Toyota Tries to Fix Damage to Reputation
Toyota has climbed into the upper echelon of
auto manufacturing and retailing by producing reliable vehicles. The company’s
cars and trucks, it seems, have designated positions
on the top of customer satisfaction surveys.
However, a massive recall over concerns that accelerator
pedals might get stuck in go mode because of manufacturing and design issues
caused the company to halt sales and production of eight popular models representing
57 percent of Toyota’s sales. The models affected include:
- 2005-2010 Avalon
- 2007-2010 Camry
- 2009-2010 Corolla
- 2010 Highlander
- 2009-2010 Matrix
- 2009-2010 RAV4,
- 2008-2010 Sequoia
- 2007-2010 Tundra
The company said its dealers should begin receiving parts late today or early
tomorrow for the estimated 2.3 million vehicles involved in the recall. Dealerships
are expected to extend service hours to complete repairs as quickly as possible.
“We
deeply regret the concern that our recalls have caused for our customers and
we are doing everything we can — as fast as we can — to make things right.
Stopping production is never an easy decision, but we are 100 percent confident
it was the right decision. We know what’s causing the sticking accelerator
pedals, and we know what we have to do to fix it. We also know it is most important
to fix this problem in the cars on the road,” said
Jim Lentz, president and chief operating officer at Toyota Motor Sales, in
a press release.
The questions many are wondering is how the recall will affect
Toyota and its competitors going forward.
“Toyota had been at the top of the
heap in this industry, from word-of-mouth to ratings to quality to customer
satisfaction. Toyota has skated along as the bulletproof car company. That
moment has passed. They’re not going to fall on their faces and go out of business,
but their image has been permanently tarnished,” Peter
DeLorenzo, author of The United States of Toyota, told Advertising
Age.
Art Spinella, head of CNW Market Research, told CNNMoney.com, “The
fall was quicker than the rebound will be. That’s for sure.”
Michelle Krebs,
senior analyst with Edmunds.com, said, “Ford and Hyundai were
already gaining on [Toyota]. If you look at what Ford did in ’09, they slashed
the [market share] gap between Toyota and themselves by half. They may well
pass them this year.”
Discussion Questions: What is your assessment of how Toyota
handled this recall? What will the company need to do for its brand moving
forward? What independent action should Toyota dealers be taking?
- Toyota Announces
Comprehensive Plan to Fix Accelerator Pedals on Recalled Vehicles and Ensure
Customer Safety – Toyota Motor Sales U.S.A.,
Inc. - Toyota’s loss: Ford’s and Hyundai’s gain – CNNMoney.com
- Toyota to begin sticky pedal fix, restart production next week – The Detroit
News - Billion-Dollar Battle Ahead for Toyota to Rebound From Recall – AdAge.com
The mea culpa by Toyota and coincidentally Domino’s Pizza warranted my blog last week. When critical brand promises are void and admitted, the reputation is compromised. That extent to all the handwringing was further exacerbated by a Domino’s DM apologizing on YouTube (clip on the blog.) In Domino’s case they seem to be using it as a reason to retry the brand which, from public comments isn’t working. From Toyota’s, their reluctance to admit massive failure will force anyone owning or considering a Toyota to put a question mark after the brand for a long time.
Recalls are not a big deal. Most people probably won’t even take their car in. If they do it will be fixed. Problem solved. Move on. Toyota is way ahead of the game pretty much putting the big three out of business. I have to give Toyota credit. Just imagine if one of the US government run car companies had the same issue, would there even be a recall?
Toyota blew it! For months, if not years, they denied any mechanical problems causing rapid acceleration. They battled against a recall, while evidence that there was a problem grew. And now many consumers who have experienced the problem are questioning whether a stuck gas pedal assembly is really to blame.
This is a PR nightmare for Toyota, one that is completely of their own making. Mr. Spinella is right, the fall will be quicker than the recovery and the door is open for Toyota’s competitors to grab market share.
Remember the Tylenol ‘crisis’ a few years back? Still got it in your medicine cabinet, I bet. How about the Audi ‘sticking’ accelerator pedal issue? They kind of botched the handling of that affair (and they didn’t even have Toyota’s standing) and today there’s probably one parked somewhere on your street, and maybe in your own driveway.
