What does Toyota have in common with the credit squeeze? Was the slack oversight of banks that resulted in recession echoed in the National Highway Traffic Safety Administration's slack monitoring of Toyota? That might be the case.
First, we might learn more from Toyoda president Akio Toyoda. At first he balked but now he has finally accepted a formal invitation to testify to a House Oversight Committee. Someone in PR must have had a quiet word with him and explained that no appearing would damage the company's brand even further.
The key issue for the committee is how much Toyota knew about the defects and how much did they cover up. Toyota's former attorney Dimitrios Biller claims he has documents showing that it was a cover up and that Toyota hid key findings of safety defects. For its part, Toyota claims Biller severed ties with Toyota three years ago so his information would not be reliable.
Still, there is a bad smell here. It isn't helped with BusinessWeek reporting that two former regulators, Christopher Tinto, vice-president for regulatory affairs in Toyota's Washington office, and Christopher Santucci, who works for Tinto, who are now on the Toyota payroll actually stopped US auto defect probes as far back as 2004. This is really creepy because it echoes the close links between Wall Street and Treasury that resulted in the lax oversight of banks that produced the recession and credit crunch.
The damage to Toyota's reputation can't be under-estimated here. A recent survey by the YouGov Brand Index has found that Toyota's reputation has crashed. Up until now, Toyota was one of the top auto brands but in recent days, it's turned sharply negative. Toyota's reputation is now even worse than that of the Hummer. As the autoblog point out, Toyota's -17.1 rating in early February is now below more traditional bottom-feeders like Hummer, which scored a -10.7 on the very same day.
The question is whether Toyota's reputation can be restored? Will Toyoda's testimony to Congress fix the damage? Probably not. Stephen Pope at Forbes says Toyoda's appearance will come to late. Success had made Toyota arrogant. "It clearly shows that in the long drive to surpass General Motors as the world's leading manufacturer, Toyota never looked to practice humility,'' Pope writes. "It is a crime to be a drunk driver here, but the leading executives of Toyota had become drunk on their own stunning success. What makes it worse is that President Toyoda carries the company name … The higher Toyota climbed up the mountain of corporate success, the less time and attention it paid to the once-famous mantra of Total Quality Management. It is lame to blame American workers at parts suppliers for poor workmanship. Toyota had ample opportunity to be on the case of any supplier making a one-time shortfall in quality. The very fact that Toyota has always been at the top of reliability surveys means the company should have held onto that status for dear life."
So what should Toyota do? Maurice Schweitzer, a Wharton professor of operations and information management says Toyota should make the grand gesture of contacting owners individually in order to get them into dealerships for repairs, and then compensate them in some way, perhaps by offering a rebate for another free service.
Will that be enough? It will be a sign that Toyota is again trying to connect to its customers and feel their pain. Whether it fixes the problem is another issue altogether. There are still too many questions about how much Toyota knew and whether it stopped authorities blowing the whistle.
I think Toyota is well aware of its customer’s satisfaction. It will do its best to regain its popularity in auto industries. The company should ask its franchises to give the customers a free service.