DCU School of Communications

Assignment Submission
Student Name(s): Diego Alvarez
Student Number(s): 15210723
Programme: MA in Social Media Communications
Project Title: The Toyota Recall Crisis Case Study
Module code: Public Relations: Issues and Principles
Lecturer: Martin Molony
Project Due Date: 16-MAY-2016

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Executive summary

The products of the Japanese giant, Toyota, had an excellent reputation worldwide,
particularly after the events of World War II. In this period the company thrived in
the US, reaching the perfect midpoint between quality and price for American
consumers. All the efforts to conquer the US were fruitful even with vigorous and
local competitors such as GM and Ford – potent symbols of American capitalism.
However, the reputation of this company had an enormous ordeal that put at risk
all the reputation that the firm had accumulated throughout decades of successful
growth.

During 2009 and 2011, the Japanese automobile, Toyota, recalled more than eight
million vehicles worldwide when they found out that there was a problem in the
gas pedal in eight of its most popular models and admitted problems with brakes
in the Prius hybrid model. This issue developed after several reports stating that
numerous vehicles experienced unintended acceleration. Among the cars affected
by this issue, there were three of the leading models in the US market: the Camry,
Corolla, and Rav4 SUV, which altogether represented 57% of sales of the brand in
the United States in 2009. Hence, five of its North American facilities stopped
producing these units.

It all started just in the fall of 2009 when a Lexus ES350, collided on a highway in
San Diego, California, and killed four occupants (George and Pratt, 1997). At that
moment, Toyota revealed that the cause of the tragedy was the carpet under the
driver's seat that was displaced and supposedly ended up jamming the gas pedal.
Then the Japanese automaker warned that the call to repair would not take any
further actions beyond that one. However, the National Highway Traffic Safety
Administration (NHTSA), in its traditional role of prosecutor against automakers,
suspected that the problem could be connected to many other factors such as the
gas pedal, its mechanism, and even the car ignition system.

One of the first solutions that the Japanese company suggested in the first place
was to shorten the length of the pedal, so it does not get stuck on the carpet while
they get the final pedal version from their factories. Alongside this sudden action,
the company also discussed the replacement of carpets, but in the meanwhile, they
established a provisional policy of tying up the carpets with a cord to prevent the
carpet from detachment. Thus, after taking other rushed measures to counteract
the neglected actions from Toyota, the company did not know for certain what the
root problem was and then they decided to introduce a mandatory software that
“overrides the electronic gas pedal when the brake pedal is pressed” (Parboteeah
and Cullen, 2013: 38).

Toyota, after these unfortunate technical problems in their cars, was compelled to
implement procedures and new standards to ensure the final quality of their
vehicles, but also, the company was forced to regain its prestige and image of the
public. Thus, this loss of credibility has been directly reflected in the volume of
sales, there was a decrease of 20% of the sales due to car recalls and the stop in
production of some of their vehicle models. Therefore, Toyota spent an enormous
amount of money in campaigns to regain its credibility in North America and
started to do the same in Europe, where Toyota has set a budget of twenty million
euros (Christians et al., 2015).

Purpose and Challenges

The value of a big business does not lie in material goods such as factories,
machinery, buildings, etc. By contrary, intangible assets such as knowledge,
experience, the company's public image, product positioning, etc. are becoming
increasingly more important in trading on markets worldwide (Stokes et al., 2010).
Hence, the question arises: what happens when a company -even a large
multinational corporation- faces such a crisis that affects its image?

The recalls are not a rarity in the automotive world. In fact, they are widely
practiced not only in the car industry but also in many other production areas the
world. However, this case, in particular, is remarkable for Toyota’s history for
three significant reasons. First, there is a human factor in which the malfunction of
a particular component of the car, can determine death or severe injuries to the
users. The second reason has to do with the fact that this crisis was one of the
biggest corporate scandals in the contemporary business community (Combe,
2014). Moreover, it is considered by many experts, one of the largest recalls in the
history of American automotive market alongside cases such as Ford's Failure-to-
Park Recall in 1980, The Takata Seatbelt Scandal in 1995, Ford Ignition Problem in
1996, among others (DeMeter, 2012). The third reason why the Toyota case is
important is that it contrasts with the proverbial quality that the Japanese
company has forged through many years of experience and good reputation
(Hirschmeier and Yui, 2013).

