Ryan J. Suto's Blog

26 November 2010

Toyota Practices: A How-Not-To in Reputation Management

            This post discusses the actions of the Toyota Motor Corporation from late 2009 to early 2010. Toyota began recalling many of its vehicles due to several reports of unintended acceleration. As the story unfolded, Toyota broadened its recall several times, consumer concern increased, and media coverage skyrocketed. Toyota’s response was investigated by the U.S. government, and Toyota was subject to Congressional hearings. It’s clear that Toyota did not follow the best practices of reputation management; the corporation was not transparent, honest, nor presented as concerned for their relationship with their customers.
Best Practices
            Managing ones reputation is important in public relations. Good reputation comes directly from being transparent, authentic, and responsive to publics. Reputation is also related to the identity and the image of an organization. The identity of an organization is “what is central, distinctive, and enduring about an organization…” (Brønn, 2010, p. 307). Identity must be built on a consensus of both internal and external stakeholders, and must be obvious to those outside the organization. Image is simply what the member of the organization believes others think of the organization itself. The image of an organization should reflect its identity. Finally, reputation is what external publics actually think of the organization. Reputation is not only important for the organization’s relationship with external publics, but also internal publics. In general, people wish to work for organizations about which they feel highly, and they may wish to invest in those organizations, as well. Indeed, reputation is mostly about relationships, because “the quality of relationships determines reputation, that quality relationships and reputation result more from the behavior of organizations than from messages disseminated, and that the value of relationships includes the value of reputation” (Brønn, 2010, p. 307-10).
            Reputation is also about trust. There are five stages of losing trust, disappointment, surprise, concern, disgust, and outrage. After publics lose trust in an organization, the organization loses those publics. Trust must come from communication and openness. To maintain high reputation, an organization must communicate visibility, distinctiveness, authenticity, transparency, consistency, and responsiveness. To be open, an organization must communicate information that is detailed, timely, accurate, and comparable to previous experiences (Brønn, 2010, p. 311-14).
Toyota Practices
Over the course of several months, Toyota announced three recalls surrounding the unintended acceleration of several of their vehicles. Each recall expanded the scope of the problem and the number of vehicles affected. On January 29, 2010, an automotive research analyst at HIS Global Insight said, “[Customers are] saying ‘Well, gee, the one pillar Toyota built its brand on was reliability, quality.’ Now that quality is questionable, and suddenly they’re looking at the Hyundai dealer across the street” (Haq, 2010). On February 2 the BBC reported Toyota's executive in charge of quality said, "The sales forecast is something that we're extremely worried about" (BBC, 2010). Although this may have been only one of several statements this individual made, this comment can clearly be taken as a callous one, as these defects reportedly led to several deaths around the country. On February 5 the USA Today reported that the recalls would hurt current Toyota owners, stating, "with safety shortcomings in some of the vehicles laid bare, it may become harder to resell their new cars when they go on the used-car market" (Sullivan, 2010).
Later in the timeline of this crisis, concern turned from the unfortunate nature of the recalls to Toyota’s possible negligence in the handling of safety concerns. On February 22 the Associated Press reported that Toyota’s first recall of floormats began in hopes of avoiding a more expensive recall of the accelerator pedal itself (AP, 2010). This “could raise concerns in Congress over whether Toyota put profits ahead of customer safety and pushed regulators to narrow the recalls’ scope” (AP, 2010). This led federal prosecutors to launch an investigation in pursuit of criminal charges against the corporation (AP, 2010). Because public apologies are admissible in court, this development likely limited what Toyota was able to release to the public regarding the recalls (AP, 2010). On April 5 the National Highway Traffic Safety Administration (NHTSA) announced it would bring action against Toyota “for failing to notify the auto safety agency of the dangerous ‘sticky pedal’ defect for at least four months, despite knowing of the potential risk to consumers” (NHTSA, 2010). On April 16 Toyota agreed to pay a $16.375 million fine as a result of NHTSA’s legal action (NHTSA, 2010).
            Best practices states that an organization must stay true to its core goals and values, be distinctive, and be transparent. The organization must honestly and effectively communicate with its publics. Finally, the organization must work on its reputation with its publics by being actively engaged in relationships with them.
By compromising the principles of reliability and quality, Toyota compromised its reputation. By not being transparent with the core issues in the initial recall, Toyota violated the trust of prospective buyers. Finally, by publicly worrying about its own profits while its customers were losing value in resale price, Toyota damaged its relationship with established customers and dealers. Because of these failings, it is clear that Toyota’s performance is a ‘how-not-to’ in reputation management.

Associated Press. (2010). U.S. launches criminal probe into Toyota safety. Retrieved from http://www.msnbc.msn.com/id/35520628/ns/business-autos/
BBC News. (2010). Toyota call recall may cost $2bn. Retrieved from http://news.bbc.co.uk/2/hi/business/8493414.stm
Brønn, P. S. (2010) Reputation, communication, and the corporate brand. In R. L.Heath (Ed.), The SAGE handbook of public relations (pp. 205-221). Thousand Oaks, CA: Sage Publications.
Haq, H. (2010). Toyota recall update: dealers face full lots, anxious customers. Christian Science Monitor. Retrieved from http://www.csmonitor.com/USA/2010/0129/Toyota-recall-update-dealers-face-full-lots-anxious-customers
National Highway Traffic Safety Administration. (2010). Additional information on Toyota recalls and investigations. Retrieved from http://www.nhtsa.gov/Vehicle+Safety/Additional+Information+on+Toyota+Recalls+and+Investigations
Sullivan, J. (2010). Toyota recalls will cost owners in lower resale values. USA Today. Retrieved from http://content.usatoday.com/communities/driveon/post/2010/02/toyotas-woes-will-cost-owners-in-lower-resale-values/1

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