting what seems to be strong support at home.
The recalled cars are also slowly but surely making their way through Toyota’s service bays and back onto the road.
With that as backdrop, Toyota is getting its next move in gear, offering a slew of incentives to attract buyers back into the fold. There are Zero Percent financing packages now available for up to 60 months on many of their models, 2 years of free maintenance for new buyers of Toyota, Lexus, and Scion vehicles, and cash rebates of from $500 to $3,000 being paid out as well.
Toyota will get its market share back, for certain. Eventually even the massive recall, the class-action lawsuits, the Congressional hearings, and the criminal cases will all be put behind them.
For me, however, the real damage here is that in the process of all this coming to light we have also learned way too much about the underlying values of how Toyota seems to be run. There are way too many allegations of Toyota having known of problems and having pushed them aside and/or withheld documents from the public, according to a recent series of articles published in The New York Times and The Wall Street Journal (WSJ). The WSJ also reports Toyota is spending considerable effort working to blunt the credibility of alleged whistleblower Dimitrios Biller, a former Toyota lawyer, by attacking him on personal grounds rather than on just on the facts of the case.
In the long run, it is in these issues that you can begin to see Toyota’s most serious strategic problem. They have great products, a track record of automotive innovation that leads the world, and the money to fund their way out of the immediate current crisis. But if behind this is an immoveable corporate culture which is unwilling to face the truth of its own internal problems, this once great company will begin to fall apart from inside, long before anyone on the outside realizes that something is happening that is far more serious than the current crisis.
The real strategic issue then is not about Toyota finding ways to stave off the lawsuits, convince Congress that they are truly serious about fixing the cars, and entice its once-loyal customers to come back to the fold. It is instead for Toyota to learn to embrace and support its own internal critics, which doubtless include many executives and engineers who at least had some good questions about product integrity but were not able to make their voices heard.
It may be tough to listen to sometimes, but often one of the most important assets a company has is the ability of a company’s employees to challenge each other forcefully. Only in such a culture can a company truly achieve its highest possible potential.