Toyota Fights Back: In this the Corporate Rope-a-Dope

March 8, 2010

Toyota has been like a boxer on the ropes taking punch after punch from the media, Congress, consumers, and other critics.  Mohammad Ali used a strategy called the rope-a-dope.  Ali would lean against the rope taking punches in order to tire his opponent out and counterattack when given the chance.  In more general use, rope-a-dope is when an entity places itself in what appears to be a losing position in an attempt to become the winner.  With the march 8, 2010 counterattack, perhaps Toyota is making its move to “win” in this crisis.  It is still far too early to tell.  However, the counterattack is far cry from the apologies and verbal punches Toyota has been absorbing the past few months. 

As a quick recap, Toyota has had a series of recalls related to sudden acceleration in vehicles.  The sudden acceleration is serious having caused a number of deaths as cars would speed up often exceeding 100 mph.  Toyota’s recall have addressed floor mats and then the gas pedal itself.  Toyota service departments have often been open 24 hours to handle the repair/replacement of the gas pedals.  The televisions airwaves are filled with Toyota advertisements talking about the repair and testimonials from customers saying how they still love their Toyota vehicles. 

Recently Toyota has been taking punches from Congress that have been amplified by the traditional and online media.  The key charge is that Toyota has not really found that problem.  The argument is that the problem is really in the electronics, not the mechanical system as Toyota says.  This is pivotal distinction.  If Toyota has not solved the problem, its customers are still at risk from its flawed product.  At best, Toyota looks incompetent as it cannot find the problem,  At worst, Toyota looks like it is ignoring a safety problem by pretending the pedal design is at fault when they know it is the electronics.

A key piece of evidence being used against Toyota is an “experiment” conducted by David W. Gilbert, an automotive technology professor at Southern Illinois University-Carbondale. 

“Gilbert told a congressional hearing Feb. 23 that he recreated sudden acceleration in a Toyota Tundra by short-circuiting the electronics behind the gas pedal — without triggering any trouble codes in the truck’s computer.

The trouble codes send the car’s computer into a fail-safe mode that allows the brake to override the gas. Gilbert called his findings a “startling discovery.”

House lawmakers seized on the testimony as evidence Toyota engineers missed a potential problem with the electronics that could have caused the unwanted acceleration.” http://news.yahoo.com/s/ap/us_toyota_recall_electronics;_ylt=AhF0kk4JAJTINoJOzqYMv5cEq594;_ylu=X3oDMTNocnYwbTBnBGFzc2V0A2FwLzIwMTAwMzA4L3VzX3RveW90YV9yZWNhbGxfZWxlY3Ryb25pY3MEY2NvZGUDbW9zdHBvcHVsYXIEY3BvcwM2BHBvcwM2BHNlYwN5bl90b3Bfc3RvcmllcwRzbGsDdG95b3RhZGlzcHV0

Toyota could no long rest against the ropes and is now fighting back.  The cornerstone of the counterattack is testimony from Stanford University professor Chris Gerdes, director of Stanford University’s Center for Automotive Research, and a consulting firm, Exponent Inc.  For most people, Stanford would seem more credible that Southern Illinois.  However, the Stanford Center for Automotive Research and its engineering school receive money from Toyota.  Gerdes maintains his analysis is independent but there are reasons for doubt to creep in.  Experts seem to agree that the conditions found in Gilbert’s “experiment” are extremely unlikely to occur in the real world. 

The stakes are high.  In addition to reputation and sales loss, Toyota is facing intensified Congressional scrutiny over the electronics concern.  This includes accusations that Toyota has ignored the safety issue since 2006.  Toyota has hired a former U.S. Secretary of Transportation to head an internal examination of its quality and safety issues.  A third-party expert is a way add credibility to such investigations.  Here part of the announcement:

“Toyota Motor North America, Inc. (TMA) announced today that former U.S. Secretary of Transportation Rodney E. Slater will lead an independent North American Quality Advisory Panel to advise the company’s North American affiliates on quality and safety issues.

The panel will work closely with Toyota’s North American leadership team, and will have direct access to Toyota Motor Corporation President Akio Toyoda.

