Professionalism/The Toyota Recalls of 2009-2010

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The Toyota Camry, one vehicle under the 2009-2010 recall

The Toyota Corporation was founded in Japan in 1937 by Kiichiro Toyoda. In 1972, Toyota began manufacturing operations in the United States and started full-scale vehicle production by 1986. They have become the world's largest automaker in both production and sales, producing over 8.5 million vehicles in 2010 [1] [2]. Toyota is a publically traded company on the Tokyo Stock Exchange (TSE) and is currently valued to have a market capital of $123.33 billion [3].

Reputation

Over the years, Toyota automaker has earned its renowned reputation as "the world's best automaker" by making safe and reliable transportation for billions of consumers. But this favoritism has dropped since 2009 as Toyota recalled 2.3 million vehicles spread across eight of its models due to unintended acceleration. Erich Merkle, president of Autoconomy.com believes, "People don't buy [Toyotas] for their good looks... [or] their cash-back or financing offers. They buy them because they have a lot of confidence in the quality and safety of the vehicle." [4]

Toyota has won numerous awards from J.D. Power and Associates to back up these claims. Toyota placed first among all corporations and earned 10 segment awards in 2007 in the J.D. Power and Associates Vehicle Dependability Study. For the 13th-consecutive year, the Lexus LS Luxury Sedan was the top performing model for the industry. The Vehicle Dependability Survey is one of many studies that indicates Toyota and Lexus quality continues to improve [5].

Public opinion of Toyota’s cars are strongly positive, but the company has dealt with issues that predate the 2009 recalls. In September 1986, Toyota was ordered by the National Highway Traffic Safety Administration (NHTSA) to recall vehicles for speed control problems [6]. Toyota also settled an unintended acceleration incident internally and did not report the incident to the NHTSA until 5 years later [7].

Timeline of Recalls

A Twofold Problem Lead to Recall

Sticking Accelerator

Despite Toyota's reputation for quality and long-lasting vehicles, the company faced challenges of a sticking accelerator pedal in many 2009-2010 models. A friction problem occurred when drivers pressed the accelerator pedal under certain operating temperatures and humidity conditions[14]. An increased friction in the accelerator pedal mechanisms caused the pedal to become "harder to depress, slower to return, or, in the worst case, mechanically stuck in a partially depressed position", shown in this pedal diagram[15] [16]. The sticking accelerator forced Toyota to recall over 5.4 million vehicles worldwide with 2.43 million in the U.S alone. The accelerator recall cost Toyota over $2 million in losses and lawsuits. In addition to its financial costs, the foreign manufacturer risked losing its strong American trust in quality and safety.

Floormats

Some Toyota dealers sold unapproved floor mats that were too thick to lay properly under the accelerator pedal without rubbing against it. The depressed accelerator pedal caught underneath thick floormats, unapproved by NHTSA standards, and did not allow the pedal to return to its natural position. Thus, the partially depressed pedal rendered an unintended acceleration, causing multiple vehicle accidents and crashes.

User Error

While Toyota was quick to adapt the keyless technology of push-start engines to its newer models, they failed to give adequate user instructions of how to stop the engine in case of an emergency. The push-start button should be held down for three seconds, while the engine is in neutral during an emergency to shut off. However, the company neither placed any warnings on its vehicle dashboards nor included guidance in its vehicle manual, even though many users never review it. After the NHTSA released its investigations, the lack of driver instructions forced Toyota to further expand its recalls.

Even though Toyota could have improved driver safety with more intuitive emergency operations, drivers do make mistakes. Two highly publicized cases reveal panicked drivers unintentionally pressed the accelerator pedal, instead of the brake, causing an accident because "investigators found either strong indications that the driver's account of the event is inconsistent with the findings of the analysis"[17].

