Drawing the lessons of Toyota

By Shen Dingli
0 Comment(s)Print E-mail China.org.cn, March 8, 2010
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Toyota Motor Corporation has been in deep trouble lately. Due to problems in its gas pedal and braking systems, it has had to recall millions of its cars. Toyota cars have been involved in traffic accidents that have led to the deaths of dozens of people in North America, and the company’s reputation safety has been seriously damaged.

Much has been said already on Toyota’s quality defects. But there is still room to further elaborate. It is important to understand whether Toyota deliberately sold cars knowing they contained intrinsically flawed systems that could hurt others, and of course the company itself. And if not, how did the problem vehicles reach the marketplace? There are also questions about Toyota’s approach to crisis management. Finally we need to consider what lessons can be drawn from the fiasco, especially by Chinese businesses.

Although Toyota’s credibility has been badly damaged, it is safe to say that the company did not intentionally market a flawed design. For many decades, Japanese corporations involved in manufacturing have essentially been living on their reputation. One has to admire their meticulous attitude to technological innovation and extremely high quality standards, particularly of their electronic goods. Their products have enhanced the quality of life of people all over the world. Toyota is one of Japan’s leading car makers and has improved the lives of millions of people, including many Chinese. Despite historical differences and mistrust between China and Japan, Chinese citizens have no problem using and enjoying electronic goods made in Japan.

It is ridiculous to suggest that Toyota would knowingly release a car with built-in defects. Toyota would not risk its hard-won reputation built over seventy years. What is more, no car maker can boast with absolute assurance that its products have no technical defects. Toyota’s gas pedal and brake system problems are not unique; other car makers have seen similar problems.

This is not to defend Toyota. The company deserves to be severely criticized. But we should contrast Toyota, whose safety problems were introduced unintentionally, with manufacturers that knowingly sold flawed and dangerous products. For instance, China’s Sanlu intentionally produced milk powder containing Melamine, a compound rich in nitrogen, a chemical component of the protein contained in milk. But Melamine is not a nutrient; it is a poisonous chemical especially dangerous to children. Sanlu systematically and intentionally manufactured poisonous material disguised as milk, causing the deaths of many Chinese infants and doing long-term damage to many more. Its vicious greed seriously damaged China’s image.

Toyota’s problems are not excusable but they are understandable. They have to do with global car safety issues in which no-one can claim to be absolutely confident. The company had been expanding too fast and failing to fully apply its traditionally effective domestic safety standards to its manufacturing operations outside Japan. This is deplorable, but the Sanlu affair was a criminal act. One has to commend Akio Toyoda, Toyota’s president and CEO, for courageously and genuinely apologizing in Washington, and Beijing. By contrast, the Sanlu CEO, Tian Wenhua, made no public apology until she was arrested.

Toyota’s strategic failure lay in its crisis prevention – its inability to assure quality at the highest possible level; its tactical failure was poor crisis management. Despite many warnings, including incidents involving its cars and law suits involving its gas pedal and brake systems, the Toyota company did not respond in a timely fashion. This failure led to its present embarrassment, undermined its reputation for quality, and may well have undermined the “Japan brand” as a whole. Certainly, Toyota will, deservedly, end up paying a high price.

While Toyota undermined its reputation through its poor response to customer queries, the rest of the world has no reason to rejoice. The American auto industry is unlikely to gain from the incident. Akio Toyoda was shamed in the US Congress, but that will not revive demand for cars in America; the American financial crisis that has hurt its auto giants will not dissipate because of Toyota’s failure. America’s structural challenges will not be solved just because Toyota also faces challenges. American auto makers may gain a little market share, but it will be a drop in the ocean. America’s own car technology quality will not necessarily improve. Rather, Akio Toyoda’s tears could bode well for a return to quality in the Japanese car quality.

And it goes without saying there’s no room for any complacency in China. Chinese car sales in America number in the hundreds so there have, so far, been no similarly high-profile safety issues. But the congressionally-endorsed US-China Economic and Security Review Commission has long been following the safely record of China’s exports of car parts to America, and has already convened hearings on safety problems of Chinese gas pedals and brake systems. With cars likely to be a future strategic export to the US, one can only have deep concern about the challenges and potential safety issues that could undermine any robust rise of Chinese vehicle exports to America.

This is especially relevant since, as recently as two years ago, China’s food security was still a major issue for American importers of Chinese goods. Many American customers complained that their pets died after eating dog and cat food imported from China. China tacitly admitted there was a problem, but said it was limited in scope and that overall the country had high standards of food security. But with huge amounts of pet food being exported, even a tiny percentage of contaminated food can cause many pet deaths. When a country is not able to control its pet food security and does not even properly apologize for failures that cause loss of life – and cherished pets are surely lives – how can we expect it to cope with car safety issues that are far more difficult to prevent?

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