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Toyota's fractured structure may be at root of safety problems

The uncoordinated response to problems resulted from a diffuse organization, former company insiders say.

February 23, 2010|By Ralph Vartabedian and Ken Bensinger

In a bold national TV appearance early this month, a top executive at Toyota's U.S. sales office in Torrance declared that the automaker had discovered the exact causes of sudden acceleration in its vehicles: floor mats and sticking pedals.

But only days earlier, executives from Toyota's regulatory office in Washington told congressional investigators that they could not be absolutely sure what was behind the problem. And the company's attorneys acknowledged shortly after the meeting that sticking pedals would not cause sudden acceleration.

The contradiction led Rep. Henry A. Waxman (D-Beverly Hills), chairman of a powerful House committee investigating Toyota, to issue a stinging letter asserting that the company couldn't get its story straight.

To former Toyota insiders, however, the mangled message has roots in the company's fractured organizational structure in the United States -- a design that put key decision making in the hands of executives in Japan and ultimately impaired its ability to prevent the now-burgeoning safety problems before they reached the crisis stage.

As Toyota Motor Corp. has grown into a powerhouse of the auto industry over the last decade, it has built up a vast complex of engineering centers, test tracks, financial arms, sales offices and manufacturing plants that spread from California to New York, spilling over into Canada and Mexico as well.

But Toyota lacks a single U.S. headquarters; its units can operate as fiefdoms that report independently to Japan. The complicated tasks of gathering information about sudden-acceleration reports, analyzing the problems and engineering fixes, as well as reporting the issues to federal safety regulators, were handled by different Toyota subsidiaries, each managed separately in many cases from Japan, former Toyota managers and employees say.

And documents released by House investigators show that some of the disjointed subsidiaries of Toyota had an explicit strategy to minimize safety recalls, saving the company hundreds of millions of dollars even while reports of fatal accidents were increasing.

On Monday, Toyota disclosed that a federal grand jury in New York and the Securities and Exchange Commission had subpoenaed documents, adding criminal and securities investigations to its expanding political and regulatory probes.

"You know the joke that every bank branch has a president -- well, every Toyota facility has a president, and one can't tell another what to do," said John Jula, former engineering manager at the company's technical center in Ann Arbor, Mich.

Jula, who left Toyota in 2003 after eight years, said he had almost no interaction with the sales or dealership organizations that were collecting safety data from consumers, because all of the information flowed to Japan and all of the key engineering decisions came out of Japan. He left the company, he said, convinced that its dedication to safety had deteriorated.

Jula said he also had little contact with U.S. plant managers even though he was responsible for designing interiors for some of the models made in the U.S.

But the tight control exercised from company headquarters in Toyota City, outside of Nagoya, led the company into a series of disastrous miscalculations, critics say.

"They let Americans do what they do best, advertising and services, and in that area they left us alone," said Laurence Boland, who left Toyota in 1995 after a 25-year career at the automaker's sales organization based in Torrance. "But when it came to money and technical matters, they kept the control in Japan."

Boland and others say the system of the tight control from Japan has been characteristic of the company's handling of safety issues for decades.

Boland, who handled regulatory compliance, recalled that he was assigned in 1979 to collect information requested by U.S. safety regulators about sticking gas pedals in the Celica model. The pedal was attached by a hinge, which would rust over time in wet climates and then stick. The records he amassed, however, were sent to Toyota's engineering operations in Japan, he recalled.

When he later visited Toyota's Washington office and reviewed the submission to the National Highway Traffic Safety Administration, he found that much of what he had collected was gone.

"It got cleansed in Japan," he said.

The strategy parallels the conduct in the last year, in which the company boasted of successful efforts to minimize safety recalls and saving the company hundreds of millions of dollars, according to documents released Sunday by House investigators.

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