Discussion Assignment 3.1

What Really Happened

to Toyota?

S U M M E R 2 0 1 1 V O L . 5 2 N O . 4

R E P R I N T N U M B E R 5 2 4 1 7

Robert E. Cole

Please note that gray areas reflect artwork that has been

intentionally removed. The substantive content of the ar-

ticle appears as originally published.

SLOANREVIEW.MIT.EDU

What Really Happened to Toyota?

CONSUMERS WERE SURPRISED in October 2009 by the first of a series of highly publicized recalls of Toyota vehicles in the United States. Citing a potential problem in which poorly placed or incor-

rect floor mats under the driver’s seat could lead to uncontrolled acceleration in a range of models, Toyota

announced that it was recalling 3.8 million U.S. vehicles. The recall was triggered by the report of a fiery

crash in California, where the accelerator of a Lexus sedan got stuck, resulting in the driver’s death.

THE LEADING

QUESTION

Why has Toyota been struggling with quality issues?

FINDINGS

Management’s recent focus on growth weakened the emphasis on quality.

The quality of com- petitive products has improved.

Public perceptions about quality can be greatly influenced by media reports.

Given the spate of recalls and quality problems, managers wonder whether Toyota’s difficulties throw its legendary manufacturing model into question. BY ROBERT E. COLE

Toyota’s quality problems in the United States were signaled with a recall in late 2009 for problems with floor mats, but they didn’t end there. Since then, more than 20 million cars have been recalled.

O P E R A T I O N S

SUMMER 2011 MIT SLOAN MANAGEMENT REVIEW 29

Additional reports of unintended acceler-

ation from sticky gas pedals prompted the

National Highway Traffic Safety Adminis-

tration to pressure Toyota to recall

additional vehicles and models.

To car buyers and students of manu-

facturing excellence, Toyota was no

ordinary company. It was in a class by itself,

long known, even revered, for its sterling

quality. For manufacturing executives who

have strived for decades to emulate Toyota,

the mere suggestion that it had quality is-

sues was a serious matter, to say the least.

All over the world, executives paused to

wonder if they had been chasing after the

wrong manufacturing model.

Despite Toyota’s long record of build-

ing reliable, low-defect vehicles, public

perceptions about quality are often

greatly influenced by reports in the media

and their overall timing. The public view

can be at odds with the objective mea-

sures. In the case of Toyota, there were

definitely indications that the quality level

30 MIT SLOAN MANAGEMENT REVIEW SUMMER 2011 SLOANREVIEW.MIT.EDU

O P E R A T I O N S

of its products had fallen off in recent years. What’s

more, the changes had occurred during a period of

time when many of Toyota’s competitors, including

Ford, Chevrolet and Hyundai, were producing better

and better cars. The key question was the source of

Toyota’s problems: To what extent did they originate

with the product designs and assembly, and to what

extent could they be pegged to the company’s manu-

facturing systems? (See “About the Research.”)

The degree to which Toyota’s quality problems

should be seen as serious depends to some extent

on whether we view them in absolute terms or rela-

tive to its competitors and on the size of the gap

between consumer perceptions and objectively

identified problems. Even before the March 2011

earthquake and tsunami hit Japan, the company

had incurred huge financial and reputational costs

stemming from the recalls and subsequent public-

ity. Since then, the effects of the earthquake and

tsunami on both Toyota and many of its supplier

companies have been significant, resulting in cut-

backs in production and delays in the delivery of

new vehicles. With reduced product availability,

some prospective Toyota customers are likely to

choose another brand, and the long-term risk is

that some of these buyers will find that the other

brands meet their quality expectations just fine.

Defining the Problem It would be difficult to overstate Toyota’s role in shap-

ing the modern approach to quality improvement.

Beginning in the early 1960s, Toyota, together with its

supplier companies, pioneered numerous quality im-

provement methodologies, providing the operational

basis for Japanese total quality control. TQC, in turn,

provided the basic building blocks for the Six Sigma

methodology, which has been actively embraced by

leading U.S. companies such as GE and Boeing. In the

1960s, Toyota management began to understand the

critical links between quality, customer satisfaction

and profit. The importance of these connections be-

came deeply rooted in Toyota’s management

philosophy and an integral part of the company’s em-

ployee training and growth. Quality emerged as a

central element in Toyota’s global strategy and became

embedded in the renowned Toyota production sys-

tem. In this context, referring to Toyota’s recent quality

problems as a “fall from grace” is not an exaggeration.

