Toyota Recall – Global Crisis Management

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Table of Contents

Introduction
An Analysis of Toyota’s Handling of the Crisis
The Toyota Crisis and the Internet
My Advice to Toyota
How Toyota can Use the Media to Restore its Image
Conclusion
References

Introduction

All organizations face crisis of different natures and scales at one time or another and the auto manufacturing industry is no exception to this. Devlin (2006, p.48) asserts that it is the premise of an organization’s management and the Public Relation (PR) offices to ensure that in the event of a crisis, the organization recovers gracefully and in a timely manner.

The objective of crisis management is to protect the stability of the organization by ensuring that stakeholder interests are protected and the organization’s losses are mitigated. Public relations forms an integral part of any crisis management efforts especially when the news media is involved.

In the course of the previous year, a crisis has hit the car manufacturing giant, Toyota forcing it to recall hundred of thousands of some of its bestselling models all over the globe. The negative publicity that this matter has received from main stream media has been immense. This has resulted in damage to the company being significant as can be illustrated by the company’s stock prices taking a plunge as vehicle sales plummet.

In light of these daunting realities for Toyota, this paper shall argue that effective PR and timely crisis management can be used to achieve a company’s marketing objectives even in the face of a global crisis.

The paper shall perform a brief analysis of Toyota’s handling of the crisis so as to highlight if proper crisis management policies were employed. The role of the media in this situation will also be reviewed and advice offered as to how Toyota can best harness the media to sanitize its tarnished image.

An Analysis of Toyota’s Handling of the Crisis

In the course of the past few months, Toyota has had to recall vehicles from all over the world over issues to do with sudden acceleration which is allegedly as a result of sticky accelerator pedals. In addition to these problems, there have been speculations that there could be braking problems as well as electronic system problems in the new model Toyota Cars.

Toyota’s crisis reached new levels following revelations that the death of an American highway patrolman, Mr. Saylor and his family in August last year were as a result of faults in the Toyota manufactured vehicle. Mr. Saylor’s finally words through an emergency call confirmed that his vehicle, a Lexus, had stuck its accelerator and had no braking which subsequently led to the fatal accident (Frean & Lea 2010).

The initial reaction by Toyota to this incident was the issuing of advisories instructing owners of specific model vehicles (including Lexus IS350) to get rid of driver side floor mats in their vehicles as this were suspected to cause the accelerator to stick. In addition to this, the company declared that it would continue working towards developing a long term solution to this problem.

However, it emerged at the beginning of this year that Toyota was issuing a recall of Lexus models to make some adjustments due to breaking problems that had been experienced by customers world wide (Lewis 2010).

This recalls have allegedly been necessitated by an increase in the number of reported cases of injuries and deaths attributed to Toyota vehicles. Even in light of this, company officials have maintained that recalls are not technically required since the brakes problem is of a temporary nature and indeed very rare.

Following the accident involving Mr. Saylor and his family, company representatives of Lexus issued a statement of condolences through which they expressed their deep regret at the family’s loss. The company went on to proclaim that they would investigate the issue do as to ensure the safety of Toyota’s customer’s.

This was a sound crisis management maneuver for as Blythe and Zimmerman (2005, p.304) assert, in the event of a crisis that leads to some form of lose to a customer, a public apology demonstrates the organizations empathy which may lead to some amount of goodwill from the general population.

From the onset, Toyota was assertive that the acceleration problem was isolated to only a number of models which it subsequently outlined and proceeded to give advisories on. This was an attempt at localized damage limitation and as Shirley (2000, p.32) confirms, this is a prudent move since all brands of an organization do not have to suffer for a crisis in one of the branches.

A report by The Times confirms that Toyota has been keen to isolate its luxury brands from the quality crisis that has hit most of the company’s new motor brands (Lewis 2010). Despite this crisis management strategy having hit some glitches as the luxurious Lexus IS350 model is in the shortlist of problematic vehicles, the isolation policy has helped the company to save face and retain some semblance of quality and reliability.

One of the errors that Toyota made while handling the situation was in its original insistence that the problem had to do with the few individual customers who experienced the problem. In addition to this, Toyota attempted to downplay the issue and did not publicize its advisories as much as it should have.

This might have been as a result of the fear by the management of the huge cost and reputation dent that the problem would cause for the company. In light of the recent recall in which the company has been forced to acknowledge that there had been problems inherent in the Toyota cars, the company’s initial claims on the vehicle’s safety have been seen to have been wrong.

