Total Recall

Manish Sharma

Toyota President Akio Toyoda. Pic source: Telegraph.co.uk

Toyota is facing a lot of flak these days for its tardy crisis management. The company sent the auto sector into a tizzy over its decision to recall nearly 8 million cars and trucks, including its leading sedans Camry and Corolla besides its much hyped hybrid model Prius, across continents.

The past few years have witnessed an increasing number of such high-profile recalls. Nearly two years ago, Mattel Inc. – the maker of renowned Toy brands like Barbie, Hot Wheels, Matchbox and Fisher-Price – recalled nearly 450,000 toys that were manufactured in China. In another major case, pharma major Merck & Co. voluntarily withdrew its blockbuster arthritis pain medication Vioxx over its alleged association with heart attacks and strokes. In India also, the instances of Nokia’s trouble with its faulty BL-5C batteries and chocolate giant Cadbury’s struggle over pesticide issue are still fresh in public memory.

Ever since Toyota’s crisis erupted, its management has run the basic module of crisis management more or less on the lines. It put information about recalls in the form of FAQs, its spokesperson is facing the media heat while re-affirming the company’s commitment towards quality and technology, and its spin doctors have been working overtime to keep the information stream flowing continuously on social media. Yet, nothing seems to be working for them.

Any crisis is a test of leadership skills. If a mistake is made, then the company should accept it. It may or may not minimize the damage but the company will at least appear to be a responsible corporate citizen. Toyota floundered at the core philosophy of reputation management. Its president, Akio Toyoda, has been conspicuous by his absence. The task of managing sentiments has been shouldered by its managing officer, Hiroyuki Yokoyama, who often appeared timid and harried at times and failed to evoke a sense of confidence among its stakeholders and consumers. For more than a fortnight, Toyoda — the grandson of the company’s founder — evaded the media. He resurfaced to re-affirm the ‘genchi genbutsu’ principle, which means ‘go and see’, but it seems he wasted crucial time that is at a premium in any crisis management exercise.

Moreover, he got his timing wrong. His press conference coincided with the news of recall of nearly 400,000 Prius cars. The Japanese government ordered the troubled auto-maker in August to probe its new Prius hybrid after nearly 14 brake-related complaints were received by the company. However, the company tried to deflect the complaints as a matter of perception. Also, it took too long a time to recall the Prius that it should have done at the outset. Once the bad news is out, scribes are often turned into sleuths and even the smallest of the problem is magnified to fuel the crisis fire burning. After all, bad reputation makes a good copy; ask a gentleman named Tiger Woods. Rather than tackling the situation aggressively, Toyota tries to put a lid on the stink. It sends the message that it tries to indulge in corporate skullduggery instead of being honest and transparent. For a company that is battling to save its brand equity, as Toyota brand is built on trust, technology and quality, this is akin to a corporate hara-kiri.

The only way a company can prepare for a crisis is to try to avoid it. But once you are in a crisis, it is not how you react that counts but how people perceive your acts. 

  1. Amit
    February 15, 2010 at 6:42 pm

    Well said Mr Baro. While it is responsible on the part of companies to recall products (may be even fashionable 🙂 ), its shocking to see the frequency of these recalls. The manufacturers need to pay a price for mass defects, in the past we have seen a few brands build a reputation for themselves which such recalls:)

  2. Nava Kumar Baro
    February 11, 2010 at 2:55 pm

    Product recalling has become a standard game to hide faulty blunders for companies across the sectors . Culprits of these heinous crime try to project it as a way to Corporate Social Responsibility while corp comm consultants perceive it as an opportunity for reputation management. I think that it is the demand of the genre to look out for some other relevant and innovative ideas for practicing modern CSR, reputaion management etc.

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