Toyota: Recall scandal

Background

Toyota Motor Corporation (TMC) has been one of the most praised automakers in the United
States particularly for their reputation for producing dependable, reliable and safe vehicles. This
reputation in the United States has been enjoyed by the company since the mid-sixties, when the
first really popular car sold by Toyota, Corona, and Corolla, was later introduced to the American
customers.

Since that time Toyota has been building up its business success based on three core pillars:

Focus on quality of the product in both implementation and design phases.

Toyota Production System (TPS) that has been recognized widely and admired by other
auto- manufacturers and businesses from various industries for its built-in running
processes of efficient production, eliminating waste, and identifying and correcting
problems promptly.
Design and build the vehicles based on most innovative and advanced technology.

All these foundational principles have been serving Toyota well over the years and allowed it to
achieve the status of not only being the best auto manufacturer in the world, surpassing the long-
standing position of GM in that capacity, but also the most profitable carmaker.

What went wrong?

End of 2009 and the beginning of 2010 have been marked as most darkest periods in the
automakers history, when not only the safety of their vehicles, but also the business reputation,
integrity, and trustworthiness of the company had been called into question.

It all began with the horrifying accident on August 28, 2009 when a family of four passed away in
a 2009 Lexus ES 350 which accelerated out of control to the estimated speed of 100 mph in excess.
A phone call made by one of the occupants in the vehicle indicated that the car had no brakes.

In the race to be No.1 in the market, selling and producing more and more vehicles to achieve the
set goals for profits, shook the pillars of the companys foundation in the market. Toyota started
to neglect the quality parameters which eventually gave a rise to prolonged investigation by
National Highway Traffic Safety Administration (NHTSA); excessive coverage in the media, with
Los Angeles Times and ABC TV network at the helm of the investigative, often biased, reporting;
heightened scrutiny from the lawmakers.
At the end of February 2010, where the top Toyota executives, including the Toyotas President
Akio Toyoda, were summoned to testify the issue of unintended acceleration; and rise to
allegations of possible covering up of the problems by Toyota. In addition to the moral impact of
the ongoing investigations and recalls, there are very tangible financial consequences for the
company resulting due to:
Loss of revenue because of the production and sales halt in January 2010 estimated $895
Million in lost sales over recall
Loss in paid civil fines made cumpolsary by the government for failing to report known
safety problems $16.375 Million
Loss due to the humungous legal fees paid to the hired defense attorneys undisclosed
Loss due to the decline in the stock prices of the company annual drop of about 9%
-$11 Billion
Loss in sales by the customers who switched from Toyota products because of the improper
handling of the safety concerns unidentified
What could have been done?

The corporations sole purpose was to be able to maximize shareholders earnings rather than
expending shareholders funds for the social well-being. Simply, profits above all other factors as
long as the law was followed is not unethical but if Toyota had been more responsive to the
acceleration issues to recalled and reported the vehicles due to ethical responsibility rather by the
forces of law and NHTSA reporting, customers had maintained more faith in Toyota in its delivery
of quality and safety and prices of stock would not have taken much of a hit.

Conclusion

Toyota president has been quoted as saying he wants to rebuild the quality and image of the brand
after the fall from the recall scandal. However, it seems that his intentions were not of moral duty
but rather self-interest to rebuild the profitability and reputation of Toyota. Not only did they delay
the recall process but also they continued to sell vehicles with the known issue, jeopardizing the
safety of the customers against moral duties. Had Toyota made a Maxim of building image and
quality, motivated by moral law rather than by self-interest, many lives would have been saved,
lesser people would have been injured and litigation, the law suits and fines would have been
minimized if not no-existent.

References
http://www.nolo.com/legal-encyclopedia/toyota-recalls-litigation-over-acceleration-
32656.html
http://en.wikipedia.org/wiki/2009%E2%80%9311_Toyota_vehicle_recalls
http://www.autonews.com/article/20131024/OEM11/131029935/toyota-loses-first-
acceleration-lawsuit-must-pay-$3-million
http://businessethicscases.blogspot.in/2014/02/toyota-acceleration-concerns-
decelerate_6627.html