It is hard to exaggerate the damage that Toyota has done to its hard-won reputation for quality and reliability with the massive recall of its cars because of problems with the accelerator pedal. As many as 10 million vehicles may be recalled in the US, Europe and China, and production and sales of eight popular models has been suspended for a week, with all the attendant bad publicity and anger among car owners.
Toyota recently surpassed the ailing GM to become the world's largest carmaker. One incidental factor at risk in the rush to be the world's biggest is the reputation of being the world's best. Traditional Japanese values either have not been transplanted to the United States or the management did not understand or have a full handle on what was happening in its North American plants and sales operations.
Toyota is certainly guilty of hubris, in celebrating becoming the biggest, as president Akio Toyoda admitted. Ironically, the company's international advertisements - still running - boast that the letter 'h' is disappearing from alphabets, dictionaries and news reports because 'H' has found a better place in the Lexus H vehicle. 'H' in the car model stands for 'hybrid', but 'hubris' is a good word for Toyota's failings, followed by 'C' for 'complacency'.
The carmaker's modest US$550 million profit forecast for the current financial year risks being wiped out, along with the company's reputation for quality. Maryann Keller, the most respected analyst of the US auto industry, declared last week that Toyota's 'reputation for long-term quality is finished'. In an interview with Bloomberg, she added that, 'People aren't going to buy Toyotas, period. It does not matter which model. What's happened is sufficient to keep people out of the stores.'
That may seem overly harsh. Classical damage theory suggests that companies that quickly admit to problems with their products, apologise and move to fix the problem with adequate compensation may not suffer too much and may gain plaudits from customers for honesty.
Toyota has certainly moved swiftly in the past week, not least by recalling such large numbers of models and cars that account for 60 per cent of its American production. The recall was extended to about 1.8 million cars in Europe as well as to vehicles made in China with an accelerator pedal made by a US supplier. Similar vehicles made in Japan with Japanese-supplied parts are safe.
By the weekend, Toyota said that it had devised a plan to fix defective pedals and was to announce it early today, Hong Kong time. All in all, it may seem that the car company was alert, responsible and responsive.
