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Toyota, what's so hard about doing the right thing?

February 11, 2010|David Lazarus
  • A mechanic fixes braking software on a Toyota Prius at a dealer's repair shop in Nagoya, Japan.
A mechanic fixes braking software on a Toyota Prius at a dealer's repair… (Jiji Press / AFP/Getty Images )

Successfully responding to a corporate crisis -- like, say, having to recall millions of vehicles because they accelerate out of control or have trouble stopping -- isn't that complicated.

The experts say you need to tell customers everything you know as soon as you know it, and you should never ever give the appearance that you're spinning the story or, worse, covering up bad news.

"You can't hide," said Bob Grupp, president of the Institute for Public Relations, an industry-funded think tank. "These are uncomfortable situations to be in. But in today's 24/7 society, you have to step up and acknowledge your reality very quickly."

So why don't more companies do it?

Toyota Motor Corp. is the latest to give the impression that it had to be dragged screaming and kicking to disclose the truth about potentially lethal defects in its products.

Since the fall, Toyota has issued recalls on 10 million vehicles for problems related to unintended acceleration, with about 2 million vehicles subject to more than one recall. This week the company said it would recall about 437,000 Prius hybrids and other models because of brake problems.

Stuff happens, and Toyota still makes a pretty darn good car. I used to drive a RAV4, and before that a Corolla. Never had a serious problem with either.

But Toyota's actions throughout this mess -- the initial denials, the obfuscating, the gradual acknowledgment of safety issues -- suggest that its priority first and foremost has been to cover its crankcase, not safeguard its customers.

The gold standard for corporate crisis management remains Johnson & Johnson's response to the Tylenol scare in 1982. Seven people were killed after some loony placed cyanide-laced capsules in packages on store shelves.

Although the deaths were limited to the Chicago area, J&J immediately recalled all Tylenol nationwide -- 31 million bottles -- at a cost of about $100 million. The company also launched a public-awareness campaign to protect consumers.

Another example of placing the public first happened in 1996 when Odwalla, the Northern California juice company, discovered that its apple juice had been linked to a deadly strain of E. coli bacteria in Washington state.

The company ordered a nationwide recall of all products containing apple juice at a cost of $6.5 million. It also adopted a policy of complete transparency so that customers and business partners would know everything the company was doing to remedy things.

"This isn't the time to be cheap, that's for sure," said Ben Allen, chief executive of Kroll Inc., the world's biggest risk-consulting firm. "The reputational damage can be enormous."

He said his advice to clients is always in keeping with conventional wisdom: "Be clear, be honest and say what you don't know."

Nevertheless, Allen said it's not surprising when companies throw conventional wisdom out the window and try to improvise.

A classic example occurred in 1989 when the Exxon Valdez oil tanker ran aground in Alaska's Prince William Sound, spilling nearly 11 million gallons of oil and blackening more than 1,200 miles of coastline.

Critics say Exxon dragged its feet in responding to the disaster, relying at first on lower-level executives to handle things and downplaying the severity of the situation.

The company waited 10 days before taking out newspaper ads apologizing for the spill but pointedly failing to acknowledge any responsibility.

"People get caught up in the short-term risks and make decisions that get them into trouble," Allen said.

At first, Toyota blamed the unintended acceleration problem on floor mats. Then sticky gas pedals.

Toyota's top U.S. exec, Jim Lentz, finally appeared on NBC's "Today" show last week to declare that the company had everything under control.

"We have the fix, and we're going to take great care of our customers through our dealers," he said.

Congressional leaders subsequently wanted to know how this squared with what Toyota officials had told their staffers, that the causes of unintended acceleration remained "very, very hard to identify."

Now we have the recall primarily involving Prius brakes. Toyota reportedly has known of dozens of instances of brakes malfunctioning on the vehicle since the newest model went on sale in Japan and the United States last May.

"It's typical for companies in these situations to lawyer up," said Chris Lehane, a San Francisco crisis-communications consultant. "But this puts you in a position where it's hard to do the right thing."

J&J officials said they had no road map for handling the Tylenol crisis. So they turned to a credo expressing the company's values that was written in 1943 by Robert Wood Johnson, J&J's chairman for three decades.

"It was the credo that prompted the decisions that enabled us to make the right early decisions that eventually led to the comeback phase," David Clare, J&J's president at the time, said afterward.

The company's credo begins like this: "We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services."

Simple words. Put into practice, they may have saved the company and possibly saved lives.

Toyota has a credo too. It's called "The Toyota Way," a 14-point management primer that includes putting customers first. Unlike J&J, though, no one at the carmaker seems to have looked to the company credo for guidance.

Maybe Toyota needs a better way.

Send tips or feedback to david.lazarus@latimes

.com.

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