Toyota’s quality problems in the United States

were signaled with the initial recall in late 2009 for

problems with floor mats, but they didn’t end there.

Over the next four months, the company recalled 3.4

million more vehicles in three separate recalls over

and above the initial 3.8 million, for a total of more

than 7 million. There were several issues: potentially

sticky gas pedals, pedal entrapment and software

glitches that affected braking on some models.

Back in 2006, well before Toyota’s difficulties be-

c a m e p u b l i c , t h e c o m p a ny ’s m a n a g e m e n t

commissioned a survey of U.S. consumers that in-

cluded the following question: How much influence

does having a recall on your current vehicle have on

subsequently purchasing that same automotive

brand again? At the time, 11% of U.S. car owners said

a recall was influential, and 20% said it was highly in-

fluential.1 But in Toyota’s case, at least, the actual

reaction was harsher than the hypothetical: A Gallup

national survey in late February 2010 found that 31%

of Americans believed Toyota vehicles were unsafe;

the percentage among Toyota owners was only 14%,

but for non-Toyota owners the figure shot to 36%.2

Even if the media exaggerated the seriousness of

problems and politicians politicized them, customer

perception is the final arbiter.

Moreover, the number of safety-related recalls

kept growing. Between February and August 2010,

there were 13 separate Toyota recalls. They affected

old and new models and were based on a wide range

of issues (including steering control and fuel leakage).

Just as things seemed to be settling down last winter,

the company announced two further recalls in Janu-

ary and February 2011. In May 2011, Automotive

News reported that more than 20 million Toyota

vehicles had been recalled since autumn 2009.3

The Consumer Perspective There is no question that Toyota’s quality image

among consumers suffered with the recalls. Not

only is the decline visible in survey data, it has also

been greatly amplified by the media. David Cham-

pion, senior director of Consumer Reports’ Auto

Test Center, has said that Toyota vehicles’ quality

measurably decreased in recent years. In 2007, the

magazine observed that the fit and finish of some

Toyota models, as well as overall vehicle quality, had

declined. In 2008, Consumer Reports decided no

SUMMER 2011 MIT SLOAN MANAGEMENT REVIEW 31SLOANREVIEW.MIT.EDU

longer to give automatic “recommended” ratings to

all Toyota models based on their previous evalua-

tions.4 J.D. Power and Associates, another influential

evaluator of autos, also noted a recent decline in the

quality of Toyota’s products.5 Its Initial Quality

Study surveys car owners and lessees 90 days after

purchase, asking some 160 detailed questions. In

2009, before the recalls, Toyota was tied with Mer-

cedes Benz for sixth place overall and was the top

company among mass-market producers. The 2010

results, released in June 2010, told a different story.

Toyota fell to 21st out of 33 brands, while the Lexus

brand fell from first place to fourth place, behind

Porsche, Acura and Mercedes-Benz.6

At first glance, the change between 2009 and 2010

appears to be stunning. However, J.D. Power’s data

show that between 2000 and 2009, the quality of

Toyota’s products actually improved. Part of the issue

is in the way quality gets measured: J.D. Power looks

at the number of defects per 100 vehicles. In 2009,

Toyota had 101 problems per 100 vehicles; in 2010,

the number of defects increased to 117. Although

that may seem like a significant change in quality, for

the individual car owner it is actually quite small (an

increase from 1.01 problems per vehicle to 1.17), and

it hardly suggests a collapse in quality. This method

of reporting can make the differences among brands

appear more substantial than they are.

At the same time, the auto quality ratings across

brands have become compressed over the last three

decades. That means that the relative changes in

brand rankings from year to year, which are widely

featured in the media, do not necessarily reflect im-

portant absolute changes in performance. J.D. Power

reports in detail on brand performance in different

categories of mechanical and design quality. From

2009 to 2010, the most notable decline involving

Toyota’s models was in power train design, which

declined from “about average” to “below average.”7

These findings are consistent with other observa-

tions that Toyota’s quality problems are largely

engineering rather than manufacturing problems.