Although the obvious drawback from this case is seemingly the decrease of new
car sales, this case also complicated sales of second-hand vehicles. The National
Auto Auction Association (NAAA) asked the pre-owned car dealers to be cautious
about selling Toyota cars involved in the controversy (Ciravegna, 2012). In the
same way, Consumer Reports advised consumers to abstain from buying any of the
Toyota products included in the recall until the situation is resolved (Bapuji, 2016).
Thus,

“The automaker expects its global recall related to faulty accelerator pedals — and
the sales and production suspension that resulted — to cost about $2 billion or
180 billion yen. Earlier in the week, analysts pegged the cost at about $1.1 billion
but pointed to future brand damage as an additional price” (Swanekamp, 2010)

However, despite the substantial financial losses, there are other equally important
elements that Toyota had to overcome: the alarming loss of image and quality; and
the damage to its reputation as a reliable and safe automobile company. Thus,
Toyota’s crisis was a crucial issue in its lifespan as a leading corporation. For the
past 20 years, his most loyal clients have been baby-boomers Americans who are
disillusioned with the poor performance of the Yankees cars, Japanese cars mainly
became Toyota and Honda (Kohlbacher and Herstatt, 2008)
Insight and Perspective

The solution that Toyota addressed was divided into three communicational
stages. The first one had to do with the public statement of the President of Toyota
and the CEO of Toyota in America. The second one was a campaign called “Your
Toyota is my Toyota” that was massively distributed via social media. And the
third one was another campaign that consisted some ‘reparations’ for the new
users.

Objectives & Strategy

The main objectives from the perspective of the Publican Relations revolve around
the problems above. There are two factors that Toyota had to face: The human
factor and corporate prestige/reputation.

In the case of the human factor must be considered that initially the company
refused to accept responsibility for their actions. Initially, the company attributed
the problems to the gas pedal and the alleged defective mat and from this claim the
Toyota started a chain of excuses that affected the company’s image. However,
after a few months they realized that they should have had a PR policy that could
help them recover their sales and reputation. Hence, the first step the company
took was a public apology.

Months after the crisis and after many failed attempts to control it, the president of
Toyota, Akio Toyoda, made a public statement to the international media
addressing the worst crisis in 70 years living the Japanese car company. He said:

“I extend my condolences from the deepest part of my heart. I am deeply sorry for
any accidents Toyota drivers have experienced. I sincerely regret accidents. Truly
speaking, truly, I feel very sorry for the members of the Saylor family who ended
their life with Toyota vehicles. I extend the condolences from the deepest part of
my heart. All the Toyota vehicles bear my name. When the cars are damaged, it is
though I am, as well. Toyota has, for the past few years, been expanding its
business rapidly. Quite frankly, I fear the pace at which we have grown may have
been too quick.” (Toyoda, 2010)

According to reporters at the hearing in Nagoya, the atmosphere was very tense
between Toyota executives, and especially Toyoda, who was furious to see his
family name sullied by this disgrace. This scandal not only affected him in a
personal way but also it was an offense to his culture as a Japanese. Thus, even
though the number of human beings who lost their lives by driving these unsafe
cars cannot be compensated, at least there is an intention to take responsibility for
their actions. In this sense, Gibney underlines the importance of a public apology
by stating:

“Apology, although a small part, is still an important part of justice. Apology, if well
conducted (for the right reasons and in the right ways), can also be a significant
conduit for justice. The recognition that it brings to the wrong/crime helps the
victim to reconcile with oneself and, in the process, with others and the world…
apology is a fairly simple tool in the end, when applied successfully. It is a matter of
humanization” (Gibney, 2008: 90).

The accountability and sincere apologies served to humanize the company and
therefore to seek, as it were, some consumer redemption. However, this strategy
comprises not only a Public Relations practice but in the case of Japanese culture is
more of a moral obligation. In this light, George and Pratt (1997) agree that there is
a significant cultural aspect in the conception of the apology. He makes clear
distinctions between an apology from an American and Japanese perspective. In
the former, he states that the approach revolves a justification that explains a
determined behavior as an excuse. Whereas in the latter, apologizing does not have
to do with accountability but with a cultural context in which both parts –the
victim and victimizer- have to apologize to create a sense of social order.

Apart from the human side analysed above, the second objective has to do with
Toyota’s image restoration. It is important to mention that one of the major
concerns Toyota had was the relationship with its employees. Similarly to the
concept of the Japanese apology, there is also one other important cultural factor:
the link between the Japanese worker and their employers/place of work. The
Japanese have a strong commitment to their job, and they consider it also part of
their lives. Many workers develop a solid sense of belonging towards their co-
workers, bosses and the philosophy they stand for (Lincoln and Kalleberg, 1992).
Therefore, it was critical for Toyota to link consumers and employees as a means
to convey a message of being concerned about both. Thus, the campaign “Your
Toyota is my Toyota” was launched in several countries and represented the
intention to wipe out the bad image provoked by the car recalls.

