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Sat 13 Feb 2010 04:00 AM

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Toyota grapples with tattered reputation

Faced with an unprecedented recall of millions of vehicles, the PR machine at Toyota is floundering.

Toyota grapples with tattered reputation
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Toyota grapples with tattered reputation
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Toyota grapples with tattered reputation
Repairing the faulty acceleration pedal involves tweaking its assembly to remove the excess friction that caused the pedals to stick.
Toyota grapples with tattered reputation
Bridgestone was forced to recall seventeen million tyres in 2000 following a series of deadly crashes, prompting more motor firms to put crisis PR plans in place.

Faced with an unprecedented recall of millions of vehicles and rivals swooping in on its customers, the public relations machine at Toyota Motor Corp - one of the most savvy brand-creators in Asia - is floundering.

Toyota has consistently played down recurring complaints of unintended acceleration in certain car models, breaking what PR experts said is the cardinal rule in crisis management: assume the worst.

"People want to see a company take full responsibility, be empathic to the victims and their families and be in control by outlining the problem and how they intend to solve it. They also expect the CEO doing all this," said Ong Hock Chuan, a technical adviser of Jakarta-based PR consultancy Maverick who specialises in crisis management. "Toyota seems to have failed in all counts."

Toyota president Akio Toyoda, the grandson of the giant company's founder, has not formally addressed the public or media on the recall problems.

Through November, the firm continued to blame loose floor mats for the problem. That has eventually spread to a potential problem with accelerator pedals, and US safety regulators are now renewing efforts to reconfirm whether the electronic throttle control system could beat fault.

At a news conference in Nagoya last week - the first appearance by an executive from headquarters since the recall expanded - there was no deep bow, a standard fixture in Japan when a firm declares it is responsible for its mistakes.

"There should have been a more convincing explanation, including from the president," said Masato Takahashi, a public relations consultant at Kyodo PR.

"Even when they announced the recall initially, you can't just say, ‘We're going to do a recall'. They should have gone further in way of explanation, and there should have been a heartfelt apology from the top."

At the news conference, a little-known Toyota executive in charge of quality, Shinichi Sasaki, said part of the reason Toyota decided to use US autoparts maker CTS's accelerators was to help contribute to the local US economy.

That was not what customers want to hear, PR consultants said, least of all when public memory is still fresh of a 911 call of August 28 along with the sounds of the caller's Lexus crashing, killing its driver and three members of his family.

"It is an absolute disaster for a company which is Japanese, which has top-notch quality control, to have done it in such a spluttering manner," said Suhel Seth, managing partner of Indian brand management firm Counselage. "What's worse is that in this case this whole concept of the visible Japanese apology was so missing."

Toyota spokeswoman Mieko Iwasaki said the company had all along taken the steps it believed were the best and fastest to put its customers first.

"If that was perceived as too slow, we will accept that as a sign of our shortcomings," she said.

For the past decade, Japan Inc has tried to learn from past mistakes, when critics lambasted its habit of keeping data under wraps and its efforts to convey an image of calm deliberation.

After Bridgestone Corp was forced to recall seventeen million tyres in 2000 following a series of deadly crashes, more companies have put in place crisis management procedures and turned to corporate communications firms for help.

Some argue that Toyota did what it could, as soon as it grasped the full gravity of the problem.

Toyota ran full-page ads in major US newspapers last week alerting consumers to the recall and production shutdown. Jim Lentz, president of Toyota Motor Sales USA, appeared on US TV and expressed regret for worrying drivers of its cars.

The scope of Toyota's recalls and production stoppage shows how serious Toyota is, said Hannah Cunliffe, a fund manager at Germany's Union Investment, which holds Toyota shares.

"Some of the comments that have come out of the management really show that they are not trying to put anything under the carpet or trying to deny anything," she said. "I don't feel they are handling it badly. But it's a very tough thing to handle."

Consumers in Japan have been slow to voice concern, and rival automakers have not offered incentives to capitalise on Toyota's woes.

"It seems to be a problem just in the US," said retiree Masanori Kawami, 63, who said he was expecting delivery of a Prius at the end of this month. "I'm not worried."

But that nonchalance may not last.

North American and Japanese dealers have received several dozen complaints over insufficient braking on Toyota's new Prius hybrid on bumpy or frozen roads, Toyota said.

Toyota's massive safety recall comes as no surprise to Dimitrios Biller, a former company attorney fighting a lawsuit against the world's number one automaker alleging Toyota has concealed evidence from courts and the US government.Biller worked at Toyota defending the company in product liability cases from April 2003 until September 2007 and alleges that the company systematically hid evidence that would have led to costly trials in the United States.