Another factor worth noting involves the role of

changing owner perceptions. People who bought a

Toyota in 2009 likely did so in the belief that they

were buying a high-quality car. They were reacting

to what market researchers call a positive halo effect.

All things being equal, buyers in this situation pay

less attention to small problems (or don’t even no-

tice them) when filling out surveys. If there were any

initial irritants, owners in this environment fre-

quently become used to them. But in 2010, in the

midst of a barrage of negative news about Toyota’s

problems, customers became far less forgiving about

Toyota’s product flaws. Whereas consumers tended

to overestimate Toyota’s objective quality with low

reports of defects in 2009, in 2010 they tended to

underestimate the quality with high reports of de-

fects. Toyota’s objective quality problems, while

significant, became greatly exaggerated by the

media. While the objective data about the compa-

ny’s quality performance suggest it has deteriorated,

there is no evidence showing that it collapsed. The

dynamics of specific measurements, combined with

negative media coverage and the improved quality

of competitors, have contributed to a further tar-

nishing of Toyota’s quality reputation and weakened

consumer trust.8 For years, Toyota’s core brand

theme in the United States and Europe was adver-

tised as quality, durability and reliability, with an

added emphasis on value.9 Increasingly, those

themes were less effective in differentiating its prod-

ucts. That raises the question about how Toyota will

market its vehicles going forward.

Damage to the Brand A possible parallel to the challenges Toyota faces can

be found with Ford, which experienced significant

negative fallout from rollover incidents involving

the Explorer/Firestone tire failures in 2000 and 2001

ABOUT THE RESEARCH

I began collecting data for this paper systematically in early 2010 and continued

the research until May 2011. However, my long history as a researcher of auto-

motive quality provided the underpinnings for this initiative. The initial efforts

consisted of monitoring the media, both print and online, to see both what they

reported and how they reported it. I also gained access to publicly available data

from internal Toyota documents related to vehicle safety and defects submitted

in response to congressional subpoenas, and I consulted with officials at the

U.S. National Highway Traffic Safety Administration. Depositions from Toyota

executives were made available to me. I showed early drafts of the paper to a

variety of individuals, including former Toyota employees, retirees and quality

experts in Japan, the United States and elsewhere. I interviewed and discussed

particular issues with Japanese academics with deep knowledge of the auto in-

dustry. I also had access to a report commissioned by Toyota from the

Japanese Union of Scientists and Engineers, titled “Findings by Independent

Experts about Quality Assurance at Toyota.” Databases from Automotive

News, NHTSA, the Project on Excellence in Journalism and information from

Toyota annual reports also proved useful.

32 MIT SLOAN MANAGEMENT REVIEW SUMMER 2011 SLOANREVIEW.MIT.EDU

O P E R A T I O N S

and the company’s alleged subsequent cover-

up. Like Toyota, Ford received enormous media

attention.10 Ford was able to fix the problem rela-

tively quickly by changing tire suppliers and

redesigning the model. But the damage to its market

position was costly and long-lasting. In the highly

profitable light truck market between 2000 and

2005, Ford went from being the market leader, sell-

ing about 100,000 units more than rival GM,

to being about 500,000 units behind.

Negative quality perceptions can linger long after

the objective quality problems have been corrected.

While many auto analysts predicted early in 2010 that

Toyota would rebound from its troubles quickly,

Ford’s experience suggests that this view may be

overly optimistic. Indeed, managers need to under-

stand the relation between perceived and objective

quality. Despite the growing volume and availability

of real data, consumers form perceptions of auto

quality on what is often limited information and per-

sonal experiences (“My brother loves his Camry”).

They may hold on to their beliefs even in the face of

objective information to the contrary.

Part of the reason brand reputations don’t re-

cover quickly can be traced to the media and to

ongoing interest by government regulators. During

January and February 2010, when Congress con-

ducted hearings on the Toyota recalls, the recall

story was among the top 10 news stories in all but

one week. In a U.S. media fixated on celebrities and

brands, stories about endangered icons are, by na-

ture, eminently newsworthy. In this case involving

unintended acceleration, with the safety of millions

of drivers and passengers at stake, there was the

added concern for public safety.11

Beneath the Problems A basic principle of risk management is to identify

risks early and eliminate them while they are still

minor problems. Toyota executives had a number of

warnings about its deteriorating quality. In early

2009, for example, before the massive recalls, Toyota

disbanded a high-level task force that had been set

up in 2005 to deal with quality issues. A Toyota man-

a g e r ex p l a i n e d t h e d e c i s i o n by s ay i n g t h a t

management had come to believe that quality con-

trol was part of the company’s DNA and therefore

they didn’t need a special committee to enforce it.

