One of the world’s top automakers, Toyota was once one of the leaders in automobile and business improvement and manufacturing. However, in 2009 the top builder of reliable and high quality cars went through one of the largest recalls in the history of the United States. Consumers had considered Toyota one of the top in the race for automobile and automobile selling among car manufacturers. They have always had a reputation as being a leader of quality and efficiency in terms of their production and manufacturing standards. Since the recall Toyota has taken a tremendous blow to its reputation and its loyal customer basis. Consumers are questioning whether Toyota was hiding the truth from the public regarding their well know accelerator issues and why they were trying to fix the problems after the issue became serious and not immediately. Some may question if this incident will permanently affect Toyota’s reputation or if Toyota handled this situation properly. In this paper we will discuss these questions as well as the cause of the problem.
Several different Toyota and Lexus models were reported to have gotten in accidents regarding acceleration issues. The accelerator’s in some of the Toyota models were getting stuck, which did not allow the drivers of these vehicles to slow down or stop in time to prevent an accident. When this issue was originally brought to light Toyota claimed that “faulty floor mat placement” was to blame and that the gas pedal would get stuck behind the floor mats which would cause the inability to slow down or stop. According to Bob Carter, general manager of the Toyota-brand division of Toyota Motor Sales USA “ The risk of the accelerator getting jammed is strictly a problem of unintended loose or ill fitting floor mats ( Niedermeyer)”.
“Toyota refuted speculation in the press that other defects might be causing its vehicles to accelerate uncontrollable, citing its own and federal safety studies (Niedermeyer)”. After further investigation by the National Highway Traffic Safety Administration the actual problem may not have anything to do with “faulty floor mat placement” but with several model’s accelerator mechanism. They found that “the design of the accelerator pedal (“one-piece, nonarticulating”) allowed it to become easily entrapped in the groove of the rubber all-weather floor mat if the rubber mat was not properly secured with at least of the two retaining hooks (Jensen)”.
Toyota finally issued a consumer safety advisory to all Toyota and Lexus owners at the end of September 2009 and at the end of October 2009 mailed certain Toyota owners safety notices to alert them of the potential problems. It is still unknown the exact date that Toyota knew their models were faulty but it is known that reports of the faulty vehicles began arising as early as 1999. The initial problem was not made public until problems persisted over the next 10 years. Even then it took the death of 4 individuals in California driving a Lexus with a stuck accelerator to final discuss Toyota’s accelerator issues. Toyota then announced they would be recalling millions of models of Toyota Vehicles. There were several Toyota models effected which include the company’s three best sellers- the Camry, Corolla, and Rav4 SUV. “Between them, they accounted for more than half of the Toyota brand’s U.S. sales in 2009 (Isidore)”.
Although Toyota should have taken this situation more seriously years ago when the problem first happened, are they really to blame? When the accelerator problem happened to only a few vehicles throughout the years it’s hard to say that Toyota is to blame. I think the fact of the matter is that they tried to pass the buck blaming the floor mat placement instead of really investigating the issue. Had they investigated the issue more carefully consumer’s confidence in Toyota may not have been tarnished. People are not buying a Toyota for just their looks, they are buying the Toyota brand because of the fact they are known to be a reliable and safe vehicle that can last “forever”.
Chris Isidore says it best when he says” For years, Toyota Motor was the automaker that could do no wrong. Now it’s made a major mistake likely to have a lasting impact on the company (Isidore)”. Not only did the recall effect some of Toyota’s best selling vehicles it caused five North American plants to halt production which affected about 14,000 employees. To halt production to its vehicles is tough in an economy where there is strict competition. Erich Merkle, president of Autoconomy.com, an industry analysis firm says “American rivals like General Motors and Ford Motor have similar vehicles to the ones recalled by Toyota, which are far more competitive than they’ve been previously. Loyal Toyota customers who decide to look at other offering are more likely to find something they like than they might have been in the past. Toyota fending off those rivals was going to be enough of a challenge without the safety issues.”
Toyota does realize the negative impact this recall has is definitely not positive but they are determined to restore consumer’s confidence in their products. Many experts think that “the damage to the Toyota brand and the company’s sales may already have been done (Isidore)”. Toyota’s stock prices have gone downhill ever since the news of the recalls went public. Although the company is trying to resolve the issue with their floor mats and accelerator issues the media and customer dissatisfaction have put the company in a tight spot to respond to its troubles. This has cause competitors like Ford and Hyundai to react quickly and offer Toyotas customers incentives to trade in their Toyota’s for one of the competitor’s models. Some are even offering incentives of $1,000 and 0 percent financing to attract Toyota’s customer base.
Every brand has its strengths and weakness. Toyota focused on a sub branch approach, in which most of its cars are linked to a single corporate brand. For Toyota that means that a problem with any vehicle at Toyota will not only affect sales of the effected model in question but to its entire inventory of vehicles. Therefore it comes as no big surprise that several of their vehicles were included in there recall. Audi was another car manufacturer that went through a very similar recall issue with accelerator problems. The overall impact this had on Audi was crucial. The resale value of the Audi 5000, which had been involve in a number of fatal accelerator accidents declined significantly as a result of the recall. This also had a snowball effect on other Audi vehicles such as a the Audi 4000, which lost significant resale value, and to a lesser extent also effected the Audi Quattro all due to the fact that they were a part of the same company. Any technical hitch with one car can also mean problems with others when the auto world in known for using shared parts and technologies across multiple models.