Toyota's Ethical Lessons

Responsiveness

The biggest pitfall in Toyota's recall was its untimely response to its manufacturing defects. They underestimated the seriousness of the problem and lagged an effective response, which put customer's lives at risk. Although the company claimed to have made solving these issues its number one priority, Toyota management failed to give an immediate public explanation of what happened [18]. They ignored making any public announcements or apologies until January 21, 2010, two weeks after their last recall. Although they recommended a short-term solution where unsecured floormats should be zip-tied to its hook or removed altogether, they failed to recognize their internal issues. A better internal risk management system could have helped Toyota identify where product weaknesses could occur [19]. They failed to understand the source of the problem immediately, despite its claims of a "new standard of responsiveness". As a result of the lagged reaction to recalling defective vehicles, Toyota was held liable and fined $16.4 million.

Responsibility

Toyota attempted to hide using unapproved floormat thickness for over four months. However, ignoring this seemingly small problem led to greater problems for the company in the long run. Evidence was found as Toyota management "bragged about saving the company $100 million because they negotiated a reduced floor mat recall" [20]. Toyota should have been more responsible for its brand and correcting issues when they occur immediately, despite heavy potential losses in revenue. In this case, the company was clearly at fault for not accepting immediate responsibility for its ignorance in the sticking accelerator case.

Ownership

Despite Toyota's poor decision to put revenue ahead of customer safety, one of the company's strengths is accepting ownership of their failures. After recognizing their technical issues, Mike Michels, a Toyota spokesman, stated during a New York Times interview, "I don’t want to get into any kind of a disagreement with CTS. Our position on suppliers has always been that Toyota is responsible for their cars” [21]. They acknowledged their failure in resolving braking issues quickly and efficiently.
After facing enormous negative publicity, Toyota proved its claim that its anti-braking software and electronic throttle controls were safe. US regulators and independent testing from Exponent reported electronic flaws in its throttle system were not to blame for reports of sudden, unintended acceleration and floor mat issues[22] [23]. This independent analysis validated Toyota's claim for safety, which helped customers regain a sense of trust in the brand.

Involved Individuals with Ethical Dilemmas

Akio Toyoda and Toyota's Changing Business Strategy

As CEO of Toyota Motor Corporation, Akio Toyoda can be held responsible for Toyota's change in business strategy, from prioritizing safety to prioritizing profits. Akio claims they could not train their employees fast enough to reflect their historic standards of quality and excellence, which lead to their safety breakdown [24]. Professor Ed Hess at the University of Virgina agrees, saying, "[Fast growth] can create serious business risks that if not properly managed can dilute a company's brand and destroy its value" [25].

Toyota's strategy change is the reason they hid knowledge of floor mat pedal entrapment issues from the public in order to maintain sales. In fact, it is illegal for an automaker to withhold defect information from the public for more than five days after the discovery of a flaw is made [26]. The ultimate result of Toyota's heel dragging was a fine of $16.4 million from the NHTSA, the highest ever levied by the department [27].

This aspect of the Toyota recall analysis is very similar to the case of the Columbia space shuttle disaster in 2003. At that time, NASA had a very similar change in business structure. Their historic mantra of "If its not safe, say so", while still in effect, became overshadowed by a new motto of "Faster, Better, Cheaper" [28] [29]. This change in priorities reflects a time where NASA tried to maximize its budget, rather than the safety of its astronauts. NASA's new internal structure can be seen as a large contributor to the hostile environment that kept Rodney Rocha, an employee who knew of the potential flaw, from sending an email to alert the people who would have the power to stop the shuttle reentry [30]. Both the Columbia and Toyota cases show that loss of life and significant damage to property can happen when safety is neglected as the most important company policy.

Yoshimi Inaba

Yoshimi Inaba, president of the North American Toyota division, received a memo categorizing a negotiated recall saving Toyota $100 million as a “win” for the company [31]. These savings resulted in an increased risk for consumers whose cars were not included in the negotiated recall. The decision outlined in the memo is very similar to the Ford Pinto debacle of 1977, where Ford saved money by taking a risk that ultimately killed many people [32].