‘I am pleased that Secretary Slater has accepted our invitation to lead the distinguished group of safety and quality experts who will help Toyota to improve its quality controls in North America,’ said Yoshi Inaba, President and Chief Operating Officer of TMA. ‘We are committed to more transparency regarding our safety and quality controls, and the independent advisors will have our full cooperation and access to any information they believe they need.’ http://pressroom.toyota.com/pr/tms/former-u-s-secretary-of-transportation-154569.aspx

Questions to Consider

  1.  Is it appropriate for Toyota to try to disprove the claims of an electronics problem?  Why or why not?
  2. What does Toyota have to gain with a counterattack?
  3. What does Toyota have to lose with a counterattack?
  4. Can a corporate rope-a-dope be an effective crisis response?  Why or why not?
  5. What ethical issues arise when a corporation uses a counterattack?
  6. What are the ethical issues for Toyota and Stanford in the funding connection?
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Toyota Recall: Hit or Miss?

January 31, 2010

Without reading or watching any coverage of the Toyota recall, you can bet the critics will say Toyota reacted too slowly in the recall.  That is a safe criticism to make.  Hindsight is 20/20 so it is easy to argue Toyota should have recognized the signs sooner and acted sooner.  Sometimes the default speed criticism is valid, sometimes it is unfair.  Keep in mind that managers are evaluating a number of variables simultaneously including financial concerns.  Besides, the speed of the reaction is relative.  What we should be more interested in is what was communicated through words and actions.  Speed is a secondary concern as long as it was not so slow that it placed people at undue risk because the organize had a very good idea of what the problem was.

A quick recap is of the recall is warranted here.  The problem was that accelerator pedals were sticking or returning to their normal position.  Drivers are worried when cars accelerate on their own—unintended acceleration.  The problem was found in a variety of Toyota vehicles in the U.S. and China.  The cars manufactured and sold in Japan did not have any problems.  The initial diagnosis was that improper installation of floor mats was to blame for the problem.  A message went out customers about the floor mats on Nov. 2, 2009 in relation to the Sept. 29th recall.  On Jan. 21, 2010 another recall notice was delivered about the accelerator pedal itself followed by a suspension of selling the vehicles in doubt on Jan. 28, 2010.  It seemed both the floor mats and the pedal design were both to blame http://pressroom.toyota.com/pr/tms/toyota/toyota-consumer-safety-advisory-102572.aspx.  The bigger issue is whether or not Toyota knew of the problem since 2007 and that the problem went beyond the floor mats and pedal design to its drive-by-wire technology (latimes.com/news/opinion/editorials/la-ed-toyota5-2009dec05,0,1844374.story). The LA Times news story does seem to accuse Toyota of ignoring the problem for over two years.  Toyota disagrees:

“Today the Los Angeles Times published an article that wrongly and unfairly attacks Toyota’s integrity and reputation.

While outraged by the Times’ attack, we were not totally surprised. The tone of the article was foreshadowed by the phrasing of a lengthy list of detailed questions that the Times emailed to us recently. The questions were couched in accusatory terms.  

Despite the tone, we answered each of the many questions and sent them to the Times. Needless to say, we were disappointed by the article that appeared today, and in particular by the fact that so little of our response to the questions appeared in the article and much of what was used was distorted.

Toyota has a well-earned reputation for integrity and we will vigorously defend it.” http://pressroom.toyota.com/pr/tms/our-point-of-view-post.aspx?id=2378

Here is a link to the exchange of questions and answers between the LA Times and Toyota:  http://pressroom.toyota.com/pr/tms/document/LA_Times_questions_and_Toyota_answers.pdf

Records show the NTSB has investigated eight acceleration problems with Toyota’s since 2003.  Six of the investigations were closed with no action taken while two did involve small recalls related to floor mats http://archives.chicagotribune.com/2009/nov/26/business/chi-tc-biz-toyota-1125-1126-nov26. We should return to the point that the recalls affect cars outside of Japan including China, the U.S., and Europe.  The accelerator pedal has a different supplier in Japan.  Here is where Toyota makes some interesting communicative choices.  Toyota has the chance to scapegoat the supplier but provides this statement about the supplier:

“Toyota Motor Engineering & Manufacturing North America (TEMA) has been working closely with supplier CTS on a revised design that effectively remedies the problem associated with accelerator pedals. Pedals featuring the revised design are now in full production at CTS to support Toyota’s needs. Meanwhile, we are also working with them to test effective modifications to existing pedals in the field that will be rolled out as quickly as possible.

