TOYOTA RECALLS (A):

HITTING THE SKIDS

 Toyota Overview
• Established in 1937, headquarterd in Japan
• “Toyota Production System” formed in 1950 based on
Just-In-Time principle
Lean”- Relentless Drive to improve efficiency & eliminate waste
• Toyota Culture

Family
Quality Safety Duty Creativity Atmosphere

• Company efforts on Quality, relaibilty and value to its customer.

• In 1957, established in USA : Toyota Motor Sales with vision to become
most successful and respected car company in USA
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 How would you assess Toyota’s early
reaction to the recalls?

• 911 Audio Clip made public: Led to one of the largest cars recalls in the history of
automobile industry

• Toyota, being a symbol of quality, got hampered and result in decline in its revenue

• Japanese Company: Poor with crisis management

• Toyota began printing adverts and create commercials on television reflecting the
message safety oriented car.

• Control damage happening to the brand

• Failed to show ingenuity to American citizens for its actions

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 How would you assess Toyota’s early
reaction to the recalls?
• Toyota brought short term measures that would control the problem, while Americans
expected leader to apologise.
• Recall Activity was not streamlined and in synchronization as Distributors and Service
centers has different answers.
• Toyota should have relaised the damage it will have to its brand equity

Toyota should have done:

• Company should have arranged a Press conference addressed by their CEO

• Hotline to address the issue of customers

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 How will you estimate the impact of the recalls
and Toyota’s reactions on the firm’s brand,
business, and share price?
• IMPACT on BRAND

• The initial response was a mixture of silence from top executives and vague, misleading
statement frustrated the government officials and public

• Slow response, poor communication and not addressing the concerns reflected the poor
crisis management from the brand

• Toyota increased its efforts through multi-channels such as televisions, radio, print media,
social media to hold on to the loyal customers and improve its brand image

• The impact largely affected the brand reputation, sales and pricing power

• The controversy of Koua Fong Lee reopened who was sentenced eight years in prison,
threatened to sue TOYOTA
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 How will you estimate the impact of the recalls
and Toyota’s reactions on the firm’s brand,
business, and share price?

• TOYOTA’s 1239 dealers had to simultaneously take cars off their lots but despite
of this they remained positive and felt the brand would recover

• Number of “spoof” videos were uploaded on YouTube and 24-hour news cycle
stayed focused on the recalls

• 7% of new car shoppers would not consider buying Toyota because of the recalls
but it was an improvement from the 18% after the third recall

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 How will you estimate the impact of the recalls
and Toyota’s reactions on the firm’s brand,
business, and share price?
IMPACT on SHARE PRICE

• In 2008 TOYOTA sold 8.5 million cars and trucks

• In 2009 it sold 7.81 million, 15.4% share of the US market, US sales accounted for 23%

• TOYOTA’s market capitalization dropped by $21 billion in January 2010

• In late January 2010, some analysts estimated that potential revenue loss in the U.S.
could reach $500 million per week

• On February 2, press reported company’s market capitalization had lost 18% in the
preceding 7 business days, erasing $20 billion in shareholder value

• Shares of Toyota lost 11.6% through February 2010

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How will you estimate the impact of the recalls
and Toyota’s reactions on the firm’s brand,
business, and share price?

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 How will you estimate the impact of the recalls
and Toyota’s reactions on the firm’s brand,
business, and share price?
IMPACT on BUSINESS

• Recall announcement of over 8.5 million cars worldwide, including 6 million in US

First recall 3.8 million due to pedal entrapment recall

Second recall 2.3 million due to sticky pedal recall

• Third recall 437,000 due to braking problems of Prius

• Opens the door for competitors to steal away the customers

• Sales of eight model making up to 57% of TOYOTA’s sales in 2009 were halted

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 How will you estimate the impact of the recalls
and Toyota’s reactions on the firm’s brand,
business, and share price?

• TOYOTA estimated that it was losing 20,000 sales per week in 2010

• In January 2010 US auto sales exceeded January 2009 sales by 6.3% but TOYOTA’s sales fell nearly
by 16%

• On February 4, TOYOTA estimated recall cost upto 180 billion yen, with 100 billion yen repairs and
80 billion yen in lost sales

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