Yes, this might hurt Toyota in the short, short, short term. But so far they’re handling it fine. Consumers aren’t stupid. They’ve believed (rightly so) in Toyota’s quality for a long time and I don’t think you’ll see very many of customers abandon them.
Let’s just hope the dealer’s staff, the face of Toyota, handle the personal interaction well.
Toyota is handling this situation far better than its domestic competitors (think the Firestone/Ford blame-go-round). They discovered the problem, admitted it, came up with a fix and are dispatching parts as through the network as fast as they can. Of course there are going to be delays. A friend of mine with an affected Camry has to wait 2 days for his fix. Not too bad considering the size and scope of the recall in North America.
In the scheme of things, Toyota handled themselves and their customers as best they could. I can see a huge PR campaign in the near future touting Toyota’s commitment to quality and their customer. But that’s only natural…
I’m with Kevin on this one. The media flap–fueled by pundit pieces like this one no doubt–will be far worse than the actual damage to Toyota. As for the closing share gap between Toyota, Ford and Hyundai, that has been coming on for quite some time and for the classic market driven reasons–equal or better quality at a lower price.
I can’t speak for every Toyota dealership, but the ones near my home developed an arrogance around price that completely turned me off on the brand. I hadn’t been into a Toyota dealership in ten years until this past spring’s hybrid credit programs led me to check them out again. And that experience simply reminded me to go across the street to the Ford dealership to check out the 2010 Fusion.
Let’s face it, they are smelling blood and going for it. We are all too familiar with Toyota bashing! The US media has been having a field day, knowing full well that Toyota would have to come to them to advertise.
Let’s get real here. Recalls are common and [nearly] every manufacturer has had one, and will have one! Toyota still makes excellent quality cars, well above the average. It is rather shameful that GM, Ford and Hyundai trying to cash in on it so openly. This a not well advised as the whole industry will suffer. Now everyone will be feeling their gas paddles, in a Toyota or not, and find a way of trying to make a buck by suing someone somewhere!
Could it have been better handled by Toyota? Yes, maybe sooner. But my strong belief is that rather than a cover-up, it has possibly been just poor information gathering by Toyota. Would Toyota suffer as a result? Yes but it should recover by mid year if they manage to keep their heads up.
But the bottom line is that any loss by Toyota would be everyone’s loss.
There’s an old expression…”It’s how you deal with failure that determines how you achieve success.” In other words, it’s easy to take bows when pretty much everything is going according to plan, the challenge is to take ownership of failures and make them right. Toyota’s obfuscation and inaction will definitely hurt them big time for a long time.
True, there are auto recalls all the time…but accelerators sticking? That’s a big one, especially for women, the keepers of family safety. Women control more than 80% of household spending including car purchases and safety ranks high on the list when it comes to purchase criteria. It will be interesting to watch how they mend this fence, if they can.
Some notable recalls have been mentioned here (Audi, Tylenol, etc.). We are talking about brand strength. This event would have killed Chrysler. Period. Done. Toyota, on the other hand will notice only a momentary dip.
Having lived through a massive brand scare in 1985, I can tell you that this is also an opportunity for Toyota. Jewel Food Stores, the largest grocer in Chicago, owned their own dairy and their milk caused a number of salmonella deaths in Chicago. Their marketing program after this event drove unprecedented loyalty highlighted by a scratch-off ticket given to each customer at the POS that had a chance to win $1M instantly. That was such an over-the-top commitment to re-brand the company, that 1985 ended up being a record year in profit for Jewel. The program was called “Your Ticket to Quality.”
Toyota could do exactly the same thing. However, because of their brand reputation, they probably won’t even need to do anything.
Toyota owned up to its problem. No excuses. Just like J&J did with the intrusions into Tylenol packages. Johnson & Johnson maintained consumers’ trust and they had survive. Toyota will also. Trust will carry forward.
Toyota will get through this without a scratch. For 25 years they have slowly and steadily built a reputation for value and reliability. Their attention to the pedal issue only reinforces that.
Unlike the mention of Domino’s above, Toyota doesn’t need to offer their brand for retrial or rebuild anything. In contrast, I believe their attention to the pedal issue only strengthens their brand in terms of reliability.
The hit to Toyota’s reputation depends on what they do over the next few months. If they fully embrace a commitment to transparency, and can efficiently fix those affected models, they’ll be fine in the long run. Toyota can draw upon a wealth of good will (I drive a 1997 Camry) that should take them through this crisis, if they tell the truth at every turn.
