TOYOTA : THE

ACCELERATO
R CRISIS
Group 4
Kannan B
Shubangkar Das
Devadhas Kishan
Ranjith Babu
Goshalram

Had the company lost sight of its long-term philosophy,

a key principle behind the Toyota Way?
Key Philosophy of
Toyota:
Toyota Global
Strategy

Kaizen that is building long lasting relationship, building interdependency, shared value and
commitment even at the expense of short term financial returns.
Though other automobile companies used to do price wise competitive bidding to buy parts from
suppliers (which is short term relationship), Toyota nurture suppliers and help them to build
capabilities.
This can helps Toyota to enjoy long term relationship, better quality, reliability and bargain power.
Going against its priority order of safety first, quality second, volume third, non-family members in
Toyota were aggressive in global expansion to get higher market share.
They expanded rapidly to Europe, US etc.
It went against its principle like Generate value for customer, society and employee.

Accept the
responsibility for
your conduct

Toyota took 5 years to accept its fault in Engine Oil Sledge Issue.
In 2009, when issue about accelerator pedal broke out, Toyota tried to mislead the people stating it
is drivers error rather vehicle fault which was later highly condemned by US NHTSA

Update yourself to
make your product
valuable

Though company created Customer First Program to meet effectively customer issues, complaints,
later it was removed as a cost cutting measure.

Had Toyota sacrificed quality in quest for cost reductions?

New President Fujio Cho, insisted
Under Toyota 2005 vision,
to reduce the speed of product
company is aggressive
development, which laid the
implementing, Global Profit
foundation for CCC21 program.
Management. Company did
Designing department were
many revolutionary
pressurized to cut cost at every
management activities which
stage by reduce the number of
saved cost dramatically.
components.
Global Vision 2010: Aspiration to
Value Innovations, which is the
get 15% market share under this
aggressive version of CCC21,
program, helped company to
helped to achieve greater
achieve, Industry Leading
savings by cheaper and faster
Operations margin of 8.6%,
development process, trimming
Global volume leader. Evidently
parts production costs, time to
they slipped from its goal of
market.
Safety and Quality to Volume
and Cost cutting.
The structural changes and
centralization in decision making
aimed at cost cutting, make
Toyota less responsive to the
quality issues like Engine Oil
Sludge and Pedal Accelerator.

Were non-family managers to blame for "hijacking"

Toyota?
Yes, prior to 1995 there were no quality issues when cars were exported to the US
From 1995 onwards, non family members took charge and pursued an aggressive globalization strategy
Factories were built in US and Europe to gain market share which overlooked the top two priorities of
Toyota : Safety and Quality
The supplier partner network was complex in the US. There was no keiretsu model which could be
adopted on which the TPS was based.
The TPS go and see principle could not be followed by the management in Japan due to the centralized
structure
The long term philosophy of creating value for the customer and society was lost with the management
focussing on short term profits alone
To cut down on costs, Toyota started using single suppliers for its entire range of cars to leverage
economies of scale
The programme CCC21 focussed on extreme lean manufacturing which cut procurement costs by 40%
and installation of components by 75%. Total cost reduction realised was more than US $2.2 billion.
The VI strategy by Watanabe was more aggressive compared to the CCC21 initiative. The global recession
also contributed to these measures undertaken by Toyota

Was Toyota simply subject to the latest media

witch hunt?
Yes, Toyota was subject to the media witch hunt
Historically, Toyota is known for the quality and safety aspects of its cars. A chain of events starting from 1999 contributed to
the negative publicity and criticism from the media during the pedal issue
In 1999, 3.3mn vehicles were recalled due to the engine oil sludge issue. Toyota never admitted to design or manufacturing
flaws. Customers were annoyed when warranty claims were denied
In 2009-10, 7.2mn vehicles were recalled due to the sticky pedal issue. Toyota was lethargic in responding to this. This led to a
lawsuit filed by NHTSA. Criticism by the Transport Secretary only added fuel to the fire
In late 2010, a probe into the allegations indicated that half of the 102 cases reported pertaining to Toyota was due to the fault
of the driver (pressed the wrong pedal)
In some cases, the accelerator was not pressed at all
The entire media publicity was to criticize the TPS and change the consumer perception of safety and quality about Toyota
Toyota fell for it by not looking into the allegations immediately and keeping the claims on low priority. The publicity of people
losing lives due to crashes in Toyota cars opened their eyes which ultimately led to Akio Toyoda giving an official testimony and
relooking into the companys operations

 All major decisions were made in Japan while only sales and
marketing decisions were made in US
Resulted in time gap while taking decisions in a crisis situation

Decision making
structure
Extreme cost
reduction

Extreme cost reduction like turning down thermostats and cutting

procurement costs would have caused quality issues
Bonus cutting and layoff would have discouraged the existing
employees

More focus on
short term

The new management was interested in rapid growth as against

The Toyato way that focused on long term benefits
Moved away from customer first policy because of falling margins

New management pursued aggressive growth

Growth was more quick than companys ability to transplant its
culture to foreign markets

Aggressive growth

Drivers of current accelerator crisis

What should Akio Toyoda do now to restore Toyota's

reputation?
The new default detection system
Improve decision making
Retrench from some of aggressive global
expansion plans

ssons can other companies learn from Toyota's crisis?

Aggressive growth can lead to risks
Listen to the customers and understand what they are telling
Integrating market firms
Great communication
Accept responsibility and consider customer complaints closely