Toyota's lessons; rebuilding U.S. market under way

February 11, 2011 

Japan Earns Toyota

Toyota Motor Corp. Senior Managing Director Takahiko Ijichi, during a Tuesday press conference in Tokyo, discussed the 39 percent slide in quarterly profit.

SHIZUO KAMBAYASHI — AP

No doubt Toyota executives, from Tokyo to Georgetown, breathed a sigh of relief when the U.S. Transportation Department said this week that electronic problems weren't responsible for the rapid acceleration issues that have been a nightmare for Toyota since 2009.

But they know as well as anyone that their troubles aren't over.

Toyota's hard-won reputation for making stunningly reliable vehicles and respecting its customers has suffered damage that can't be waved away with a government report.

Toyota recognized this last year when it took the important step of appointing Steve St. Angelo, former president of Toyota's Georgetown plant, to lead a new North American Quality Task Force.

When the storm hit, Toyota had just edged out General Motors in 2008 to become the world's largest automaker. Toyota must have been doing something right to knock off GM, which had ruled the top spot since it took it over from Ford in the 1930s.

But bigger didn't necessarily mean better.

Toyota's march to the top was orchestrated in Japan and, we came to learn later, some of its reputation for quality relied on management's ability to minimize expensive recalls even when there were legitimate concerns.

The director of auto testing for Consumer Reports told the Associated Press that problems with Toyota's reliability first began to surface in subscriber surveys in 2007. Last year, he said, some Toyota vehicles dropped to below average in reliability in the survey for the first time in many years.

While reputation was suffering, costs were mounting.

Toyota has recalled more than 12 million vehicles globally over safety problems since 2009. It paid the U.S. $48.8 million in fines for its handling of the recalls. Toyota's sales in the U.S. declined last year by 0.4 percent while overall sales rose 11 percent. Its U.S. market share fell two percentage points to 15.2 percent.

And, just Tuesday, Toyota reported a 39-percent drop in quarterly profit, compared to a year earlier.

Toyota has shown signs that the tough lessons reflected in those numbers have been taken to heart.

"We are making fundamental changes in the way our company operates," St. Angelo, said at the time he was appointed to his new job.

In an interview last month with the Herald-Leader, St. Angelo said the decision to recall or not grows out of discussions and analysis among many people, including both executives and engineers. "The decision today is a consensus. It's not based on one person's decision."

In that interview, St. Angelo explained a rash of recent recalls. Many customers had remained loyal to Toyota through the recent firestorm, he said. "I made a commitment to (Toyota chairman) Akio Toyoda that if there's anything I feel uncomfortable about, I'm going to do a recall to protect those customers who stood by us."

It sounds almost like an evangelical call to recommit to the customer. Good. Staying true to that commitment is the one lasting value that can make Toyota — or any company for that matter — both bigger and better.

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