Toyota has been proactive in getting the message to their existing owners (I’m one of them) about this recall. Is it painful? Of course it is.
However, Toyota has worked hard to earn trust and confidence. They know the stakes in getting this right are important, as do their customers.
The January, 2010 Consumer Intentions & Actions (CIA) Survey of offers some measure of the frailty of relationships, and the issue of safety has to be addressed. When asked “What brand of vehicle they drive?”, better than 10.4% of the adult population is driving a Toyota (does not include Lexus). That compares to 10.1% in October, 2009, and 10.4% in July, 2009.
However, of the consumers who said that they are “Planning on buying or leasing a vehicle in the next 6 months?”, in January, 10.3% will make a Toyota their FIRST CHOICE. In October and July, that FIRST CHOICE level was 11.2% and 12.8% respectively.
The SECOND CHOICE for consumers in the Surveys of Adults “Planning to buy/lease” was 11.6% in January, 9.4% in October, and 10.7% in July. Toyota still has believers. They need to move the SECOND CHOICE back to the top.
The Toyota customer in comparison to the general population is younger (40 vs. 45), more likely to be married (61% vs. 51%), better educated (14.6 years vs. 14.4 years), earns more ($57,908 vs. $56,546), more likely to to be Professional/Managerial or Owner (30% vs. 25.3%, and more likely to have children in the household.
If Toyota talks to their customers, demonstrates their concern, and follows through, they’ll win loyalty over the long haul. Painful for short term profits, but it does not have to be the end of their leadership, or a PR disaster.
I can’t speak to the history of this situation but I do like the way they are handling this now. I do believe that more retailers would benefit from just being honest and apologizing about their mistakes earlier on. President Clinton is another example of this. People do forgive and move on.
There seems to be a disconnect here between the poll results–almost half of respondents thinking it’s “big”–and the almost blase remarks many have offered; and I have to say I agree with the former far more than the latter: to say a recall is no big deal because they happen all the time is to entirely miss the point; it’s precisely because they DO happen to other manufacturers that it’s bad…it implies Toyota is no better than (fill in the blank).
Obviously, how the recall is handled, and whether or not this is the start of other problems matters most, but the response to date has been underwhelming.
They could have handled it better but it will be a blip on the brand IF it is an exception and not a rule. The perception of Toyota’s quality as superior to its American competitors has been in play for about two generations now…it’s going to take a lot more than this to change it.
While many believe that Toyota will emerge largely unscathed from their recall (which according to my local dealer is a debatable term), I think this has the potential to be a real turning point.
Toyota has enjoyed a stellar reputation for quality among all of its brands, including Lexus and Scion. It was one aspect that was unquestioned in terms of brand choice and it propelled vehicles like Camry, and the Lexus line, to the tops of their respective categories.
This will not be the case much longer, particularly for the hundreds of thousands of people (like me) who recently bought a Toyota car that is subject to the “voluntary recall.”
There are three key reasons for this:
– Toyota withheld information about this defect for a number of months. It was only after it claimed six lives that it has been brought to the mass public’s attention.
– A company doesn’t stop selling its most popular products if there isn’t something seriously wrong. Real or perceived, it’s an issue and one that is underscored by keeping the vehicles from being on sale.
– If you call a dealer and inquire, they have one of several responses:
1. “You will be receiving a letter from Toyota in the near future with instructions…”
2. “The media really blew this out of proportion. The cars are still safe.”
3. “We’ll have _____ get back to you…” which of course is followed by an unreturned phone call.
– The American car companies, albeit propped up in a couple of instances via the US government, are poised to make a comeback, with better vehicles and more aggressive (and comparative) marketing. Look at Ford and GM’s numbers from last month and there is good evidence that US consumers are willing to reconsider those brands. Those sales came clearly from Toyota and also reflect a better economy.
– China has issues, both in terms of quality and values and as the American consumer feels better economically, this could be a contributing factor, even though Toyota is obviously not a Chinese company!
While the story has not yet been fully written, Toyota has seriously damaged its customer equity, particularly for recent buyers. Honda is already making aggressive moves to take its fair share, alongside the other domestic (and Asian) manufacturers. These buyers and their subsequent purchases will reflect on how well Toyota makes good for its customers.
At this point, I’d bet the under in Toyota versus its competition.