When Akio Toyoda, the chief executive of Toyota and grandson of the company’s founder, stepped in front of a microphone last October at the Japan National Press Club in Tokyo, many observers were shocked and a bit perplexed to hear him say Toyota was “grasping for salvation,” and just steps away from “capitulation to irrelevance or death.” It hardly mattered that he was trying to shake the company’s executives from their complacency by referencing a popular management book, How The Mighty Fall. The peculiarities of Japanese business culture aside, this is not how leaders of global companies are supposed to talk, and Toyota—despite its US$4.4-billion loss in 2008 and a similar forecast for last year, a brutal year for the entire industry—was still widely considered the world’s most successful automaker.
Four months later, Toyoda’s comments sound eerily prophetic, causing some to wonder whether he knew more than he was letting on. Once praised for its manufacturing prowess and relentless efforts to improve quality control, the automaker has suddenly found itself in the midst of a crisis following its biggest-ever vehicle recalls, totalling some 8.5 million of its cars, trucks and SUVs—almost as many vehicles as all carmakers sold in the United States last year. Toyota is facing lawsuits from drivers who allege it knowingly covered up defects, and government officials are accusing the company of foot-dragging when it comes to acknowledging potential safety issues. It’s a far cry from just a few years ago, when Toyota’s ascension seemed unstoppable, and people walked into dealerships ready to pay the full sticker price because they believed Toyotas were the best-made cars on the road.
Though few Toyota vehicles sold to customers have experienced problems, the stories of those affected have been terrifying: some drivers say they experienced “sudden unintended acceleration,” a polite way of describing a car or truck careening down the highway with the throttle stuck open. Last August, in the most high-profile example—which marked the start of Toyota’s very public downhill slide—off-duty highway patrol officer Mark Saylor was driving a 2009 Lexus near San Diego when it suddenly sped out of control. In a 911 call, a passenger is heard frantically relaying the doomed car’s final seconds: “Our accelerator is stuck…we’re in trouble…there’s no brakes…we’re approaching the intersection…hold on.” The car struck another vehicle, tumbled down an embankment and caught fire, killing Saylor, his wife, her brother and his daughter.
It’s still not clear exactly what caused the crash, although a preliminary sheriff’s report blamed incompatible floor mats, which caused the gas pedal to become jammed. Toyota has since recalled millions of vehicles because of floor mats and millions more because of sticky gas pedals. With Toyota’s brand built on quality, such harrowing incidents, coupled with persistent speculation about what could have caused them, are hammering the company’s reputation with each passing day. The fact that separate problems have emerged with the brake systems of Toyota’s Prius hybrid, a flagship vehicle for the automaker’s technological prowess, has only stoked the fire.
How did the world’s most beloved automaker suddenly find itself lurching from one crisis to the next? Observers say it’s no coincidence the recent rash of recalls follows Toyota’s decision in 2002 to overtake General Motors as the world’s biggest car company, setting in motion a period of rapid global expansion that caused the company to stray from its roots, and put a strain on its oft-admired manufacturing system. Others say a culture of arrogance and infallibility has added to Toyota’s problems.
The immediate cost of the recalls are estimated to be US$2-billion in repairs and lost sales, but it’s the potential for long-term damage to Toyota’s painstakingly built brand that executives need to worry about. Not surprisingly, Toyota is desperately trying to limit the fallout before it’s too late. Exposed as just another big, out-of-touch automaker, it’s now more a question of whether Toyota’s vehicles, already described as “boring” even by their fans, will be given the taint of being unreliable too, a poisonous label that can take years—even a decade—to shake. Just ask General Motors, Ford and Chrysler.
One Friday morning last September, George Jusdanis was returning home in his new Toyota Tacoma, purchased just three weeks before. With a load of produce in his pickup truck—Jusdanis and his wife, Jane, ran a fruit and vegetable stand outside their Hamilton home—the 78-year-old reversed into the garage while Jane, 77, waved him in. It was a routine they’d been through countless times, but this day, something went horribly wrong. The truck sped up, crashing into Jusdanis’s wife of 52 years. She later died.
The Tacoma was included in a Canadian “safety improvement campaign” last November that focused on floor mats. The campaign followed the U.S. recall of 4.2 million vehicles because of concerns that accelerator pedals could become jammed in their floor mats, causing a loss of control. But no vehicle defects could be determined in the Jusdanis case and the collision investigator’s ﬁndings were inconclusive. Jusdanis and his family remain convinced there was “something electronically or mechanically wrong” with the truck, says Jim Scarfone, their lawyer, and will pursue legal action against Toyota.