“We commend CTS for working diligently and collaboratively to find a solution to the potential problem and in developing a new design,” said Chris Nielsen, TEMA’s Vice President of Purchasing. “CTS is a long-term and valued supplier to us.”

http://pressroom.toyota.com/pr/tms/manufacturing/statement-from-toyota-on-supplier-153203.aspx

Toyota stands with the supplier rather offering them as the cause.  This statement shows Toyota’s willingness to take responsibility for any problems found in their vehicles even in the face of its largest recall involving millions of vehicles.  CTS made its own case saying the design they followed was from Toyota and that they are being unfairly linked to the recall.  Here are some CTS comments:

“”We are disappointed that, despite these facts, CTS accelerator pedals have been frequently associated with the sudden unintended acceleration problems and incidents in various media reports,’ said Dennis Thornton, CTS Vice President and General Manager of Automotive Products Group. Toyota itself has also publicly stated that this recall is separate from the earlier recalls which were done to remedy sudden acceleration in vehicles.” http://www.theautochannel.com/news/2010/01/29/463816.html.  CTS is having to address its own reputation issues but Toyota is not the one pointing fingers or implying responsibility.

In addition, Toyota took the unusual stand to suspend the sale of new vehicles:

“Toyota Motor Sales (TMS), U.S.A., Inc., today announced that it is instructing Toyota dealers to temporarily suspend sales of eight models involved in the recall for sticking accelerator pedal, announced on January 21, 2010.
 
“Helping ensure the safety of our customers and restoring confidence in Toyota are very important to our company,” said Group Vice President and Toyota Division General Manager Bob Carter. “This action is necessary until a remedy is finalized. We’re making every effort to address this situation for our customers as quickly as possible.”
 
Toyota announced it would recall approximately 2.3 million vehicles to correct sticking accelerator pedals on specific Toyota Division models. Toyota has investigated isolated reports of sticking accelerator pedal mechanisms in certain vehicles without the presence of floor mats. There is a possibility that certain accelerator pedal mechanisms may, in rare instances, mechanically stick in a partially depressed position or return slowly to the idle position.” http://pressroom.toyota.com/pr/tms/toyota/toyota-temporarily-suspends-sales-153126.aspx

Toyota had already recalled over million vehicles for the floor mat issue.  Toyota was willing to recall and suspend sales, both are corrective actions designed to reassure customers the vehicles would be safe once the recall changes were made.  Toyota’s President, Akio Toyoda apologized to customers:

“’We’re extremely sorry to have made customers feel uneasy,’ Akio Toyoda told public broadcaster NHK on the sidelines of the Davos forum in Switzerland, in his first public remarks on the recall since it went global this week.

‘Right now, we are trying to establish the facts and preparing for giving an explanation so anxiety among customers would be removed as soon as possible’” http://news.yahoo.com/s/afp/20100130/bs_afp/japanautocompanyrecalltoyota_20100130082516

Toyota’s words and actions indicate a strong concern for customers and a willingness to protect its reputation.  Still, if the problem really was known in 2007 and goes beyond what has been disclosed, a serious problem still remains.  However, at this point the facts do not support the charges of a cover up of an even larger problem.  That is the dilemma in product recalls.  When is a problem isolated and when is it systemic?  There are no clear rules for answer that question.

Questions to Consider

  1.  How would you evaluate Toyota’s communicative response to the acceleration crisis?
  2. Why might it be fair to criticize Toyota for being slow?  Why might it be unfair?
  3. Why do you think Toyota directly addressed the LA Times story?
  4. Who seems more credible in the exchange, the LA Times or Toyota and why does that matter?
  5. What role does being slow to respond play in shaping stakeholder perceptions of an organization in crisis?
  6. How does this case illustrate the connections between reputation management and crisis communication?
  7. How would you rate the ethics of Toyota’s crisis communication given the facts reported in the case thus far?

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