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Experts See Flaws In Toyota’s Handling Of Crisis
The problem with faulty gas pedals in its cars and trucks is rare, Toyota says, and car owners are unlikely to experience any trouble. Toyota's reputation is another matter.
Crisis management experts say just how far Toyota's image tumbles depends on how quickly it can fix the problems and how well it communicates with hundreds of thousands of loyal customers.
They also say that Toyota's growth has outpaced its management structure. The company didn't have in place the mechanisms to identify and deal with the problems before they exploded into two giant recalls, factory shutdowns and instructions to dealers to stop selling eight models.
Toyota Motor Corp. rode a reputation for reliability to become the world's top car maker. For more than 30 years, it won customers and market share from General Motors Co., Chrysler Group LLC and Ford Motor Co. by building high-quality cars such as the midsize Camry and compact Corolla.
Americans, particularly baby boomers, frustrated with Detroit's poor quality, fell in love with Toyotas because they rarely broke down. Last year, they bought more than 356,000 Camrys, making it the top-selling car in the U.S. The Corolla was second with almost 297,000 sales.
In short, drivers trusted Toyota. Now that trust is in danger.
Toyota said late Tuesday it would halt sales of some of its top-selling models, including Camry and Corolla, to fix gas pedals that could stick and cause unintended acceleration. It recalled more cars on Thursday.
Crisis managers say the issues with the pedals likely surfaced early on at lower levels of the company, but no one wanted to deliver bad news to the boss.
"Nobody wants to go upstairs and say 'Hey, we just made 10,000 cars that have a problem and it's going to cost us millions to fix them,'" says Robert Wiseman, a professor of strategic management at Michigan State University.
In March of 2007, Toyota started getting reports of gas pedals being slow to rise after being depressed for acceleration. Engineers fixed the problem in the Tundra pickup early in 2008.
But troubles persisted in other models, eventually leading to last week's recall and the plans to suspend sales and shut down of six factories while Toyota tries to fix the problems.
Toyota insists that the sudden, uncontrolled acceleration is "rare and infrequent" but offered few specifics. A spokesman at the company's office in Torrance, Calif., didn't return two messages left seeking comment for this story.
The delay in dealing with the problem now leaves Toyota in an untenable public relations situation. It's forced to alarm customers and take vehicles off the market before the repair parts are ready, said Jim Cain, senior vice president of the Quell Group, a Troy, Mich., public relations firm and a former Ford Motor Co. spokesman.
He also said the company likely had the information it could have used to diagnose the problems much faster.
"There are always consumer complaints and warranty information, parts return data and other things that can indicate problems before they become of such colossal magnitude," he said.
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Seeing problems early will become even more important as automakers increasingly sell the same model with common parts across the globe, Cain said. Companies want to act quickly to avoid global recalls that will only become more costly, he said.
Toyota, which is ahead of other automakers in globalization, could see its U.S. problems spread to Europe, where a similar accelerator part is used. The company is studying possible responses there.
Toyota's response at least partially replicates the crisis communications strategy used by Johnson & Johnson in the 1982 Chicago-area Tylenol poisoning case.
J&J recalled more than 20 million bottles of Extra Strength Tylenol and burned every one. It also communicated with the public and came up with new tamper-resistant packaging.
The company placed consumer safety above cost, restoring its reputation quickly, said Brenda Wrigley, chair of the public relations department at Syracuse University's S.I. Newhouse School of Public Communications.
"Treating people honestly and openly is the way to go," she said.
With Toyota's mechanical problem, though, the company can't just pull all of the problem products off the shelves, she said.
"They're really in a bind. Short of saying 'park it in the driveway and don't drive it anymore,' how do you prevent everybody from exposure to a safety issue?" Wrigley asked.
Toyota thus far has avoided Ford's mistakes from last decade when hundreds of people died or were injured in accidents involving tread separation on tires, most of which were on popular Explorer sport utility vehicles. Ford blamed tire company Bridgestone/Firestone Inc., while Bridgestone said the Explorer's design was faulty. Both companies' reputations were tarnished.
The latest developments follow a recall of 4.2 million Toyota vehicles in late 2009 over concerns that floor mats could bend across gas pedals, causing sudden acceleration.
The problems, Wrigley said, hit Toyota extra hard because it has touted quality for years to gain advantage over competitors.
"Quality was their differentiator and now it's their Achilles heel," she said.
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Sources: MSNBC, Google Maps
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