This has greatly damaged the company’s credibility and reputation as being committed to customer safety. Fear among customers has escalated as Toyota drivers lack the assurance that their cars are safe.

This status quo has been worsened further by government warnings issued to Toyota drivers in America advising them to quit driving their vehicles for fear of accidents (Demetriou & Ruddick 2010). This has at the least damaged the company’s customer base to a large extent in the USA. Competitors have taken this opportunity to capitalize on Toyota’s losses and offset its market dominance.

Due to the speculation that Toyota knew about the problems with its vehicles but knowingly withheld the information from the public, there is mounting pressure on Toyota and lawsuits are being filled especially in the USA by car owners. Toyota dealership shops are also seeking compensation for the recalls and the damage that is resulting from the company’s damaged reputation.

The insinuation that Toyota knew about the problem but decided to downplay it could cost the company millions, or even billions of dollars in court settlements as was demonstrated in the late 1990s case in which Firestone/Bridgestone was forced to pay $7.5 million in settlement due to claims that is failed to deal with quality problems in its tires (Hearit 2006, p.154).

Had Toyota addressed the issue from the onset and adopted a policy of full disclosure, none of these daunting predicaments would be facing the giant manufacturer.

The Toyota Crisis and the Internet

We live in an increasingly globalized world which is characterized by instant access to information mostly as a result of the internet. As such, mainstream media outlets such as Television, Radio and Newspaper have at times been forced to play second fiddle as informal news outlets in the form of blogs and social websites take the lead.

The major problem with most internet media (especially social networking sites and blogs) is there is lack of verifiability and or accountability for claims made. As such, if there is no authoritative source of information, speculation and rumours may be interpreted as the absolute truth.

As such, a cardinal mistake by Toyota was that the company did not make any official statement on the matter. This informational black hole resulted in the media, and in particular bloggers and twitters being the authority on the matter.

While some of the information provided was of credible and truthful, sensational gossip also made the rounds in various sites as individuals told and retold their tales. The first public comment from an executive at Toyota’s head office in Nagoya was only made in February; almost 6 months after the crisis began (Frean & Lea, 2010).

Had Toyota acted in time and issued a solid statement, it would have been the authority on the matter and all the speculation would have been nipped at the bud. This would have given Toyota an opportunity to avoid the situation being blown out of proportion.

Despite these failures, Toyota has over the last weeks realized the power that the internet wields and has therefore sought to utilize this media to tell its side of the story and curb speculations and slander. The company posted a document on the internet which was addressed to Toyota owners. In the document, the company proposed to shed light to the recall; an issue which had until then been marred with speculations.

The letter informed the customers of the recall schedule and reassured all that dealerships would indeed extend their work hours so as to fix all problems in good time (Toyota 2010). Toyota has also elicited the use of social networking websites such as Twitter where it has encouraged customers to air their views. The company has adopted an honest stance by allowing negative comments to be aired without censorship.

My Advice to Toyota

Since the crisis has already begun, the best that Toyota can do is undertake “firefighting” and hope to emerge from the crisis with limited loses both in reputation and finances. Devlin (2006, p.45) declares that effective crisis management strategy is that which handles a perceived threat in a sequential manner.

He goes on to articulate that the primary concern in any crisis should be the safety of the consumers and the public at large. A failure to address this fundamental concern will invariably lead to intense damages from the crisis in the form of scarred reputation and financial loses.

While Toyota has already undertaken part of this step by recalling some of its brand, it is in my opinion that emphasis has not been placed on customer safety. while Toyota has formed safety advisory group and allegedly tightened its reins on its safety control, this is seen by many customers as mere damage control since consumer safety is not emphasized.

The company should endeavour to constantly remind customers that their safety is the company’s primary concern.

An experimental study by Dean (2004) whereby a comparison of how people reacted to expressions of concern verses no expression of concern found that post-crisis reputations were stronger when an organization provided a strong expression of concern for faults or any other misgiving.

With this in mind, I would advice Toyota to constantly remind the public that it is working overtime to resolve the issue as it overly concerned about consumer safety and convenience. Attempts at this can already be seen in the company president’s Toyoda’s heartfelt apology and expression of grief over the inconvenience that the troubles have caused to the company’s customers.

In managing a crisis, any show of weakness or indecision may spell doom for an organization. A company should therefore appear confident and optimistic that it has the situation under control.

