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Out of Control - Case Study 3

Toyota faced a major recall crisis involving 8 million vehicles and 51 deaths linked to mechanical failures. Toyota had lost its strong culture of quality emphasis as it aggressively expanded globally and cut costs through initiatives like localized manufacturing. Toyota's president apologized and said the company pursued growth over developing its people and organization. Toyota is now restructuring to give regional executives more recall power, holding quality meetings, and retraining employees in quality control to remedy its problems.

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Samar Qadir
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858 views

Out of Control - Case Study 3

Toyota faced a major recall crisis involving 8 million vehicles and 51 deaths linked to mechanical failures. Toyota had lost its strong culture of quality emphasis as it aggressively expanded globally and cut costs through initiatives like localized manufacturing. Toyota's president apologized and said the company pursued growth over developing its people and organization. Toyota is now restructuring to give regional executives more recall power, holding quality meetings, and retraining employees in quality control to remedy its problems.

Uploaded by

Samar Qadir
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Out of Control

With a worldwide recall of some 8 million cars and 51 deaths


that U.S. regulators say have been caused by mechanical failures in its
cars, Toyota Motor Corporation faces a corporate crisis of epic
proportions.58 What happened at the car company that had finally
achieved the title of world’s largest car maker? (It overtook General
Motors in 2008.) What factors contributed to the mess it now found itself
in?
Toyota Motor Company
At the core of Toyota’s manufacturing prowess is the Toyota President Aki o Toyoda,
grandson of the company’s
Production System (TPS), which has long been touted and revered founder, bows in apology
during a press conference
as a model of corporate efficiency and quality. Four management where he announced a global
vehicle recall. Toyoda’s gesture
principles (the 4P model) were at the core of TPS and guided of bowing is the Japanese way
of publicly expressing remorse
employees: problem solving, people and partners, process, and as an act of contrition to restore
philosophy. The idea behind these principles was that “Good Thinking faith in the company’s brands.

Means Good Product.” Taiichi Ohno, a long-time Toyota executive, is widely credited as the
innovative genius behind TPS. During the 1950s, Ohno, along with a small core of other
Toyota executives, developed several principles of car-making efficiency that became what is
now known as lean manufacturing and just-in-time inventory management. “Ohno’s ideas not
only changed the auto industry, they changed late-twentieth-century manufacturing.” At the
very core of these concepts were attention to detail and a “noble frugality.” However, over the
years, it appears that Toyota’s executives slowly lost the “purity” of that approach as the once-
strong commitment to quality embedded in Toyota’s corporate culture became lost in its
aggressive moves to grow market share and achieve productivity gains.
From about 1995 to 2009, Toyota embarked on the “most aggressive overseas
expansions in automotive history” and at the same time had a laser-like unparalleled focus on
cutting costs. Four major cost-cutting and expansion initiatives severely strained
organizational processes and employees. One initiative was localized manufacturing. Starting
in the late 1990s, Toyota established manufacturing hubs in Asia, North America, and Europe.
Such an approach meant relying more on local suppliers and design teams to tailor cars to
local tastes. Another initiative was called Construction of Cost Competitiveness for the 21st
Century, or CCC21. It was a massive cost reduction program. Through an ongoing process of
redesigning parts and working with suppliers, more than $10 billion of savings were achieved.
The Value Innovation initiative was a more ambitious version of CCC21. Under this program,
more savings were achieved by making the entire development process cheaper and by
further cutting parts and production costs. And finally, the Global 15 initiative was a master
global plan for attaining a 15 percent share of the global car market by 2010. As of mid-2010,
Toyota had an 11.7 percent share of the worldwide car market. However, this “combination of
high-speed global growth and ambitious cost cuts led to the quality lapses that tarnished the
once-mighty brand.” Toyota’s president, Akio Toyoda apologized for the company’s actions
and said, “We pursued growth over the speed at which we were able to develop our people
and our organization. I regret that this has resulted in the safety issues described in the recalls
we face today, and I am deeply sorry for any accidents that Toyota drivers have experienced.”
So what is Toyota doing to remedy its problems? In addition to the massive recall, the
company’s president says that it is setting up a system to respond more quickly to complaints.
In fact, the automaker has promised to give regional executives a bigger role in issuing recalls
based on local consumer complaints, although Mr. Toyoda says that the final decisions
regarding recalls will continue to be made in Japan. The company is also holding twice-yearly
global quality meetings and more frequent regional quality meetings. And finally, the company
is re-committing itself to better training employees in quality control.

Discussion Questions
1. Using Exhibit 2-5 and the information from the case, describe the culture at Toyota
Motor Corporation. Why do you think this type of culture might be important to a car
maker?
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2. How do you think a long-standing culture that had such a strong commitment to
quality lost its ability to influence employee behaviors and actions? What lesson can
be learned about organizational culture from this?
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3. Do you think it was important for Mr. Toyoda to apologize for the company’s
decisions? Why? (Think in terms of the company’s stakeholders.)
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4. What could other organizations learn from Toyota’s experiences about the
importance of organizational culture?
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