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Toyota: A Lesson of Economic Integrity

Econimics of Integrity by Anna Bernasek

Guest Author Blog: Anna Bernasek is the author of THE ECONOMICS OF INTEGRITY

These days Toyota  doesn’t lack for detractors. There’s something interesting about all the criticism, though. If you buy what the critics are saying, Toyota’s problems are coming from the same place that its success did: integrity.

Toyota made its reputation and built a very successful car business by relentlessly focusing on quality over a decades-long period. With none of the inherent advantages of the formerly dominant “big three” automakers, Toyota methodically built cars that impressed drivers around the world. For many customers, the Toyota brand became synonymous with quality. Toyota’s integrity was a huge asset and a key reason why today they are the most successful car company in the world.

Like many others, I found Toyota’s success fascinating and devoted a chapter to its methods in my newly released book “The Economics of Integrity.”

Guest Author Blog

But according to Toyota’s detractors, everything changed in the 1990s.

Toyota’s sacrificed quality in favor of rapid growth, abandoning the principles that made it one of the most admired companies in the world. And now, suddenly, the problems are coming home to roost. Testifying in front of congress, even Toyota’s CEO Akio Toyoda linked complaints of unintended acceleration to Toyota’s growth, saying that the safety issues resulted from growing the business at a pace that exceeded Toyota’s ability to develop its organization and people.

For a company that so many people admire, it would certainly be ironic to see a scandal bring Toyota down. Toyota would then be studied not only for its history of success based on quality, but also as an object lesson on what happens to a brand when integrity is compromised.

But of course that’s not the way the story has to end.

Toyota’s destiny is in its own hands. Toyota is faced with a challenge of rebuilding customer trust. As the company that effectively wrote the book on making quality cars, Toyota needs to attack the problem with a step by step, methodical approach.

The unintended acceleration problem is a tricky one. It’s a rare event, but not unheard of. For example, on 2008 models Toyota got a total of 52 complaints, which translates into one for about every 50,000 cars sold. Every car manufacturer gets some level of complaints on the unintended acceleration issue. 

Getting a complaint doesn’t mean the carmaker is at fault, though.

According to a government study dating back to 1989, many if not all complaints of unintended acceleration were attributable to driver error. Cars have changed since then, so there always remains a possibility that something is going wrong. But it’s interesting that no company has been able to completely eliminate complaints of sudden acceleration.

No matter what the source of the problem is its up to Toyota to address it.

As Toyota well knows, trust is based on perception. Toyota needs to make it very hard for unintended acceleration to occur. Until Toyota can drive the complaint rate down, the issue won’t go away.

Editor's Note: In a previous posting, the author wrote that Ford has received more complaints of unintended acceleration than Toyota. Ford contacted CNBC to dispute the claim and sent us the following statement,“We do not recognize those calculations for us or others in the industry. The NHTSA database (VOQ data) includes six different types of customer complaints under a broad category called "Vehicle Speed Control." When we analyzed the NHTSA data and removed complaints due to our speed control deactivation switch recall — which is not at all related to sudden acceleration — Ford's performance in this category has improved each year and our complaints have been significantly lower than Toyota's each year since 2005.”


Anna Bernasek
Image: Harry Diorio

Anna Bernasek is the author of THE ECONOMICS OF INTEGRITY.

Her writing about finance and the economy has appeared in The New York Times, The Washington Post, the International Herald Tribune, Fortune, TIME and Australia’s Sydney Morning Herald newspaper.

She has commented on economics as a guest on broadcast media including CNN, CNBC, public television and National Public Radio. Ms. Bernasek divides her time between New York City and the east end of Long Island.

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