Toyota Grades

I've spent years watching companies over time. You get to observe lots of neat things if you look closely. Companies almost appear as living, human entities (they're not, Supreme Court!) For example, one can observe a formerly innovative and nimble company get "fat and happy" and lose their competitive lead. This can happen for all sorts of reasons, not the least of which is simply good, old fashioned arrogance. Corporate culture plays an important role too, particularly when a company's work force doubles in a relatively short time. The newer employees change the culture or have trouble integrating or are simply less manageable due to the sheer size and speed of the expansion.

Toyota is once such company that has grown rapidly. In my estimation, they got extremely arrogant and started to play the game differently. Instead of constantly striving, a more traditional approach was adopted. Problems were lobbied away, bad news was ignored and leadership is failing miserably. Perhaps more of the blame lies not with the engineers, but with senior management. Senior management simply failed to lead and do the right things. Perhaps they felt the risks of bad news were too great, so better to hide hit?

What is clear, is that the engineers are being left out of the loop. The WSJ had a piece yesterday on how key employees aren't being communicated with how to handle the problems. This is a first class management failure indicative of  arrogant and insulated senior leaders. Their crisis PR strategy has been abysmal. EVERYONE who even remotely studies management knows about both the JNJ Tylenol case back in the '80s and the New Coke debacle about the same time. The strategy for navigating any PR nightmare is simple: show quick, decisive action, "own" the problem and make it right. Toyota has done the opposite at every occasion.

So, Toyota management get's a solid "F" for it's efforts over both the past few years and certainly for the past few months. I recommend heads start rolling.

BUT, there is another side to this story. Toyota still builds superb vehicles. Yes, quality has fallen a bit in recent years, but it still ranks very high. (In the interest of full disclosure, I am the happy owner of two Toyotas- once of which is subject to the pedal recall). In this department, I give them an "A-". Current perception is vastly different than the facts.

Take Ford. Did you know they are currently recalling some 16 million vehicles for a faulty switch that can set the vehicle on fire? Did we all forget about the Ford "Exploder" of the late '90s and early 2000's? Ford blamed Firestone while Firestone blamed Ford and both were thought to be going out of business because of the bad PR. Toyota apparently didn't take note.

These things happen. What makes this case a little different is not that Congress is getting involved or that Toyota swept the problem under the rug. It's different because Congress is in the auto business- as a Toyota competitor nonetheless. Recall that (I love using the word "recall" in this post!) that the U.S. taxpayer invested tens of billions into GM and Chrysler recently (Congress gets a "D" for its handing so far- better than usual!) All this should make for a great show today. Keep in mind that most "sudden acceleration" issues are simply people stepping on the gas instead of the brake. We've all done it, but usually it's just a tap on the wrong pedal in the driveway and no harm done. Unfortunately, we live in a litigious society where spilling hot coffee on yourself brings billion dollar lawsuits. Toyota has said it can't actually find a problem and while I'm sure freaky things happen to electronics from time to time, you have a greater chance of getting hit by lightning than having a serious accident because of this.