Both Toyota and Ford received a lot of criticism from the public for their decisions valuing financial gain over human lives. Most critics agree it is an atrocious act for a company to place a value human life, and place profit above customer safety [33]. However, Professor Kip Viscuchi of Harvard College and Professor Ted Gayer of Georgetown University disagree. They argue the average value of a statistical life is $6 million [34].

Using the average statistical value for a human life, the $100 million saved by Toyota is equal to over 16 lives saved. Toyota was faced with the dilemma to spend the money and possibly save lives, or save it and risk people dying. The ethical decision becomes more complicated when the ultimate use of the saved $100 million comes into consideration. If the money used to develop advanced air bags is ultimately saving thousands of human lives, is it ethical for Toyota to knowingly take actions that would lead to the death of a few individuals? If Toyota knew for sure that only one person would die from their $100 million savings, would it be ethical for them to knowingly commit that person to death just to save $100 million?

References

  1. ↑ The Truth About Cars, 2011. “TTAC Announces the Top 3 Automakers of 2010. Now With Official Numbers”. http://www.thetruthaboutcars.com/2011/01/ttac-announces-the-top-3-automakers-of-2010-now-with-official-numbers/
  2. ↑ Toyota, 2011. “50 Years in the U.S”. http://www.toyota.com/about/our_business/our_history/timeline.html
  3. ↑ Yahoo Finance, 2011. “Toyota Motor Corp.”. http://finance.yahoo.com/q?s=TM
  4. ↑ "Toyota's Reputation Takes a Huge Hit" http://money.cnn.com/2010/01/27/news/companies/toyota_sales_halt/index.htm
  5. ↑ “Toyota Earns 10 JD Power Vehicle Dependability Awards” http://www.autospies.com/news/Toyota-Earns-10-JD-Power-Vehicle-Dependability-Awards-18780/
  6. ↑ “Toyota Recall” http://kansascity.injuryboard.com/automobile-accidents/toyota-recall-a-time-line-of-toyotas-checkered-safety-history.aspx?googleid=278022
  7. ↑ “Toyota’s Safety Problems” http://www.time.com/time/business/article/0,8599,1962218,00.html
  8. 1 2 3 4 5 , CNNMoney.com. "Toyota's Troubles: A Timeline".
  9. ↑ “BBC News”. http://news.bbc.co.uk/2/hi/business/8487984.stm
  10. ↑ Toyota. "Pressroom". http://pressroom.toyota.com/pr/tms/toyota/customer-faqs-for-2003-toyota-157609.aspx?ncid=11092 |title=Toyota Vehicles : Customer FAQs for 2003 Toyota Sequoia Recall / Toyota |publisher=Pressroom.toyota.com |date= |accessdate=2010-05-22}}
  11. ↑ "Toyota Announces Voluntary Safety Recall on Certain Toyota Corolla and Corolla Matrix Models". Pressroom.toyota.com. http://pressroom.toyota.com/pr/tms/toyota/toyota-consumer-safety-advisory-102572.aspx. Retrieved 2011-03-03.
  12. ↑ Vartabedian, Ralph (2011-02-09). "Sudden acceleration: Sudden acceleration in Toyota vehicles is a mechanical issue not electronic, U.S. study finds". latimes.com. http://www.latimes.com/business/la-fi-toyota-nasa-20110209,0,4830024.story. Retrieved 2011-03-03.
  13. ↑ "Toyota recalling 2.17 million vehicles in U.S.". msnbc.com. 2-24-2011. http://www.msnbc.msn.com/id/41756436/ns/business-autos/. Retrieved 4-23-2011.
  14. ↑ "Toyota Recall Recap: Floormats, Sticky Pedals, AND User Error", 2010. http://www.thecarconnection.com/marty-blog/1055164_toyota-recall-recap-floormats-sticky-pedals-and-user-error