We have already discussed early signs of Toyota’s

quality problems as reported in Consumer Reports. In

January 2008, Chris Tinto, Toyota’s U.S. vice president

in charge of technical and regulatory affairs, further

warned his fellow executives that “some of the quality

issues we are experiencing are showing up in defect

investigations (rear gas struts, ball joints, etc…).”12

These and other early warnings were ignored. In a pat-

tern not uncommon in large organizations, politically

powerful executives shrugged off early warnings of

lower-ranking executives.13

There appear to be two root causes for Toyota’s

quality problems. The first is an outgrowth of man-

agement’s ambitions for rapid growth. The second

is the result of the increasing complexity of the

company’s products.

Growth Toyota’s drive for growth moved into high

gear in 1995 with the appointment of Hiroshi Okuda

as the company’s new president. Okuda, known for

his aggressive efforts to remake Toyota, was the archi-

tect of an ambitious global growth strategy, known as

the “2005 vision.” It called for rapidly increasing Toyo-

ta’s global market share from 7.3% in 1995 to 10%

over the next decade. The company achieved a global

market share of 9.7% in 1998 and then set a new target

of 15% by 2010. Toyota was well on its way to achiev-

ing that goal (its global market share reached 13% in

2008) when the global financial meltdown and Toyota

product recalls threw the effort into disarray.

Akio Toyoda, Toyota’s current president (and

grandson of the company’s founder), puts the turn-

ing point at 2003; from then on, sales grew faster

than the company could manage. He acknowledges

that the strategic focus on growth warped the “order

of Toyota’s traditional priorities.”14 In other words,

growth had taken priority over the company’s tradi-

tional focus on quality.

Toyota’s aggressive growth targets were out of

character for what historically had been a conserva-

tive company. Under family leadership, Toyota had

pursued growth cautiously; for example, it was the

last of the major Japanese auto companies to begin

manufacturing vehicles in the United States. Given

its huge cost and quality advantages, it is likely that

Toyota could have gained U.S. market share much

more rapidly than it did. However, to avoid protec-

tionist sentiment, management had been careful

SLOANREVIEW.MIT.EDU SUMMER 2011 MIT SLOAN MANAGEMENT REVIEW 33

not to exploit the company’s ability to reduce prices

to build market share, preferring to rely instead on

its reputation for reliability and durability.

Okuda convinced corporate leaders to pursue

rapid sales growth and profits while downplaying the

risks associated with this strategy. The 15% market

share target meant surpassing GM as the global vol-

ume leader and expanding production to new

locations. It also meant hiring significant numbers of

new employees, contracting with new non-Japanese

suppliers and hiring large numbers of contract engi-

neers. Between 2002 and 2008, Toyota’s overseas

manufacturing facilities increased from 37 to 53, and

global sales rose an average of 9% per year.15 That ex-

pansion gave management little opportunity for

adjusting its systems and practices to accommodate

such strong growth. Organizational incentives, espe-

cially informal ones, became skewed toward growth.

Without specific policies that preserved the traditional

quality focus, key decisions affecting product devel-

opment, supplier management and production

became biased in favor of meeting sales, delivery, cost-

cutting and profit targets. Many of the changes were

subtle (for example, tilting promotion criteria more in

favor of success at meeting growth targets), and they

may not have been what Okuda and members of Toy-

ota’s executive team intended. But cumulatively, they

had negative impacts on quality. Top corporate lead-

ers tend to underestimate how their mandates get

transformed as they travel down the hierarchy.

