Toyota's massive recall of cars is serious stuff–-a safety concern that may have cost lives. It's a disaster of still immeasurable consequences for "the world's greenest carmaker". But by now, we've heard enough about Toyota's supposedly self-destructive and greedy management. But before we bury Toyota in ridicule, let's address what's really happened and what it means.
Comments from the media, academics and politicians have ranged from bemusement that Toyota could let minor mechanical defects threaten its image as a sustainability leader to outright hostility. It's "just another corporation", which in liberal-ese is the worst put-down ever, groused one suddenly cynical Australian professor on an ethics website that I frequent.
Let's dispense with the myths that Toyota was somehow trafficking a "we don't know what's causing this" lie or was slower to respond than other companies that have faced catastrophic challenges.
It's still not clear, and may never be, whether any lives were lost or anyone was ever in serious danger. But perception matters. "You're fighting a very complex multi-front war when something of this magnitude hits," says Eric Dezenhall, a top crisis management adviser.
Audi faced a similar crisis in the late 1980s, leading to the coining of the term "sudden acceleration syndrome". The media in the US, capped by the 60 Minutes show, ran exposés marked by gruesome pictures of sheet-draped bodies next to wrecked Audis, and the National Transportation Safety Board dutifully issued warnings.
Professing bafflement, as it couldn't figure out what was wrong, Audi was reluctant to issue a recall to fix something that it didn't have evidence needed fixing, which led to more public pillorying and lawsuits. It didn't matter in the end that safety authorities totally cleared Audi. The reputational damage to Audi, then considered a gold standard of safety and mechanical excellence, was catastrophic, and it has never fully recovered.
"In this [Toyota] case, there appears to be some genuine mechanical issues," says Dezenhall. "But there is still the conspiratorial assumption that company executives suppressed the problem while making cost-benefit calculations about how many lives might be lost versus how much a recall or potential class action suit might cost."
Toyota saw that it would face far more destructive problems if it proposed a quick fix that either it couldn't execute or didn't really address a problem that it didn't yet fully understand.
Long Road Ahead
"Toyota is now caught in a vortex where legitimate grievances collide with hysteria and motivated adversaries who only gain by keeping this crisis in the news," Dezenhall observes.
He says that when there are plaintiffs' lawyers looking to sue, PR people looking to self-promote by declaring the crisis to have been botched, politicians "making hay", competitors who want to exploit Toyota's problems, distressed consumers, and a media that is desperately seeking–-and will surely find–-some kind of telltale memo, Toyota is in for a long fight.
But what should they do? "Fix the mechanical problem as fast as possible, hold consumers' hands throughout the process, and consider it a long-term investment in the brand," Dezenhall concludes.
Finally, let's dispense with the narrative that Toyota is a fallen socially responsible angel. That designation, for any business, is silly–-the lazy analysts' way of ignoring the vast array of practical and moral trade-offs that every organisation confronts even without crises.
Toyota first caught everyone's attention in the 1970s, when it made cheap but reasonably well-made low margin vehicles that consumed less fuel, which was fortuitous when oil prices soared. It later sold its hybrid technology as green to credulous enviros, turning the Prius into a premium-priced status symbol. But when you apply environmental metrics, the ultimate "green car" is a life-cycle green bust, as it takes more combined energy to produce a Prius than a Hummer.
What's the verdict? Toyota was, and by all reasonable measure remains, a great company. It has been a marvel of efficiency and brilliantly innovative. Its historical success, well deserved, is one of the most impressive business stories of the past 50 years. But, it makes mistakes–-in manufacturing, and in management of a crisis. Let's wish a still admirable company fast healing. In this challenged economy, we all need all the help we can get.
Jon Entine is a visiting scholar at AEI.