  15. ↑ "Toyota: Gas pedal fix is on the way". Statesman.com. http://www.statesman.com/business/toyota-gas-pedal-fix-is-on-the-way-207185.html. Retrieved 2011-03-03.
  16. ↑ MSNBC, 2010. "No easy answer to why Toyota accelerators stick". http://www.msnbc.msn.com/id/35110966/ns/business-autos/
  17. ↑ "Toyota Recall Recap: Floormats, Sticky Pedals, AND User Error", 2010. http://www.thecarconnection.com/marty-blog/1055164_toyota-recall-recap-floormats-sticky-pedals-and-user-error
  18. ↑ Kageyama, 2010. "Toyota Recall Could Have Large Impact On Sales". http://www.huffingtonpost.com/2010/02/02/toyota-recall-could-have_n_445531.html
  19. ↑ Connor, 2010. "Toyota Recall: Five Critical Lessons". http://business-ethics.com/2010/01/31/2123-toyota-recall-five-critical-lessons/
  20. ↑ "Toyota's Legal Issues, Independent Testing, and Little Black Boxes". February, 2010. http://www.tundraheadquarters.com/blog/2010/02/23/toyotas-legal-troubles-independent-testing-and-little-black-boxes/
  21. ↑ Connor, 2010. "Toyota Recall: Five Critical Lessons". http://business-ethics.com/2010/01/31/2123-toyota-recall-five-critical-lessons/
  22. ↑ "Toyota's Legal Issues, Independent Testing, and Little Black Boxes". February, 2010. http://www.tundraheadquarters.com/blog/2010/02/23/toyotas-legal-troubles-independent-testing-and-little-black-boxes/
  23. ↑ Associated Press, 2011. "Toyota recalls 2.17 million vehicles in U.S." http://www.news-record.com/content/2011/02/24/article/toyota_recalls_217_million_vehicles_in_us
  24. ↑ Bangkok Post, 2010. "Toyota: We grew too fast". http://www.bangkokpost.com/breakingnews/169480/toyota-we-grew-too-fast
  25. ↑ Reliable Plant, 2010. "What Every Business Can Learn From Toyota's Fall". http://www.reliableplant.com/Read/23530/Businesses-can-learn-from-Toyota
  26. ↑ Bibeka Shrestha, 2010. "Toyota To Pay $32.4M Over Defect Report Delays". http://www.law360.com/topnews/articles/216521/toyota-to-pay-32-4m-over-defect-report-delays
  27. ↑ CBS.com, 2010. "Toyota Won't Contest $16.4 Million Civil Fine". http://www.cbsnews.com/stories/2010/04/18/business/main6409394.shtml
  28. ↑ Keith Cowing, 2003. "NASA Responds to the Columbia Accident Report: Farewell to Faster - Better - Cheaper". http://www.spaceref.com/news/viewnews.html?id=864
  29. ↑ NASA, 2011. "NASA Safety and Hazard Reporting". http://www.nasa.gov/audience/safety/reporting/Safety_reporting.html
  30. ↑ Rodney Rocha, 2003. "RE: STS-107 Wing Debirs Impact, Request for Outside Photo-Imaging Help". http://www.nasa.gov/pdf/2706main_COL_rocha_email_030122.pdf
  31. ↑ Toyota Washington DC, 2009. "Toyota Washington DC". http://www.beasleyallen.com/newsfiles/Toyota%20Memo-Toyota-Wins.pdf
  32. ↑ Jim Motavalli, 2010. "At the Toyota Hearing, Remembering the Pinto". http://wheels.blogs.nytimes.com/2010/02/25/at-the-toyota-hearing-remembering-the-pinto/
  33. ↑ Kurt Niland, 2010. "Toyota's cost-savings memo valued money over life". http://www.beasleyallen.com/news/Toyota%27s-cost-savings-memo-valued-money-over-life/
  34. ↑ Kip Viscusi and Ted Gayer, 2002. "Safety at Any Price?". https://collab.itc.virginia.edu/access/content/group/8baddf16-2bb8-412e-9b77-4dcd7b770231/11.Viscusi-Gayer.Safety-at-Any-Price.pdf
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