Product complexity The other root cause of Toy-

ota’s quality problem can be linked to the growing

technical complexity of today’s vehicles.16 For a va-

riety of reasons — stricter government regulations

on safety, emissions and fuel consumption, and ris-

ing customer demand for vehicles with “green” and

luxury features — cars are becoming increasingly

sophisticated both in terms of how they are de-

signed and how they are manufactured. A typical

auto sold in the United States or Europe has more

than 60 electronic control units and more than

10 million lines of computer code — a fourfold in-

crease over what was common a decade ago.17 In

effect, cars have become computers on wheels.

To be sure, other auto companies, not just Toyota,

have had to come to grips with the issues of product

complexity. The competitive pressures to produce ve-

hicles that are safe, clean, fuel-efficient and comfortable

are industrywide. But for Toyota the challenges were

even more intense, complicated by the already consid-

erable challenges associated with global growth,

including rapid expansion of manufacturing capacity

and the proliferation of hybrids and other technologi-

cally advanced new models. Between 2000 and 2007,

Toyota’s North American sales increased from 1.7 mil-

lion units to 2.9 million units, and the company’s

offerings grew from 18 to 30 models. Lead time be-

tween exterior design approval and start of sales was

compressed to less than 20 months. Accelerated de-

sign cycles strained the company’s development and

production systems and pushed human resources to

the limit, creating the conditions for quality failures.

Although Toyota’s Lexus and Prius models accounted

for less than 25% of its sales in 2010, they were among

the most technologically complex products and were

involved in more than half of the number of recalls.

The combination of rapid growth and increased

product complexity has had major implications for

Toyota’s supplier management system and its over-

all performance. Around 70% of the value added in

Toyota’s vehicles comes from parts and subassem-

blies produced by its suppliers. So the consequences

of the growth and complexity were felt across the

company’s supply chain. First, Toyota personnel

were stretched increasingly thin as the company’s

growth accelerated. In response to the growth, Toy-

ota had to delegate more design work to outside

contract engineers and take on new suppliers be-

cause the internal engineering resources and existing

supplier base couldn’t keep up with the demands.

A high-level Toyota executive publicly acknowl-

edged in 2010 that, facing internal manpower shortages,

the company had no choice but to use a large number

of new contract engineers to boost engineering capac-

ity. In his view, that contributed to the increases in

quality glitches.18 The company came to use outside en-

gineers for as much as 30% of its development work

globally.19 That meant hiring contract engineers over-

seas; it also gave rise to a new policy of hiring temporary

engineers in Japan, which challenged the company’s es-

tablished ways of doing business. Toyota engineers had

been accustomed to communicating among them-

selves and with Japanese suppliers with whom they had

established long-term relationships that often relied on

tacit knowledge built up over the years. The influx of

34 MIT SLOAN MANAGEMENT REVIEW SUMMER 2011 SLOANREVIEW.MIT.EDU

O P E R A T I O N S

new, mostly non-Japanese-speaking engineers and

overseas suppliers during a short period of time led to

problems of coordination and miscommunication.

Less experienced Toyota engineers were increasingly

assigned to global technical centers to work with and

monitor new overseas suppliers, who were also inexpe-

rienced in Toyota practices and standards. The result

was a convergence of inexperience, with the key parties

insufficiently trained in Toyota’s standard practices.

Takahiro Fujimoto, a leading Japanese researcher

on Toyota, reports that in the wake of rapid growth,

Toyota increasingly failed to properly evaluate and ap-

prove components designed by outside overseas

suppliers.20 As a result, Toyota’s relationships with

suppliers became less collaborative, thereby weaken-

ing the company’s distinctive “relational contracting”

system characterized by long-term close OEM rela-

tionships with suppliers. Ironically, it was the

collaborative practices that had originally distin-

guished Toyota from its Western competitors.21 We

can see this play out in the results of the annual U.S.

auto-parts supplier surveys since 2007. Toyota tradi-

tionally has ranked best in its relationships compared

with other automakers. Its ranking, however, while

still high, has fallen steadily from 2007 through 2010.