Another recall that that was notorious in history was with the Ford Pinto. This was definitely not one of the largest recalls because it only affected about 1.5 million vehicles but some considered it the most dangerous. With this recall a driver could be subject to an exploding gas tank in the event of an accident. Initially Ford didn’t even want to recall these vehicles and would have rather dealt with lawsuits, which sparked a huge public outcry. In 1995 Honda another car manufacturer that is know for its reliability also had a recall on the Honda Accord and several other Honda and Acura models. This recall affected about 3.7 million vehicles. The main cause of the recall was the seat belt chassis, which had become either broken or unreliable in many cars. Chevy, Ford, and GM have also had their fair share of significant recalls throughout the years.
These recalls affected millions as well. Most people realize that at one point or another something is going to wrong with their car. Repairs are to be expected and for the most part most cars and trucks will at some point have a recall. Recalls address safety problems, whether they are minor or major. Toyota’s recall was not so much a part had to be recalled but more of the fact they tried to blame it on the placement of a floor mat. When companies try to bush issues under the rug that’s when people remember. Although at this time the recall may affect Toyota negatively overall I think its customer’s will remain loyal.
When bad things tend to happen, companies need the right strategy for talking their way out of a mess and avoiding a tarnished reputation. Choosing the best way to respond is not always easy but can make a difference towards the company’s survival. Toyota was aware there were issues with the accelerators and waited until they were in a crisis to resolve this issue. Toyota response to the recall not only affected its consumer base in the US but may have had the same negative impact with its Chinese consumers. One report indicated that “the large majority of Chinese car consumers (74 percent) are aware of Toyota’s present difficulties. Almost every two out of three of these consumers acknowledge that their confidence in the Japanese car maker has been affected (62 percent) and that the current recall practice degrades their image perception of Toyota. Among the owners, the impact is much less important though, as only a little less than one in every seven Toyota customers strongly agree on a degraded image perception and decrease in trust (15 percent), compared with one out of every four car owners of competitor brands (27 percent and 25 percent respectively) (WPP)”.
The real question is did Toyota handle this situation correctly? The most important thing Toyota did was keep their customers informed, even if it was what some considered a delayed response. They issued recalls on all affected vehicles and they stopped production on their vehicles which shows consumers they are willing to correct the problem. They are also not willing to restart production or release any affected vehicles before the problem is correct. They have been working with dealers to manage the process of the recall as best as possible to limit customer dissatisfaction. With all of these positive approaches Toyota is trying to make, the concerns consumers still have are the overall reliability of Toyota and the potential effect this recall may have on the resale value of their vehicles.
Several people have commented on their feelings towards Toyota after the recall. The majorities have been loyal Toyota customers that have owned one or more Toyota vehicle and the others have never owned a Toyota. Many of the Toyota customers felt that the media made a monster out of this recall and caused fear and panic in consumers. They also felt that the media created this perception that Toyota’s were no longer a reliable vehicle. Other people who never owned a Toyota feel that the Toyota name will be tarnished and that these problems were to be expected. If people really looked at the whole picture they may find these comments to be true. For several years car manufacturers have been sending out recalls. This is not the first one in history to happen and it will surely not be the last. Most industries anticipate for supply and demand. Toyota sales may have gone down since the recall but that is to be expected.
Car industry forecasters do not anticipate that Toyota’s loss will cause a drop in overall demand. As long as Toyota continues to make new cars, people will buy them. May reports have indicated that people who initially thought about purchasing a Toyota before this major crisis would still purchase one. They realize that this recall is no different then other recalls that have happened through out history, with maybe the exception that Toyota did not act as quickly as the media and some consumers expected they should have. Toyota is a well known company. They will bounce back from this crisis eventually and may even try to offer its customer’s incentives to purchase vehicles through one of their dealers that other car dealers may not be able to offer right now.
Overall this recall just like anything else will pass and Toyota’s sales will be among the top again. People realize that the perception the media creates can sometimes have a long lasting impact, but then something else bigger will happen and things will return right back to normal for Toyota. It is a vicious cycle that we all live in. What people may lose now in resale value is really nothing major. People can actually benefit from this by purchasing a used Toyota at a lower price than what they would have had to pay years ago.
Overall Toyota has a long history of loyal customer. This and the fact that Toyota is know for being a good quality car will allow it to bounce back from some mistakes they have made during this recall. Although its reputation may have been tarnished to some extent, they still have several loyal customers that will continue to purchase their vehicles through Toyota. This is just another obstacle they will get through. They will be able to use this incident to improve on their vehicle production and rebuild the Toyota brand and image.
1. http://wheels.blogs.nytimes.com/2009/10/01/toyota-floor-mat-problem-was-known-two-years-ago/ 2. http://money.cnn.com/2010/01/27/news/companies/toyota_sales_halt/index.htm?postversion=2010012718 3. http://www.thetruthaboutcars.com/2009/11/toyota-fllor-mats-absolutely-positively-100-certainly-the-problem/ 4. http://www.nytimes.com/2011/02/09/opinion/09wed2.html1?_r=1 5. http://www.insurancejournal.com/news/national.2010/01/29/106990.htm