I hit the “Publish” button too soon on yesterday’s post, Toyota Recall – The Brand Challenge. Today’s news reports that Toyota executives admit they knew about the gas-pedal problem for over a year before taking action. In fact, evidence about unexpected acceleration has been mounting for six years. The firestorm has just begun.
Toyota completely blew Step 1 of how to handle company screw ups:
1. Admit to the mistake quickly
2. Accept responsibility
3. Apologize
4. Say what you’re going to do to fix the problem
5. Explain what you’ll do so the problem doesn’t happen again
(For details of each step, link to Toyota Recall – The Brand Challenge)
While Steps 2-5 are in motion, it appears Toyota failed miserably at Step 1: admitting to the mistake quickly. So the perception will be that they took action only because they got caught. It would be one thing if the company didn’t know about the problem until the National Highway Traffic Safety Administration notified them, and they immediately took action. But that’s not what happened. They knew.
Toyota’s credibility is now shot – certainly in the short-run and likely in the long-run. In fact, the company’s recall of 437,000 hybrids because of problematic brake systems, announced although the recalled cars “meet safety standards,” is being met with skepticism in light of the sticky gas-pedal debacle. Customers are wondering if the recall came quickly only because of increased scrutiny. What could’ve been a feather in Toyota’s cap for quickly admitting the problem is now another dagger in their reputation for quality. Projected hard costs to Toyota for the recall repairs is projected to be in the $billions. The cost to the brand is unknown, but will likely dwarf the cost of repairs.
I’ve said many times that a company’s brand is fragile, built over years and even decades. Trust is the foundation of successful brands. When trust is knowingly violated, the brand (so carefully built) is compromised. Winning back trust is a long, long road.
OK, I know this is a stretch, but it pains me to see Toyota screw up their brand this way. I’ve owned several Toyotas (my first real car after I got out of school) and have grown to admire the company and the brand over many years.
When I think of Toyota I think of great management and quality. Or did.
Just like I used to think of highly of Tigers Woods. I’m sure his game will be impressive when he finally comes back to the PGA Tour, but he’s lost that certain “something special” with me. And I don’t mean endorsement contracts.
Maybe we shouldn’t put our sports stars and top brands up on a pedestal. But as times goes on it’s becoming more apparent that these problems have been simmering for years while Toyota pursued a rapid growth strategy.
I feel let down, disappointed, even angry. I trusted Toyota and feel they betrayed that trust. It will be very hard for them to earn that trust back. Honda makes good cars too, you know, and Hyundai has been improving by leaps and bounds. Even Ford is looking good these days.
A recent article in the San Francisco Chronicle pegs the damage at $30 Billion (that’s right, with a “B”) in lost stock market value. And the impact on sales will be huge in the short term at the very least.
All this because Toyota wanted to be the biggest, and forgot how to be the best.
Can Toyota recover? I hope so. But it’s going to take years.
Further reading:
Toyota introducing a new car in Japan is more about the party than the car nowadays. While Automotive News thinks the glitz serves the newest Lexus CT 200h well, it can easily be argued that the party accoutrements have grown to be more visible than the car.