Toyota's Crisis

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“Campus”

DENMARK
CORP 3364
Crisis and Business Continuity Management
An Analytical Evaluation
On
Toyota’s Crisis of Unintended Acceleration
Submitted By:
Ram Prasad Kadariya
P11016207
Nov. 28, 2011

Tutor:
Sven-Eric Bruhn Bertelsen
Toyota Crisis of Unintended Acceleration
Definition
Any company smaller or larger can have a crisis sooner or later and that can have serious negative impact on it. Pearson and Clair ( 1998 ) as cited in Crandal, Pamel and Spillen ( 2010 ) define crisis as an event with low probability but high impact on organization. Similarly, Coombs ( 2007 ) defines crisis as an unpredictable event that can have serious impacts on organization with negative outcomes ( cited in Crandal, Pamel and Spillen, 2010, p. 4 ) Toyota became world’s No. one automobile company going ahead of General Motor in 2008. But sooner Toyota got into the serious crisis caused by the safety issue of sudden unintended acceleration and its lack of proper management leading to the massive recall of more than 14 million vehicles globally (Jacks Investment Research, 2011), government investigation, heavy fines of 48.8 million US dollar for not reacting appropriately to the report of problem and the legal actions from the victims (New York Times, 2011). Here it seems that wide spread criticism of Toyota from public, medias and government agencies (MacKenzie & Evans, 2010 ) was unpredictable for Toyota. Similarly, massive recall of 11 millions vehicles, government investigation, fines and legal action from the customers were serious negative outcomes. Damage on Toyota’s reputation (The Economist, 2011) and loss of market share (Kitamura, Ohnsman and Ito, 2011) are other negative outcomes of the incident. This event had been very difficult to handle for Toyota These all things indicate that this is a case of serious organizational crisis in the terminology of Crisis Management.

Contributory Factors
Denial of the problem:-
Toyota denied the problem until it was forced to take action. Toyota had been denying its accelerator problem since the very beginning of the first case surfaced in 2002 and did not take action until the problem escalated in 2009 (Hemus, 2010). The best way to deal with the problem is to deal with it before it escalated. According to National Highway Traffick Safety Administration of USA, 34 people have been killed in the Toyota crashes caused by the sudden acceleration since 2000. All the complaints regarding the sudden acceleration were dismissed by Toyota, its dealer and government agencies blaming on drivers pressing the wrong pedals or mechanical problems (Krisher, 2010). If Toyota had taken this problem and formed a team of experts at the beginning, it would not have faced the crisis of 2010.

Toyota’s Corporate Culture
 Wayne State University Professor of communication Mathew W. Seeger (2010) argues that elements of Japanese corporate culture like consensual decision-making process, keeping the problem behind the scene are contradictory to the demand of a multinational company. Toyota’s CEO Akio Toyoda’s late public apology, late decision on recall of vehicles, and the medias revelation of Toyota’s pre- acknowledgement of the accelerator problem and hundreds of past complaints indicate the same pitfall in Toyota’s corporate culture. Inability to explain the uncontrolled acceleration

Toyota was not able to identify the problem of sudden acceleration with certainty for a long time. Mr. Jim Lentz, president of Toyota Motor Sales USA, said at congressional hearing that he was not sure whether the fixes that were being undertaken would solve the problem ( Krisher, 2010 ). Such state from the top management level might have catalyzed the customer’s anxiety and harmed company’s reputation even more. Sluggish response

The case of first sudden acceleration came on the surface in 2002 (Institute of Engineering and Technology, 2010). But the case got widespread media coverage when...
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