Crisis Management at Toyota

AbstractThis study reports on the results of a study conducted with undergraduate students at a Midwestern university. The study's focus is on developing and validating the Toyota Customer Confidence Survey (TCCS). Another objective of the study is to measure student understanding of Toyota's handling of its vehicle acceleration complaints and how this handling/mishandling may have cost the auto manufacturer its storied reputation. Statistical techniques like Principal Components Analysis (PCA - Varimax Rotation), Scale Statistics (Cronbach's Alpha) and Scree Plots have been used to determine the psychometric properties of the TCCS.Keywords: Crisis Management, Toyota, Statistical Technique, Vehicle Complaints.IntroductionAllegations that as many as 89 deaths resulted from the unintended acceleration of Toyota vehicles between 2009 and 2011 was a staggering blow to the corporation's decades old reputation of engineering excellence, loyal customers and a penchant for resolution of consumer complaints, however few in number they may be. After all, the Toyota Camry was the #1 selling vehicle for several years running; American manufacturers, particularly Ford Motor Co. visited Toyota facilities and observed their corporate and manufacturing practices in an effort to emulate the industry leader and Toyota had the lowest number of Lemon Law complaints filed with consumer protection agencies nationwide.In fact, due to the unintended accelerations leading to fatal accidents, Toyota recalled approximately seven million cars in the United States. Did this debacle of Toyota signify that Toyota's legendary lean manufacturing practices were over rated? Did it also mean that the company had grown too quickly without due regard to quality issues12? Or, do these issues reflect worker problems at Toyota.2^'18Given this stellar history, customers, consumer advocates, competitors and government agencies were all stunned when Toyota responded to scores of documented, serious, and even deadly accident reports, all suggesting a defect with the accelerator in Toyota vehicles, in a restrained, indifferent and sometimes imperious fashion. Toyota was quick to attribute the accidents or incidents to driver error or improper placement of floor mats. Toyota was particularly resistant to any suggestion that the defect was electronic in character.Only after hundreds of accidents, thousands of complaints, the filing of class action lawsuits and the imposition of civil penalties by the National Highway Traffic Safety Administration, did Toyota respond with multiple recalls of millions of vehicles in an effort to isolate and correct the problem and/or placate the consumers' hue and cry. Unfortunately for Toyota, American consumers felt betrayed by the company whose name was once synonymous with engineering excellence and exemplary business ethics25. The CEO of Toyota was compelled to testify before Congress and to issue an apology to the company's customers but only when pressed to do so by a reporter. Nonetheless, Toyota's American profits fell 39% in the midst of the controversy, hard evidence of the power of consumer perceptions of expectations unmet.The paper will examine Toyota's ethical transgressions in depth and will posit that Toyota's mismanagement of this crisis of confidence was due, in part, to the company's deliberate or unwitting adoption of the American manufacturing practice of accelerating production at the expense of quality, as well as its Japanese management's tendency to stubbornly resist pressure when that pressure is perceived to be inappropriately applied. Previous researchers have pointed out that Toyota's culture may have led to its delay in addressing the ethical issues13"17.Automotive industry observers speculated that Toyota initial mishandling of the accelerator crisis was due in large measure to the fact that Toyota's corporate structure was not "designed" to respond to problems and perceptions created by the accelerator controversy. …