Reference no: EM131029152

Case for Analysis: Toyota's Culture and the "Sticky Pedal" Recall

Toyota is an extremely successful automaker that has built a reputation for quality by fostering a culture of continuous improvement and long-term relationships with employees, vendors, customers, and other key stakeholders. With such a strong organizational culture, how did the company reach a point in which it was criticized for not sharing enough information about the unintended acceleration problems that were documented in the form of complaints as far back as March 3, 2004? Six years later in 2010, Toyota paid a steep price for initially ignoring or not proactively dealing with the acceleration problem; it conducted a massive recall of more than 8 million vehicles to fix the faulty gas pedals. Not only did the company's reputation take a large hit but U.S. Transportation Secretary Ray LaHood slapped a $16.4 million fine against the automaker.

Many people were upset with Toyota's handling of the crisis and apparent lack of transparent communication about the extent and cause of the problem. For some time after complaints of unintended acceleration were tiled with authorities and the company, Toyota maintained that the cause of the acceleration was poorly fitting floor mats. It took until January 2010 for the company to make the decision to replace the faulty accelerator pedals.

Toyota's organizational culture may be partly to blame for the ill will that was created over the handling of the faulty accelerators problem. First, Toyota's culture of keeping potentially negative information locked tightly within the firm is at odds with what many organizations do during a crisis in the U.S. For example, the leaders of Johnson & Johnson made it a point to communicate with the public major developments regarding the cyanide-laced Tylenol capsule tamperings in 1982. Second, Toyota's leadership may be too insulated to allow it full or timely access to negative information. This problem may be due to the fact that Toyota has a formal, hierarchical organizational structure that prevents negative information from reaching the top.

Will Toyota rebound and regain its global prominence as a top quality automaker? Some experts suggest that the company will eventually work through and resolve these accelerator-related problems. However, another question remains: Will the company also attempt to modify its culture so that it can handle future crises in a more open and timely manner?

QUESTIONS FOR ANALYSIS

1. Why did Toyota wait so long to publically acknowledge and replace the faulty accelerator pedals?

2. Changing a culture from one that rewards secrecy to one that is more transparent (especially in a crisis) appears to be difficult. Why?

3. If you were the president of the Toyota Motor Corporation, how would you have handled the unintended acceleration problems? Explain.

Sources: Adapted from Josh Mitchell and Kate Linebaugh, "Toyota Faces $16.4 Million U.S. Fine," Wall Street Journal (April 6, 2010); Laurie A. Harbour, "Toyota: Crisis & The Importance of Culture," Automotive & Design Production 122, no. 2 (March/April 2010): 12-13; Norihiko Shirouzu and Mariko Sanchanta, "Support Wavers At Toyota For Chief," Wall Street Journal, February 23, 2010, p. A.4; "Leaders: Accelerating Into Trouble, Toyota," The Economist, February 13, 2010„ p. 14; Kate Linebaugh, Dionne Searcey, and Norihiko Shirouzu, "Secretive Culture Led Toyota Astray," Wall Street Journal (February 10, 2010), p. Al.