Toyota CEO Akio Toyoda received an MBA in the US (Babson College, ‘82) and recently has been returning there, particularly Washington, D.C., to receive extensive on-the-job training in crisis management.
Lesson 1 Speak First and Often: Mr. Akio Toyoda’s initial response to the Toyota’s recall for sudden acceleration in January, was um, let’s just say it was not a passing grade. When Mr. Toyoda became CEO in June 2009, he distanced the company from the media — a mistake for an international executive. After the recall he appeared unconcerned and didn’t make a statement until NHK chased him down near a ski slope at Davos. He made a short statement and then escaped in an Audi. Needless to say, this added gasoline to the raging fire. Since then, he has done his best to recover, but it has been a struggle.
Lesson 2 First and Second Impressions Count: As we all know, first impressions are lasting impressions. And if your second impression is as unimpressive as the first, you are in serious trouble. After initially declining to testify, Mr. Toyoda appeared flustered and evasive before Congress. Granted, some of this was simply language and culture, but he needed to present a more striking figure and did not. His tears later while listening to supporters from car dealers, while genuine and understandable, furthered the impression that he was in over his head.
Lesson 3 News Coverage is a Contact Sport: Unlike the Japanese media, which has largely not covered Toyota’s domestic consumer complaints, the US media is going after this in an aggressively and even sometimes questionable way. (See ABC’s story and its explanation of how it used misleading images in the car test.)
Lesson 4: Reality TV Meets Reality News: Copycats appear any time there’s a chance to make a corporation with deep pockets pay (See the Pepsi syringe scare). It’s bad enough that you are trying to figure out just what is going on with your cars, and now you have people who maybe seeking 15 minutes of fame and fortune. Even if these attempts are exposed as fraud, the damage tends to remain, because people remember the initial story more than the follow up.
Lesson 5: There’s More Than One Fire: Corporations are large complex organizations with numerous issues and problems. When Mr. Toyoda took over, his most pressing problem was Toyota’s shocking financial performance. For decades Toyota had set global standards manufacturing quality and financial excellence. Last year Toyota took a $5B loss and so Mr. Toyoda’s mission was clear: Fix the financials. He diligently began doing so, cutting Toyota Formula 1 racing and its $550 million budget. Yet several issues combined in this crisis: Financial problems, a new CEO, the Prius brake problem, and the festering issue (according to the New York Times since 2004) of sudden acceleration (and there may be more issues waiting to be uncovered).
Lesson 6: It Ain’t Over: Mr. Toyoda’s education will continue. Even if Toyota proves that the sudden acceleration wasn’t in its engineering, as it insists, damage has been done. Only reviving consumer trust and sales, which will take time, can get Toyota back into the fast lane.