Magazine article Risk Management

When the Toyota Way Went Wrong

Magazine article Risk Management

When the Toyota Way Went Wrong

Article excerpt

[ILLUSTRATION OMITTED]

The vast and ongoing Toyota recall saga shows just how great of a setback product recalls can be to a company's reputation. How a company reacts to a recall can have critical effects on both short-term profits and long-term recovery.

Initially, many companies point the finger at others instead of taking responsibility for the problem. When Toyota heard reports of sudden acceleration in its vehicles, the company first blamed the floor mats, then the throttle pedals, then its pedal supplier, CTS of Indiana. This was not an ideal strategy. When faced with a possible recall situation, an affected company's first reaction must be to address the problem and provide direction on what is being done. Later is the time to address where blame should be directed. Engaging in flat-out denial or blaming others only hurts a company's credibility.

Recalls require swift action on the part of company executives. Putting together a strong crisis management plan at the outset is critical to address the issue, ensure that the recall process proceeds efficiently and stem the tide of negative publicity. It is crucial to address the concerns of all parties involved, whether they come from customers or the government. When consumers learn there is a problem with a product, they will look for reassurance from the company that the product is safe. The company should immediately communicate that the problem is being addressed and that solutions are forthcoming.

In the case of Toyota, consumers bought a vehicle they believed would be reliable and safe. Because the issues with Toyota vehicles resulted in crashes, injuries and deaths, the public needed to have information that it could understand quickly. This did not happen.

Companies must also be willing to apologize to the public if the situation warrants it. In Toyota's case, CEO Akio Toyoda's apology was too little, too late to alleviate customer concerns. In addition, he was virtually absent from the public eye. As president, Toyoda should have been addressing the issues through various media outlets and spelling out exactly how his company was responding to the problems.

Although Toyota's head of U.S. sales, Jim Lentz, did a better job of being visible and expressing regret for the recall, his public statements did little to provide Toyota's customers with reassurance that their vehicles were safe enough to drive. The public really wants to see that the CEO is taking action.

When faced with product recalls, open communication with the media and customers is important in order to maintain a level of trust and credibility. …

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