Suppliers attributed their growing problems with

Toyota to less experienced staff in Toyota’s purchasing

group who had not internalized the “Toyota Way.”22

As much as growth and product complexity were

at the root of Toyota’s recent quality problems, any

thorough analysis would also need to acknowledge

the role of the company’s centralized management

structure. Toyota’s information and decision making

has been highly centralized. The result: Top manage-

ment in Japan has been less sensitive to the expectations

of regulators, culture and politics in overseas markets,

and consequently, they have been slower to respond to

local problems. For example, in October 2004, Toyota

recalled pickup trucks and SUVs in Japan for steering

defects, but it didn’t extend those recalls to the United

States until September 2005. As one executive com-

mented, “[Toyota headquarters] is the kind of brain of

the company. We don’t have any independent knowl-

edge outside of them.”23

IT IS TOO EARLY to know how quickly Toyota can

overcome its quality problems. However, it is clear

that senior executives have worked hard to under-

stand the magnitude of the problems and are acting

to eliminate them. This determination is demon-

strated by several major initiatives in North America

and elsewhere to improve product quality. For ex-

ample, Toyota is reportedly seeking to reduce its

percentage of outside engineers to 10%.24 In addi-

tion, Tokyo headquarters has delegated more power

to the company’s North American executives to

make decisions affecting recalls and strengthening

the independence of quality management activities

in each region. Furthermore, Toyota has reorganized

and, in effect, deliberately slowed down the product

development process by establishing a new team of

about 1,000 quality engineers and by greatly expand-

ing its rapid quality response teams around the

globe. Although driver error appears to have been

the primary cause of the acceleration problems, user

error can be reduced by good design. In today’s envi-

ronment, that is a corporate imperative. To that end,

Toyota has reconfigured the shape of the accelerator

pedal in response to its floor mat problems.

Still, there is a lingering question raised by Toyo-

ta’s recent quality problems: What do the product

recalls say about the effectiveness of the company’s

legendary production system? Why should other

companies try to emulate Toyota if it is struggling

with so many serious design and production issues

itself? The reality is that Toyota’s problems were not

caused by a faulty production system but by poor

management decisions. In particular, the company’s

executives failed to respond aggressively to early

signs of quality problems. Toyota’s stumbles are a

powerful reminder that there is no such thing as

corporate DNA, and that superior production sys-

tems, important as they are, cannot be taken for

granted. As new senior management teams move

into positions of power, they need to recognize that

there are no guarantees that the systems and values

that have provided the underpinnings for the orga-

nization’s success can be sustained without renewed

commitment. Ensuring continuity requires clear in-

centives for the promotion of best practices,

adhered-to processes, especially strong problem-

solving processes, flexibility, effective socialization

of new employees and a supportive organizational

culture. In any organization, there will be internal

and external factors that threaten to weaken the

foundation, be they opportunities for growth,

SLOANREVIEW.MIT.EDU SUMMER 2011 MIT SLOAN MANAGEMENT REVIEW 35

temptations to skimp on training or pressures to

lower costs. Therefore, corporate leaders need to be

vigilant in maintaining practices and values that

support high-quality production systems, even as

they learn to adapt to emerging challenges. Despite

its vulnerabilities, the Toyota production system still

represents state of the art in manufacturing and

continues to provide an important model to com-

panies in a wide range of industries.

Robert E. Cole is a professor emeritus at the Univer-

sity of California Berkeley Haas School of Business

and a visiting researcher at the Institute of Technol-

ogy, Enterprise and Competitiveness at Doshisha

University, in Kyoto, Japan. Comment on this article

at http://sloanreview.mit.edu/x/52417, or contact the

author at [email protected].

ACKNOWLEDGMENTS

I have received a great many helpful comments on this

paper from individuals too numerous to list. I would, how-

ever, like to give special thanks to Michael S. Flynn, former

director of the Office for the Study of Automotive Trans-

portation at the University of Michigan, and John Shook,

CEO and president of the Lean Enterprise Institute.

REFERENCES

1. J. Press, “A New Era for Toyota and TMA in North

America,” (internal Toyota presentation, Sept 20, 2006),

http://commerce.senate.gov.

2. Gallup, “Americans, Toyota Owners Still Confident in

Toyota Vehicles,” March 2, 2010, www.gallup.com.

3. N. Roland, “Toyota Doesn’t Go Far Enough on Safety

Management Changes, Panel Says,” Automotive News,

May 23, 2011.

4. D. Sedgwick, “Toyota Likely to Win Back Consumer

Reports ‘Recommended Rating,’” Feb. 26, 2010, http://

autos.aol.com.

