Toyota Recall

Summary

This report provides an overview of the Toyota accelerator recall crisis, from a crisis management perspective. The framework used by Heller and Darling (2012) will be used to analyze the crisis, and in particular Toyotas handling of the crisis, during the critical stages of pre-crisis, acute crisis, chronic crisis and crisis resolution.

At each step along the way, Toyota management made mistakes. They had a chance first to avert the crisis. After years of inaction, the crisis occurred. However, it was still in the acute stage, and here Toyota failed to follow best practices in crisis management. The lack of transparency and culpability on the part of Toyota management only exacerbated the crisis, allowing it to bloom into a full-fledged chronic crisis. Even here, the companys management performed poorly.

It took Toyota years to recover from the crisis, and it only did so once it got past the crisis resolution point. In this case, the fine and long-belated mea culpa were the point at which the resolution occurred, years after the crisis began. Toyota has had its brand permanently damaged from the effects of the crisis, reflecting that even during the crisis resolution stage, the company made critical errors. The result is that what was a preventable crisis turned into a catastrophic one, in terms of brand reputation and brand value, for Toyota.

Introduction

On August 28, 2009, an accident occurs with an off-duty California police officer, as the Lexus he was driving suddenly accelerated, hit another car, careened off the road and burst into flames, killing all four people in the car (Motor Trend, 2010). Toyota, makers of Lexus, issued a recall in October regarding floor mats that it blamed for the issue, and only in January did it recall 2.3 million vehicles specifically for issues with the gas pedal, and subsequently another 2 million vehicles in Europe. What unfolded in the months between that crash and the January recalls was a public relations disaster for the company, one that would eventually cost it a $1.2 billion fine, so say nothing of reputation and market share loss (Ross, et al, 2014).

Wasserman (2014) reports that the company would later admit that it lied about the issue, twice. Toyota officials first made misleading statements to consumers, wherein they blamed the issue on the installation of a particular type of floor mat and issued a recall pertaining to floor mats. The second instance was that Toyota officials lied to Congress when asked to appear and explain the companys handling of the case.

Crisis Management

Crises occur frequently in business, and how a company handles a crisis is not necessarily a negative thing. As Heller and Darling (2012) rightly point out, if Toyota had undertaken the best practices approach to handling this particular crisis, it could actually have earned itself some goodwill among consumers and regulators for its transparency and accountability. Mistakes sometimes occur, especially with complex products like automobiles. Even when those mistakes prove tragic, effective handling of the crisis provides an opportunity for the company to showcase how it values its customers. Toyota, in attempting to sweep this particular crisis under the rug, ended up having more consumers killed in preventable accidents, something that highlighted a clear lack of concern for its customers, and lying to regulators only compounded the public relations disaster for the company.

Heller and Darling (2012) break out four stages of crisis management as their framework with which to analyze the Toyota acceleration crisis. The first stage is the pre-crisis stage. At this point, the issue is known to management, but is not yet a publicly known crisis. There were issues dating back to 2001 with Toyota and Lexus models, based on a fourfold increase in consumer complaints regarding a new electronic throttle control feature (AutoSafety.org, 2014). The relevant regulatory body in the US, the NHTSA, conducted multiple investigations into the complaints, but did not order a recall...

…fine brought the crisis to a resolution. The best way to bring a crisis to a resolution is, obviously, not by getting fined, publicly shamed by regulators and the performance of a full mea culpa by the leadership of the company.

The ideal situation is that the company controls the narrative of the crisis resolution. The reason that controlling the narrative is especially critical at the resolution stage is that is where the lingering impacts of the crisis are defined. Had Toyota effectively controlled the narrative during this stage, this would not be a landmark case of terrible public relations, to be endlessly cited, nor would it be a permanent stain on the companys public record.

Conclusion

At no point during this crisis did Toyota perform well. It failed to get in front of the crisis, spent the entire crisis not only playing from behind but was completely unable to take control of the narrative. Management failed, for eight years, to address this issue during the pre-crisis stage. But once it became a crisis, there was still plenty of opportunity for the company to handle the issue. The actions it took lying to the public, lying to lawmakers, seeking to cast blame elsewhere, were all undone in the course of the investigations. Toyota knew there would be investigations, and knew that they could not cover up their mistakes, but tried to do so anyway.

The best practice approach would have been to be much more honest and transparent about the issue, not tried to blame other people, and simply taken responsibility. The reality is that once something becomes a crisis, there will be some sort of damage done to the brand and its reputation. The point of using public relations to manage the crisis is to a) minimize that damage, b) take control of the conversation and c) to avoid having an acute crisis become a chronic crisis, as the latter can be a powerful negative force…