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The U.S. witch hunt against Toyota, and a lesson for foreign corporations?

February 19th, 2010 Leave a comment Go to comments

[Edit 2/20/2010] People do not remember now, but back in 2007 and 2008, Chinese toys companies were the butt of high profile highly politicized investigations for manufacturing unsafe toys; after formal investigation it turned out most of the recalls were due to fault of U.S. designers – not Chinese manufacturers.  “Made in China” was under attack in the U.S. and a target of xenophobia and protectionism.

Never mind that iPhones, designer clothing, and computers are made in China and used widely by Americans.  Never mind a University of Manitoba compiled a study in 2008, “Toy Recalls – Is China the Problem?” looking at all the toy recalls within the last two decades, and finding:

“Of the 599 recalls since 1988, an overwhelmingly high number of recalls (424 or 70.8 percent of all recalls) were due to problems which could be attributed to design flaws.”

Many Americans still see made in China goods as toxic and low quality.

Can “Made in Japan” (a country by the way whom Americans view as “strategic” partner to America in Asia) be subject to this same type of attack?

Toyota has been lambasted in the U.S. media recently due to braking problems associated with their vehicles, including their flagship Prius.  The total recall around the world involves 8.5 million Toyota vehicles.  Obama’s administration has politicized the situation too:

“Our … people will hold Toyota’s feet to the fire to make sure they are going to do everything they said they were going to do to make the vehicles safe,” U.S. Transportation Secretary Ray LaHood said at an appearance in Washington. (Reuters)

Not surprisingly, in the U.S., Toyota’s January 2010 sale has dropped by 16%, and this Business Week article went on to say:

GM’s deliveries climbed 14 percent and Ford had a 25 percent gain after both automakers targeted Toyota buyers last week with trade-in incentives.

How big is this brake problem, really?  According to NPR:

Reports of deaths in the U.S. connected to sudden acceleration in Toyota vehicles have surged in recent weeks, with the toll of deaths allegedly attributed to the problem reaching 34 since 2000, according to new consumer data gathered by the government.

To compound the issue for Toyota, Americans are even suing Toyota because the resale value of Toyota cars are now on the decline.

It was exactly 10 years ago, Ford had a massive recall involving their flagship vehicle, the Ford Explorer.  The company officially blamed Firestone for exploding tires, but investigations later showed a complicated story about Ford’s design decisions, and in fact, earlier knowledge of the issue by Ford engineers.  The result was death of 250 Americans and 3,000 serious injuries due to the Ford Explorer rolling over.

While I don’t think there is a conspiracy against Toyota, I do think there is a under-current of xenophobia and protectionism on display within the U.S. against Toyota.  This braking problem is a serious matter without a doubt.  However, comparing the negativity targeted at Toyota against the negativity Ford received ten years ago, the dis-proportionality is plenty apparent.  Remember, GM almost collapsed not that long ago.  American citizens whose livelihood depend on Ford and GM all see Toyota as enemy #1.  The message being repeated in the U.S. media is the criticism that Toyota tried to shift blame.  They want Toyota to be dragged through as much mud as possible.

Toyota’s bungled attempt to deflect criticism onto its parts supplier and its timid response to the crisis have only made matters worse for the company and its customers, says Wheaton. (“Lessons Toyota Can Learn From Ford on How Not to Handle a Recall“)

In the lesson to learn article, the author also recommend that Toyota’s CEO speak directly to the American public sooner rather than later.  I think that’d be wise too.  Once the story breaks, it can become a serious wild fire.

In the Chinese Toy Crisis of 2007 and 2008, the vast majority of toy safety issues were due to poor American design – not Chinese manufacturing.  But neither the China nor the Chinese manufacturers took the initiative actively and suffered the consequences.

Toyota needs to learn from the damages the Chinese took in 2007 and 2008.  Toyota needs to have regular PR briefings on its activities surrounding this issue.  Toyota needs to go above and beyond the call of duty to demonstrate to the American public its resolve, progress, and assurance.

Looking to the future

Toyota certainly can recover from this debacle.  Loyal customers are going to continue to purchase Toyota cars.  As long as Toyota maintains its quality, in the long run, over-all accidents and injuries statistics will restore confidence in the company’s products.

But I think there is also no doubt that protectionism and xenophobia is on the rise in the U.S., and perhaps across the West.  Can Chinese companies realistically expect to do business or invest in America (or in other areas of the West) without political backlash?

U.S. corporations are very savvy with PR, marketing, and lobbying political establishments.  It would only serve Chinese (and other foreign) corporations well if they study their U.S. counter-parts carefully.

  1. Chan
    February 22nd, 2010 at 22:07 | #1

    Hi yinyang,

    A very convincing post. I totally agree with your conclusions.

    Looking back at the last few decades, I can think of plenty of examples of widespread xenophobia in the US. In my opinion, the western media plays a central role in most of these. I continue to see them as the ultimate root cause of most of the problems between the West and much of the rest of the world.

  2. February 23rd, 2010 at 10:52 | #2

    Hi Chan,

    Thx. I just came across this interesting study by Millward Brown:

    The Top 10 Most Trusted and Recommended Brands in the U.S.

    Rank

    Brand

    TrustR Score

    1

    Amazon.com

    123

    2

    FedEx

    122

    3

    Downy

    120

    4

    Huggies

    120

    5

    Tide

    120

    6

    Tylenol

    120

    7

    Toyota

    119

    8

    WebMD

    119

    9

    Pampers

    118

    10

    UPS (United Parcel Service)

    118

    Source: Millward Brown

    Note: Study conducted over the course of 2009, prior to Toyota’s recent recall

    I’ll be eager to see where Toyota stands when they conduct this study again – that’d be a metric of damage done to Toyota. Since Toyota is a highly reputable brand, I think they can withstand this media onslaught much better than a less recognized one.

  3. March 9th, 2010 at 17:00 | #3

    NPR carried an AP report, “Class-Action Lawsuits Could Cost Toyota Billions”

    Toyota owners claiming that massive safety recalls are causing the value of their vehicles to plummet have filed at least 89 class-action lawsuits that could cost the Japanese auto giant $3 billion or more, according to an Associated Press review of cases, legal precedent and interviews with experts.

  4. colin
    March 10th, 2010 at 23:46 | #4

    Nice writeup. I’ve been posting similar thoughts in the comments of other blogs.

  1. January 13th, 2018 at 07:28 | #1

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