Ethics Matters
Part I: Mishandling of autos
‘Toyota Way’ provides no answer to recalls
John D. Copeland
J.D., LL.M., Ed.D.
Editor’s note; this is the first of a two-part series on Toyota’s massive recall of autos and
the damage done to the company.
Famed investor Warren Buffett notes “It takes 20 years to build a reputation and
five minutes to ruin it. If you think about that, you’ll do things differently”.
With Toyota’s rapid loss of its good reputation for quality automobiles, we see
Buffett’s observation in action.
For years, Toyota’s name represented unquestioned integrity and quality in
manufacturing auto. Toyota built its reputation through devotion to its guiding principles
described in “The Toyota Way”. In “The Toyota Way” the company promises, …“to
seek continuous improvement, … find the facts to make correct decisions, … accept
responsibility, … and build mutual trust”.
“The Toyota Way” inspired the writing of business books about the keys to
Toyota’s success. Business professors taught students how “The Toyota Way” enabled
Toyota to become the world’s leading automaker.
Toyota’s recalls, now totaling over 8.5 million autos, raise serious questions about
whether Toyota’s executives abandoned the company’s principles in the pursuits of
growth and profits.
Bungled response
Recalls happen to almost every large company. Regardless of the care taken in
designing and manufacturing products, mistakes happen. Consumers understand that no
company is perfect and they judge a company on how it admits mistakes, handles recalls,
and corrects errors.
Toyota it bungled its massive recalls.
Years before its recalls, Toyota received complaints about serious problems in
some of its autos. Toyota owners complained that accelerator pedals failed to spring back
to their original positions after release or sometimes stuck in the down position.
The most disturbing complaints involved unexpected acceleration problems in
some Toyotas. Owners suspected electrical problems in their autos caused the surges in
speed.
Toyota refused to accept that some of its autos contained serious and dangerous
defects. The company often ignored complaints or treated the complaints as isolated
incidents.
Finally forced to admit that something was wrong, Toyota blamed the autos’
owners for accelerator pedals not springing back into position. As the complaints
continued, Toyota still refused to accept responsibility. Instead, it blamed the problems
on the CTS Corporation, which manufactured its accelerator pedals. CTS, however, said
complaints about the pedals began as early as 1999, and it did not begin manufacturing
pedals for Toyota until 2005.
Toyota blamed floor mat designs for accelerator pedals sticking in the down
position and offered to replace them. But some Toyotas owners without floor mats in
their autos also claimed their accelerator pedals stuck.
Toyota stubbornly refused, and still refuses, to believe unexpected surges in speed
problems exist in any of its autos. The company argues that Toyotas contain a fail-safe
electronic system that causes brakes to override any unexpected surges in speed. Toyota
contends the electronic system cannot fail.
Toyota contends the National Highway Traffic Safety Administration investigated
the unexpected surge complaints and found no reason for concern. Members of Congress,
however, now question whether the NHTSA thoroughly looked into Toyota.
Stung by the criticism, NHTSA recently launched an investigation into whether
Toyota timely reported suspected defects in some Toyotas in a timely fashion. Federal
law requires manufacturers to notify the NHTSA within five days of possible product
defects. According to insurer State Farm, it warned Toyota about gas pedal and
unexpected surges in speed problems in 2007. Other evidence is surfacing that Toyota
knew even before 2007 about defects in its autos.
Sales stopped
Toyota now finds itself in a crisis of consumer and government confidence in its
autos and integrity. Congress announced it would hold hearings on Toyota’s handling of
possible defects in its autos. Federal prosecutors and the Securities and Exchange
Commission began looking into possible criminal charges against Toyota.
Under mounting criticism and pressure, Toyota stopped its sales of some models
of its Avalon, Camry, Corolla, Highlander, Matrix, RAV4, Sequoia, and Tundra. It
ordered two separate recalls of the models. Later the company ordered a recall of 400,000
of its environmentally friendly Prius because of braking problems.
Toyota’s recalls did not solve its crisis and the crisis continues to worsen - as does
the damage to Toyota’s reputation. The question is whether the company famous for the
“The Toyota Way” can find its way out of the mess it created.
John D.Copeland, J.D., LL. M., Ed. D., is an executive in residence at The Soderquist
Center for Leadership and Ethics and a retired professor of business at the Center for
Business Ethics at Bentley University in Waltham, Mass. He can be reached at
[email protected].