"This is a company that doesn't have any respect for the laws in the United States," Biller said in a telephone interview. "This is a company that has no qualms about violating court orders, concealing or destroying evidence.

"The evidence involved would have allowed plaintiffs to take their cases to trial," he added.

"This was all done in the interest of saving some money."

Biller filed suit against Toyota in July 2009 and the case centres on some 6,000 internal documents in his possession.

"It's all a question of hubris. The key issue is not just that they think they are untouchable, they think our laws don't apply for them."

"That's not just me saying that," he added. "The documents I have say that, the documents I have prove that."

Toyota disputes that version of events.

"Mr Biller is a former Toyota attorney who left the company in 2007, and he would have no knowledge about Toyota matters since that time.

"He did not handle unwanted acceleration cases when he worked as an attorney at Toyota. He is currently suing Toyota, claiming wrongful termination and emotional distress.

"As part of his claims, Mr Biller continues to make inaccurate and misleading allegations about Toyota's conduct that we strongly dispute and will continue to fight against vigorously," the company said in a statement.

Biller graduated from Loyola Law School in Los Angeles in 1989 and was a partner at Pillsbury Winthrop before joining Toyota.

He said he is unable to hold down a job since leaving Toyota because he suffered a breakdown.

Biller was involved in defending Toyota in cases involving rollover and crushed roof accidents. He said that after highlighting the issue to his supervisors and making numerous complaints, he was isolated and cut off from others in his group.

He signed a severance agreement in 2007 after being told he would be reassigned to an undetermined position within the company.

The attorney was not involved in several cases surrounding the acceleration problem that lies at the root of Toyota's current worldwide recall of eight million vehicles.

"My complaint goes directly to the credibility of Toyota," Biller said. "But the credibility of Toyota is directly related to the issue of unintended acceleration."

His description of Toyota's approach to the problem is in stark contrast with a public image of a culture of industrial problem-solving that drills into all of its workers that to understand the root of any problem you need to ask "why" (or "naze" in Japanese) five times.

Biller said the policy of concealment he witnessed was centrally run from Toyota's headquarters in Japan.

"The company is run by engineers," he said. "They make the major decisions at Toyota, even when it comes to what documents to produce."

Biller described the current recall at Toyota as an "absolute joke," adding that he believed it was an electronic problem rather than an engineering problem with the gas pedal as Toyota claims.

"Toyota can't admit that it's an electronic problem because it would be way too expensive to fix in 20 to 25 million cars," he said. "The bottom line is that they want to save money."

Toyota faces at least 30 lawsuits over possible car faultsToyota Motor Corp, the world's largest automaker, faces at least 30 lawsuits filed on behalf of customers in the US and Canada seeking a range of damages from loss of cars' value to a return of profits.

The class-action suits, in US state and federal courts and Canadian provinces, demand compensation for flaws including those disclosed in Toyota's recalls over sudden acceleration of its vehicles.

More than half the cases go beyond the floor mats and pedals cited as potential faults by the company.

Suits include Texas and South Carolina cases limited to customers in those states, and California complaints aimed at bringing in all Toyota owners in the US.

Eventually the US suits will be combined before one federal judge for pretrial evidence-gathering and rulings, said Michael Louis Kelly, a lawyer who filed two proposed national cases in California.

"Either Toyota will ask for it or we will," Kelly said in an interview.

Combining the lawsuits in a multidistrict litigation would "streamline pretrial matters" for both sides, he said.

Mike Michels, a Toyota spokesman in the US, declined to comment for this story.

Ririko Takeuchi, a Toyota spokeswoman in Tokyo, said she is not aware of any lawsuits against the company in Japan citing defects in its cars when contacted by phone.

The number of cases against the car maker has grown very rapidly. The company also faces at least ten lawsuits brought by individuals claiming deaths or injuries caused by uncontrollable acceleration of vehicles.

The suits were spurred by multiple recalls by Toyota and its Jan 26 decision to stop US production and sales of eight models to fix defective accelerator pedals.

Almost eight million Toyota vehicles have been recalled worldwide to date.

Many of those suing the company are seeking damages for buyers of Toyota models that aren't part of the recall. The South Carolina suit was filed on behalf of purchasers of any Toyota vehicle containing the electronic throttle control system known as the ETCS-i, dating to 1998.

Margaret Cronin Fisk

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