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Competitive Challenges: Toyota: Crisis & the Importance of Culture

Like all analysts who are closely watching the Toyota crisis, we are wondering what the long-term effect will be on the company and its sales, particularly in North America.

Like all analysts who are closely watching the Toyota crisis, we are wondering what the long-term effect will be on the company and its sales, particularly in North America. The domestic companies have decided to capitalize on Toyota's weakness by offering incentives to get people back into a Ford or GM vehicle and hopefully win them over. They will see some success because some of these customers are people who purchased a Toyota 20 years ago and have not stepped foot back in a domestic showroom since. Once they drive these new vehicles they will be impressed with the ride, handling, and features. They will realize that the domestics are offering much-improved vehicles today.

However, will the domestic companies win over the masses of former Toyota buyers for the long term? Toyota executives acknowledged that they may not have handled the public relations and communications of this crisis very well. But we have seen this before with the Japanese. When Mitsubishi had issues with sexual harassment many years ago, its management had a similar reaction and failed to effectively communicate to the American public and the people involved.

Of course, the Toyota crisis is a very different situation and involves more serious consequences for millions of Toyota owners. We recently did an informal survey of hundreds of people that own Toyota products or were considering buying a Toyota product, and the results were mixed. The only common thread was that the car owners were concerned with the handling of the situation and the lack of communication and stated that this would affect whether they purchase a Toyota in the future.

I'm not a communications expert, but I do know the inner workings of Toyota enough to know that this problem from an engineering level was diagnosed, reengineered, and solved in a very rapid manner. They quickly created the fix for the affected vehicles and they are rapidly reengineering all future designs. There are a couple of interesting points of note in how this was handled. First, once the fix was determined and announced, they began shipping parts to dealers for installation on the recalled vehicles. However, Toyota made sure that the dealers were adequately trained for the installations. This follows a traditional Toyota process involving extensive training before working on actual customer products. This is something that they will stand hard on because it is the Toyota way and they are customer driven.

Secondly, one must observe how Toyota has worked with supplier CTS on a resolution to this sticking pedal issue. They immediately met with the supplier to diagnose the problem and work together to determine the appropriate fix for this situation. You can bet that Toyota's sense of urgency was significant and the pressure applied to CTS was like no other. However, their first reaction was not to fire the supplier and immediately re-source the work to another supplier. Rather they took the classic Toyota approach which is work together to determine the solution for the problem.

This culture at Toyota is something that I witnessed and really had a chance to understand this past January during a visit to the San Antonio, TX plant. Our team was there the day after the announcement was made that the plant would close for one week to prevent the production of any new vehicles with this accelerator issue. But our tour of the facility saw an operation that fully embraced the culture and the support of the Toyota system. We spent a significant amount of time trying to truly understand the culture of Toyota toward its people. What we found was the constant focus on the worker that actually builds the vehicle from the president of the site, who daily attends meetings with the shop-floor staff to solve problems, to the manager of the plastics shop who spends 12 hours a day on the shop floor, not at his desk, supporting his team with problem solving.

The Toyota culture is a non-punitive culture. The goal is to train every worker to ensure they build a quality product. If this does not happen, the managers immediately point their finger at themselves and say that they must not have trained this person effectively. Rather than firing that person or moving them to another job, management makes sure the person is trained again and again until they get it right. This is the Japanese approach to supporting people.

Will Toyota recover from this crisis? Time will tell, but a betting person would take the bet with the understanding that the culture of Toyota is what made them one of the best global companies in the world and will likely be what returns them to good standing with consumers in the future. 

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