Toyota should therefore maintain a calm attitude as it deals with the problem and avoid making panicked decisions as this will only lead to an escalation of the problem. The organization should also take responsibility for the crisis since this will result in the public being more accommodative of the company (Dean 2004). This will result in less damage to the Toyota’s reputation.

How Toyota can Use the Media to Restore its Image

Toyota has always been renowned for reliability and its quality control has been the company’s insignia. The current crisis threatens to undermine these virtues that the company has held on to unwaveringly throughout the years. This grim possibility can be averted by use of the media to restore Toyotas glory.

Over the years, the role of corporate advertising has changed from goodwill to advocacy advertising (Harrison 2000, p.90). Toyota can therefore utilize these outlets to fulfill its strategic aims and objectives. Advertisements have been known to change people’s attitudes towards a particular company for the better.

By extensively engaging in media campaigns that highlight the company’s strengths, Toyota can give its image a new lease of life even in the face of the crisis that threaten to run it under.

Shirley (2000) proposes that when a crisis hits a company, it either leads to the damaging of the brand or presents an opportunity for the organization to bolster the product by using the publicity that is gained as a result of the crisis. Toyota can therefore use the publicity that the crisis is affording it to reaffirm its commitment to consumer safety.

However, this move will only function if the rectifications that the recalled vehicles are fitted with prove to be as good as the company says they are. The reputation of the company will therefore be salvaged and its credibility as a reliable and safety conscious manufacturer maintained.

Toyota has already begun making use of the media to this ends as can be illustrated by extensive advertisements in American newspapers. The advertisements stated that Toyota was in the process of fixing the current problem (Demetriou & Ruddick 2010)

Bearing in mind that continues communication is the cornerstone of all business relationships, Toyota should especially be keen to maintain constant communication with the customers who are in one way or the other affected by the crisis.

A research by Taylor and Kent (2007) indicates that establishing a crisis web site is one of the best ways in which an organization can utilize the internet during a crisis. Toyota should therefore create a crisis web site in which it will give detailed information as to the models that have problems.

Information on the particular dealerships which are accepting the recalls should also be provided and a schedule made for the convenience of the customers. These constant communication efforts will demonstrate to the public that Toyota is indeed concerned about its customer’s problems and is doing all that it can to resolve the issue.

Conclusion

The Toyota crisis has been classified as the worse of its kind in vehicle manufacturing history. The cost in terms of financial losses run in the billions of dollars and the reputational consequences are equally dire. This paper set out to argue that effective PR policy compounded with a well calculated use of the media and a timely crisis management can enable the company achieve its marketing objectives in the face of global crisis.

By performing an analysis of the way in which Toyota first handled the situation, it is clear that some wrong choices were made and their effects are still causing major problems to the company. From the discussions presented in this paper, it is clear that all is not lost and Toyota can still manage to gracefully come out of the crisis as the leading car manufacturer in the world.

The company is still in a position to turn the tables and use the increased publicity for its own good. However, all this depends on the company’s commitment to their customers and the ability of the PR and crisis management team to harness the power of the media for the company’s advantage.

References

Blythe J. & Zimmerman S. A., 2005, Business-to-Business Marketing Management: a Global Perspective, Cengage Learning EMEA.

Dean D. H., 2004, Consumer Reaction to Negative Publicity: Effects of Corporate Reputation, Response, and Responsibility for a Crisis Event. Journal of Business Communication, 41, 192-211.

Demetriou D. & Ruddick G., 2010, Toyota Woes: Staring into the Abyss, Telegraph. Web.

Devlin S. E., 2006, Crisis Management Planning and Execution, CRC Press.

Frean A. & Lea R., 2010, Toyota Recall: Last Words From a Family Killed as Lexus Crashed , The Times. Web.

Hearit M. K., 2006, Crisis Management by Apology: Corporate Responses to Allegations of Wrongdoing, Routledge.

Lewis L., 2010, Toyota Prius Global Recall Fears Spread to Luxury Lexus brand, Times Online. Web

Said C., 2010, Toyota Should Have Accelerated Response, San Francisco Chronicle. Web.

Shirley H., 2000, Public relations: an introduction, Cengage Learning EMEA.

Taylor M., & Kent M. L., 2007. Taxonomy of mediated crisis responses. Public Relations Review, 33, 140-146.

Toyota, 2010, Toyota Customer Letter. Web.

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