Toyota Fights to Preserve its Global Brand

Toyota faces its biggest crisis over a serious weakening of its reputation for quality control. How might creative leadership preserve its global brand?

Toyota has been hailed as the company of the future. This site has made no secret of its admiration for the company’s success. But events are now suggesting that the company has a lot of work to do in preserving its global brand. A year ago we wrote [Jan 2009] that Toyota’s business model was on trial:

Toyota is hurting, and Company chief Katsuaki Watanabe recently announced a projection for a first annual trading loss in its seventy year history. But Toyota’s pain still seems likely to be more sustainable than that being suffered by its rivals, whose fate is one of the urgent problems facing incoming President Obama, and who are pressing (begging?) for state bale-outs. For Chrysler, and GM, job losses are inevitable, while even survival in their present state seems increasingly unlikely. Its reaction to over-supply is to announced a temporary suspension of production for 11 days [Feb-March 2009] in all its 12 Japanese production units.

Now, [Jan 2010] Toyota is experiencing one of those crises which can rock a company to its core. Shares plummeted, as the company prepared to recall eight million vehicles globally because of problems with accelerator pedals on seven models.

At a Congressional hearing on Wednesday, [Feb 3rd 2010] US Transportation Secretary Ray LaHood alarmed both investors and consumers with the advice, which he later retracted, that owners of a recalled Toyota should “stop driving it”.

The carmaker said it was not aware of any accidents resulting from the issue and that only 26 incidents involving accelerator pedals had been reported in Europe. Last year, Toyota was forced to recall about 5 million cars worldwide over problems with floor mats trapping pedals. END
Toyota’s UK spokesman Scott Brownlee denied that the firm had delayed the accelerator pedal recall in the UK, stating it was a quality rather than a safety issue.

The Perrier Story

The developing story, although potentially far more significant has echoes of the Perrier case.

This relates to the crisis faced by the Perrier brand in the late 1980s. John Mowen & Michael Minor in their text book on Consumer Behaviour explain what happened

Perrier Group of America announced a highly embarrassing product recall [February 9, 1990]. The recall came in response to a report stating that Perrier’s high-priced bottled water was contaminated with benzene. Even though the U.S. Food and Drug Administration (FDA) said that the benzene levels did not pose “a significant short-term health risk,” Perrier’s management requested the removal of the brand from supermarkets and restaurants in the United States and Canada.

The incident turned into a public relations disaster, in large part because the company’s explanation for the recall kept changing. After traces of benzene were found in Perrier bottles in other parts of the world, company officials altered their original explanation. Benzene, they now said, is naturally present in carbon dioxide (the gas that makes Perrier bubbly) and is normally filtered out before the water is bottled. For unknown reasons workers had inexplicably failed to change the filters. Meanwhile, Perrier still insisted that its famous spring in Vergeze, France was unpolluted. By 1995, Perrier sales had fallen to one-half their 1989 peak. The company had to mount a comeback strategy. While attempting to regain share for the Perrier brand through new distribution channels, the company began to invest in other brands that did not have the Perrier name attached to them. The question remains, however, will the memory of the benzene incident forever tarnish Perrier brand name?

Lessons for Toyota

In times of corporate crisis, Denial is still a likely response. What might Toyota do to avoid the dangers of permanent damage to its future as a brand? Can lessons be learned from the fate of Perrier? What steps might a creative leadership take?

Acknowledgement

With grateful thanks to Susan Moger for her insightful comments on this story.

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10 Responses to Toyota Fights to Preserve its Global Brand

  1. Pikay Richardson says:

    Toyota has been an excellent auto company, with productivity levels second to none. But like all areas of human endeavour, perfection is a myth. Failures will always happen somewhere, sometime. Recall the flight test of the A320, the most advanced jet at the time of its maiden test flight. It rose to just over 100 meters and then dropped out of the sky. Thank God, the nobody was killed. Toyota’s problems must be seen in this light. Yes, things have gone wrong;, yes, it is disappointing for customers. But Toyota is not the first of fortune slaves. What is required is for the firm to face up to the problem, solve it professionally and then get on with building great cars. Dented confidence is only temporary.

  2. Saiful Said says:

    After the Singapore Airlines(SIA) SQ006 crash in Taipei in October 2000, when the public was asked “Would you still fly SIA” a lot of the answer was “No”

    But then the question “if you don’t fly SIA, whom do you fly with ?” is harder to answer, as at the time SIA was widely regarded as one of the best airlines.

    So, if you don’t buy Toyota, what would you buy instead? I suspect that the question is not as hard to answer as the SIA question, but it is still not going to be an easy answer.

    Looking locally in Saudi, the only car make that has a good resale value is Toyota, dodgy pedals notwithstanding.

    I am not suggesting that Toyota is not in trouble, but more that it should go back to its core values. Revenue maximization might not be the best way forward at this time. A marketing effort to rebuild the “reliability” trust may well be in order.

  3. Kamele Mnisri says:

    Toyota have built a worldwide reputation based on quality, durability and reliability and especially trust. Toyota is in a critical situation as they have to work through this issue to reassure their customers and preserve this trust relationship. What happened to Toyota could happen to any other company. Toyota is a creative company which will survive. But what will be interesting is to see how Toyota will behave to preserve its reputation and how Toyota’s rivals will behave to make profit from Toyota’s situation.

  4. Tudor says:

    Thanks Kamel

    Nice point about watching competitor reactions. The US big car lobby must be encouraging political remarks …

  5. Tudor says:

    At the momemt in the UK in BBC interviews, Toyota owners seemed relatively unbothered. But media commentators seem to be fanning the flames of anxiety.

  6. Tudor says:

    Fair points. Thanks Pikay. The firm seems to be facing up – not in denial – although it’s easy to criticize the speed of response.

  7. Kamel Mnisri says:

    The situation is getting complicated for Toyota. Could we say It is the end of Toyota Business Model?
    Kamel

  8. Tudor says:

    The story becomes more critical for Toyota which seems to be working through its entire product range. Whether through ethical leadership or crisis management, the result is that the company is ‘taking the medicine’. Criticism of the company and its leadership seems to be mostly regarding speed of its reaction to evidence of production faults.

  9. […] States. A legislator made a highly-charged statement about the dangers of buying any Toyota car. An earlier Leaders We Deserve post noted Toyota is experiencing one of those crises which can rock a company to its core. Shares plummeted, […]

  10. Residentiel maroc…

    […]Toyota Fights to Preserve its Global Brand « Leaders We Deserve[…]…

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