Crisis Management: Toyota Case Study

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Contents

1.0 | Introduction        

2.0 | Discussion        

 References        

1.0 | Introduction

“A fatal car crash involving a Lexus vehicle in Southern California in August 2009 sparked the start of a massive recall by the world’s largest automaker. Since then, Toyota has recalled more than 5 million vehicles in the North American market” (Simon, Andrews, Tian, & Zhao, 2011, p.1064). The company terminated sales and suspended production of its top selling brands in the USA and Canada for a brief period of time. “Toyota was faced with legal implications and mounting pressure from the public for an explanation for the sudden acceleration problem involving sticky gas pedals and other safety issues” (Simon, Andrews, Tian, & Zhao, 2011, p.1064). “Internal documents submitted to the US government revealed that Toyota had not acted in a timely manner in disclosing information about consumer complaints about safety” (Simon, Andrews, Tian, & Zhao, 2011, p.1064). “This lead to a fine of $16 million by the US government” (Simon, Andrews, Tian, & Zhao, 2011, p.1064). How did the world’s largest and most profitable car manufacturer which possessed an unwavering reputation for quality and reliability find itself drowning in one of the biggest corporate crisis’s of the 21st century. Toyota failed to recognize warning signs of the preliminary crisis phase which spiralled it out of control. The organizations poor handling of the crisis will be discussed further in this report focusing on the poor public relations, possible structural issues and the abandonment of their own company values.

2.0 | Discussion

Crises can have either minor or major impacts on an organisation no matter if they are of a short or long duration. A corporate crisis can be segmented into 4 distinct phases as can be seen in figure 1. “Contrary to popular belief, a crisis may not be necessarily bad. It is merely characterized by a certain degree of risk and uncertainty” (Fink, 1986). Any substantially successful business will have contingency plans in place along with crisis management procedures. These act as the basic life support systems of the organization if there is an IT breakdown, shareholder lawsuit or product failure. However, it is becoming typical that many of these plans lack in terms of media and public communication as is the case with the Toyota crisis.

The problem of sudden acceleration, sticky gas pedals and lost lives due to these safety issues began to appear in 2007, “however, it was four years later after deceptive statements, before Toyota disclosed earlier understandings about the causes and recalled millions of vehicles” (Heineman, 2014, p.1). “It is difficult to understand how Toyota, whose core principles incorporated a pre-crisis detection process could not have foreseen the upcoming crisis” (Heller & Darling, 2012, p.162). [pic 6]

This extreme lack of awareness of the pre-crisis stage on Toyotas behalf was responsible for escalating the crisis to the far more serious acute crisis stage where there were new issues arising with further recalls of hybrid models. This lead into the chronic crisis stage where leaked emails show that Toyota saved $100 million by persuading regulators not to do a full recall, as well as “the National Highway Traffic Safety Administration (NHTSA) seeking a $16.4 million fine for failure to acknowledge accelerator pedal defects” (Heller & Darling, 2012). In order for the public to maintain their trust in a company going through a crisis as serious as this, communication is paramount.