Toyota 2010: Two Recalls in Two Months

http://www.usatoday.com/money/autos/2010-01-21-toyota-recall-gas-pedal_N.htm?POE=click-refer

We quote from the NY Times 10/3/09: "Akio Toyoda, president of the world's biggest automaker, might as well have thrown himself on the ground in a tearful kowtow."

"From grief over a fatal crash linked to Toyota floor mats to regrets over the company's forecast for a second consecutive annual loss, the executive offered a litany of apologies to astonished reporters gathered for a briefing Friday at the Japan National Press Club."

"Toyota was shamefully unprepared for the global economic crisis and is now a step away from 'capitulation to irrelevance or death,' said Mr. Toyoda, the grandson of the carmaker's founder. The company, he added, is 'grasping for salvation'."

Toyoda was borrowing from Jim Collins' new book "How the Mighty Fall" which is a long awaited sequel to Collins' world renowned "Good to Great". Collins' original book was the result of an extensive study by he and his very high powered team on how a CEO takes an otherwise average company and makes it great. "How the Mighty Fall" takes the other side of that approach and asks how companies fail, concluding that those "failures" occur in "stages" (two of which Toyoda was referring to). While we don't plan to go into those stages here, it will suffice to say that the first 4 stages of decline are reversible. The last stage (capitulation to irrelevance and death) is not.

Further quoting from Collins' new book, Toyoda said his company had gotten too arrogant on "hubris born of success" and the "undisciplined pursuit of more."

All of this was said last October at the announcement of a recall of 4.2 million Toyota vehicles (the largest in its history). That recall was prompted by a crash that killed four people last August near San Diego. Dealers began shortening or replacing gas pedals and installing brake-override systems (in addition to removing or changing floor mats) because of accelerator pedals that got stuck causing vehicles to speed up unintentionally.

Now, Toyota yesterday announced a SECOND RECALL which covers 2.3 million cars and trucks from the 2005 to 2010 model years and is SEPARATE FROM the 10/09 recall. About 1.7 million vehicles are included in both recalls, including its best-selling model, the Camry.

The first recall was to fix a design flaw that could cause the gas pedal to become trapped under the floor mat. This second recall was announced this week on the heels of an ABC News televised report (click on the link in the article attached) that at least 60 crashes have occurred since that time with Toyotas that had floor mats removed. In the most dramatic incident, on the day after Christmas, four people died in Southlake, Texas when a 2008 Toyota sped off the road, thru a fence and landed upside down in a pond. The car's "floor mats" were found in the trunk of the car where the owners had put them as a part of the first recall.

It would appear that "unintended acceleration" in these vehicles is not necessarily caused by floor mats. Second, at least in some of the reported cases, hitting the brakes won't stop the car.

What is very clear here is that Toyota did not get it right when it first recalled its cars. So, there are now major quality issues. In addition, there would appear to be major engineering and manufacturing issues: we're recalling cars but we don't know what to do.

Beyond that, Toyota has been cited by prestigious strategic thinkers as a model for international business growth. Sadly, Toyota grew too fast. Catching (and passing) GM in total units produced worldwide destroyed quality. Truly, "quantity" trumped "quality".

It will be interesting to see where Toyota goes from here.