5. J.D. Power and Associates, “J.D. Power and Associ-

ates 2010 U.S. Initial Quality Study” (Westlake Village,

California: J.D. Power and Associates, 2010).

6. C. Jensen, “Toyota’s Image Falls in J.D. Power Sur-

vey,” New York Times, June 18, 2010, sec. B, p. 5.

7. J.D. Power redesigned the IQS survey in 2006, doubling

the number of items ranked, going beyond defects that can,

presumably, be repaired to include design problems. With

quality differentials sharply diminishing, the survey was in

danger of becoming irrelevant, but with a doubling of items

to be scored, brand differentials were increased. Many of

these new items have little or nothing to do with the funda-

mental safety, quality, value and performance (in that order)

that consumers, on average, say is most important when

buying a vehicle.

8. Ordinarily, just equaling longtime quality leaders is not

enough to dislodge them from their leadership position. In

Toyota’s case, however, these developments combined

with the publicity given its successive recalls.

9. M. Rechtin, “Fay in the Fray of Toyota Image Turn-

around,” Automotive News, Sept. 13, 2010, 20.

10. Parker Waichman Alonso LLP, “Chronology of

Events in Ford/Firestone Controversy,” May 21, 2001,

www.yourlawyer.com.

11. Adding to Toyota’s woes, its recalls are getting far

more publicity than those of other automakers. In late

October 2010, Toyota issued a voluntary recall on 1.5

million cars globally to replace a brake master cylinder

seal. A few days later, Nissan recalled 2 million cars

for ignition problems. Both recalls were reported on

msnbc.com. The Toyota article was 966 words and

described the company as “lurching from recall to re-

call”; the Nissan article was only 285 words long and

suggested that there was nothing unusual about Nis-

san’s recall. P.A. Eisenstein, “Dark Clouds Gather Over

Toyota After New Safety Setback,” Oct. 21, 2010,

http://msnbc.com; and “Nissan Recalls 2 Million Cars

Worldwide,” Oct. 27, 2010, http://msnbc.com.

12. A. Frean, “Fears Over Potential Toyota Problems

Surfaced in 2006, U.S. Senate Told,” Times Online,

March 3, 2010, http://business.timesonline.co.uk.

13. J.S. Busby, “Failure to Mobilize in Reliability-Seeking

Organizations: Two Cases from the UK Railroad,” Journal

of Management Studies 43, no. 6 (2006): 1375-1393.

14. N. Shirouzu, “Toyoda Concedes Profit Focus Led to

Flaws,” Wall Street Journal Asia, March 1.

15. Toyota Industries Corporation, “A New Direction for a

New Millennium: Annual Report 2001” (Kariya, Aichi, Japan:

Toyota Industries Corporation, 2001); and Toyota Motor Cor-

poration, “Driving to Innovate New Value: Annual Report

2008” (Aichi, Japan: Toyota Motor Corporation, 2008).

16. J.B. White, “What’s Safer: A Chevy or Mercedes?”

Wall Street Journal, Sept. 22, 2010, sec. D, p. 1.

17. D. Barkholz, “Fixing Cars’ Brains Saves Ford Millions,”

Automotive News, May 11, 2010, 12B.

18. N. Shirouzu, “Inside Toyota, Executives Trade Blame

Over Debacle,” Wall Street Journal, April 13, 2010.

19. M. Ramsey and N. Shirouzu, “Toyota Is Changing

How It Develops Cars,” Wall Street Journal, July 6, 2010,

sec. B, p. 6.

20. T. Fujimoto, “Toyota Overwhelmed by Demon

of Complexity,” Asahi Shimbun, March 3, 2010,

www.asahi.com.

21. R. Dore, “Taking Japan Seriously” (Stanford, Califor-

nia: Stanford University Press, 1987), 173-192.

22. R. Sherefkin, “Detroit 3 Score Higher with Suppliers,”

Automotive News, May 24, 2010, 16B; and R. Sherefkin,

“Toyota Loses Luster with Suppliers,” Automotive News,

May 25, 2009.

23. N. Roland, “Toyota’s U.S. Execs: Japan Didn’t Share

Info,” Automotive News, Aug. 9, 2010, 3.

24. Ramsey and Shirouzu, “Toyota Is Changing.”

Reprint 52417.

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