Toyota (Akio Toyoda, CEO), has had some well-advertised problems over the last year: problems with sticky accelerators that caused accidents, some fatal; the recall of 6 million vehicles, fines from U.S. regulators, and a number of lawsuits related to all this.   From what I saw, Toyota’s executives did not at first put on an impressive show in their public response to the challenges.

All of this raises a few questions for me:

• Do these setbacks mean that a company which had become iconic for its quality, manufacturing prowess, and customer satisfaction has truly gone off the rails?
• How damaging will the reputational and financial costs of these problems ultimately be for Toyota?
• Will the company be able to use all these events as additional learning opportunities, and emerge stronger than ever.

For reference, here are some quotations from a BusinessWeek article by Jeffrey Liker, professor of industrial and operations engineering at the University of Michigan and author of “The Toyota Way”:

“I personally have toured Toyota plants and been in their engineering offices in the past year. Unlike many competitors, Toyota had no involuntary layoffs through the recession and had enough extra people during the slowdown to focus intensely on quality and safety. In some plants, 40% of workers who were not needed for production were paid full-time to relearn its famous production system and attack problems in the plant with a vengeance.”

“In its Georgetown (Ky.) plant alone, Toyota reduced defects found in final inspection by more than 40%, thanks to the ideas of workers on the line. And this plant—which makes the Camry—was already producing some of the best quality in the country. In 2009, 10 of the coveted JD Power initial quality awards  for the best vehicles in a segment went to Toyota or its Lexus unit—more than any other automaker.”

“I come away in awe every time I visit a Toyota facility. It does not do justice to the hundreds of thousands of people in Toyota engineering and manufacturing and the supply base to leap to conclusions based on such thin evidence. Clearly it’s no small thing when a company shutters factories that produce its best-selling products. But it seems to me that the inferences about a wider quality problem at Toyota are not based on actual facts.”

In BusinessWeek/BCG’s survey of most innovative companies, Toyota ranked number 3, behind only Apple and Google.   With a market value of $127 billion, it’s the 34th most valuable company in the world. The air up there is pretty thin.

My own sense is that the next year will be a tough time for Toyota as it manages the recalls and the lawuits, but that this experience will redouble its commitment to quality, the trust of its customers, and market leadership.

On its website, Toyota offers these seven “Guiding Principles” to govern its work:

1. Honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world.
2. Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in the communities.
3. Dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through all our activities.
4. Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide.
5. Foster a corporate culture that enhances individual creativity and teamwork value, while honoring mutual trust and respect between labor and management.
6. Pursue growth in harmony with the global community through innovative management.
7. Work with business partners in research and creation to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships.

The company also lists the following “Five Main Principles of Toyoda”, presumably from its founder Kiichiro Toyoda:

1. Always be faithful to your duties, thereby contributing to the Company and to the overall good.
2. Always be studious and creative, striving to stay ahead of the times.
3. Always be practical and avoid frivolousness.
4. Always strive to build a homelike atmosphere at work that is warm and friendly.
5. Always have respect for God, and remember to be grateful at all times

A year from now, let’s see who expert observers would say is the world’s leading automotive company.

Jeffrey Liker’s BusinessWeek article is at

http://www.businessweek.com/bwdaily/dnflash/content/jan2010/db20100128_907800.htm

The growing list of Interesting Communities of Leadership is athttp://lovingwork.org/interesting-communities-of-leadership

Scott is scott@lovingwork.org and @scottdowns3 on Twitter.

challenges · culture · customers · innovation · leadership · quality · Toyota

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