The campaign not only stressed the fact of Toyota commitment is a rhetoric
manner. By contrary, they wanted to make amends by giving some benefits that
were encompassed in another campaign called ‘Your Choice. Our Promise.’ This
campaign launched in June 2010 showcased Toyota’s intention to provide
confidence to their new costumers by giving them more warranty years among
other benefits. During their campaign, they stated that

“By taking this major initiative, we are giving our customers complete peace of
mind. We want to reassure them that, in choosing a Toyota, they are getting the
best in quality, reliability and durability.”

Campaign / Execution

The public relations campaign began with the announcement that Toyota already
got a solution for defective accelerator pedal installed on several of its models, and
work the pedals replacement will start immediately. Consequently, president and
CEO of Toyota in America, Jim Lentz, led the campaign with an appearance in the
‘Today’ show, one of the mornings TV shows with the largest audience in the
country. Lentz began by saying that "we have developed a comprehensive plan to
solve the accelerator pedal in Toyota vehicles called to review. But first, I want to
sincerely apologize to the owners of Toyota vehicles. " (Today Show, 2010)

Thus, Lentz not only followed the same apologetic stance as Toyoda, but also
claimed that the company would fix the damaged components as soon as possible.
Lentz defended the company’s actions against the criticism that Toyota has acted
too slowly and underestimated the magnitude of the problem. Similarly, he stated
that as soon as they got the first reports of the accelerator pedals on some, they
took immediate actions to control the crisis, debunking previous claims that the
company was slow in the reaction against the crisis.

Accordingly, Lentz said he would not have let his family or friends drive Toyota
vehicles if he “had known that they were not safe." Thus, this action represents a
‘humanized’ effort to clean Toyota’s corporate image. The unusual presence of
Lentz on American television and public relations campaign launched by Toyota
proves the company’s desire to reconcile with their costumers.
In the case of the campaign “Your Toyota is my Toyota” it was viralized through
social media. The videos illustrated all the people involved in the process of
Toyota’s products.

The videos contain truthful interviews with real “Toyota factory workers and
dealer employees, filmed across the continent over the past two months. While the
core content remains the same across Europe, each market will end with the
testimony of a local Toyota dealer. The first major campaign following the recall,
the work demonstrates the commitment to quality that is embedded in Toyota’s
DNA, through the voices of its own people.” (Saatchi, 2010)

Evaluation / Results

Crisis is a vital challenge to corporate reputation. In some cases what it is at stake

with reputation, is a complete loss that might end up leading to bankruptcy.
However, there will always be a crisis in the way of some companies like Toyota
that might serve them as a means to grow even stronger than ever. In the case of
Toyota, they lost temporarily the title of the largest automaker in the world when
its production reached only 62.7% in March 2011 in comparison to the same
month of the previous year due to supply problems (Cuala, 2011).

The Japanese company is still one of the largest automakers in the world, and his
reign is guaranteed at least for a few years. However, his leadership will be tested
in an increasingly competitive sector. US automakers such as Ford and GM seem to
be leaving behind the economic crisis in 2010, and ever since their sales have
increased between 10% and 15%, only in the US, which is the most important
market for Toyota.

Since the recall crisis, Toyota has recovered its place as the world’s best-selling car
company, becoming “the first to see 10 million vehicles within a 12-month period.
Similarly, Toyota continued leveraging quality, durability, and reliability to help
drive corporate reputation; addressed safety in a forward-looking way and added
a ‘humanistic’ dimension to their costumers’ image of auto companies” (Benenson,
2015).
The majority of corporations should look after their customers’ gratification rather
than thinking only in a profitable way. Sometimes when the profit is on top of
costumers' satisfaction, cases such as this one can occur. Toyota’s initial arrogance
did not let it act urgently until the number of victims was too high and the media
started to investigate the case. However, they amended their mistakes and thrived
in a difficult economic year. Thus, not only their capability to foresee what they
wanted as a company helped them, but also the vision of how to approach their
costumers and employees.

"Your Toyota is my Toyota" campaign was based on Toyota’s employees and their
individual commitment about producing a safe vehicle. This portrayal tells us that
crises can convey beneficial improvements for businesses. The remarkable thing
about Toyota is that when it managed to recover from the disasters, it did not lose
credibility. By contrary, it made it seem that even big companies can make
mistakes, and the campaign plus the role of their executives made the company
closer to their costumers.

All these efforts showcase that a Toyota is a reliable company. They have proven to
have credibility in their products and have shown that they can have a problematic
crisis and emerge victorious if they face and recognize the mistakes. The PR efforts
show the will to change, improve and above all, think about their customers as
people and not just numbers.
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