Toyota has experienced a number of monumental setbacks in the past five years: In 2009 it was affected by the global recession, the tsunami, and the Fukushima disaster that resulted in closing Japan’s 50 nuclear reactors which provided 90% of Japan’s energy needs and affected the supply chain for auto parts, not to mention raising the cost of fuel by the equivalent of $97 billion. In 2009 and 2010 gas pedals got stuck in floor mats, which resulted in both major safety and public relations issues for the Japanese automaker. Now Toyota has admitted to having misled the public about how much information it withheld during the safety concern.
As a result of Toyota’s admission, it agreed to pay more than $1 billion to settle a claim from a U.S. federal criminal investigation that lasted four years. In question was whether Toyota concealed safety worries from the U.S. public. The FBI said that Toyota disregarded the safety of the public and called Toyota’s actions “outrageous.” The defects caused unexpected acceleration of Toyotas that led to injuries and deaths. The offenses included failure to recall over two million cars as well as continuing to manufacture new cars with the same defective parts. In addition, the allegations stated that Toyota did not give accurate facts to Congress.
The penalty was the largest ever for an automaker, and nearly 350 times the maximum possible penalty to be imposed by the National Highway Traffic Safety Administration. It sends a powerful wake-up call to other automobile manufacturers that they must be honest about safety concerns that affect the U.S. public. The U.S. Attorney General Eric Holder referenced two wrongs committed by Toyota, leading to its damaged reputation – the defective parts leading to the recall and deceiving its customers.
Toyota did eventually recall more than eight million cars, which is the equivalent of a year’s production. However, the process for U.S. Toyota managers to register complaints was arduous and resulted in a bureaucracy where they were met with defensiveness and skepticism from Toyota in Japan. From 2009 to 2011 consumer confidence in Toyota rapidly fell.
The Japanese carmaker finally admitted wrongdoing in making (or omitting) statements tantamount to misleading safety information. Their current response to the grievances is to redouble their efforts towards putting customers first. The company has made significant operational changes to improve its quality control and to respond better to customer needs.
The acts of omission are antithetical to Toyota’s company edict. The company is recognized worldwide as the source for the exemplar Toyota Production System (TPS), commonly known as “lean management.” (See video below.) A key principle of the system is front-line problem solving as part of the “Total Quality Management.” This framework was taught by Dr. Edward Deming in the early 1950s, when Japan was rebuilding its nation subsequent to the destruction caused by World War II. TPS states “No problem should be left unsolved” and assembly workers are empowered to bring a production line to a halt.
Toyota’s commitment to, and leadership in, efficient and valuable production – with an emphasis on safety – is in sharp contrast to the massive safety recall and the company being accused of a cover-up. This disconnect can lead to “loss of face” – kao o ushinau (顔を失う), meaning loss of respect or humiliation. Saving face is of paramount importance to Japanese culture.
While Toyota is admitting its wrongdoing in conveying misleading safety information to the public, its new president (2009), Akio Toyoda, grandson of the founder, has made major changes to company structure. These changes emulate U.S. organizational management, perhaps influenced by Toyoda’s U.S. business school training. The new president, who is a certified test driver, is urging Toyota to step up its efforts to make increasingly better and safer cars.
By Fern Remedi-Brown