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Accelerating Into Trouble:
An Analysis of Toyota Motor Company and its Recent Recalls

Arthur W. Page Society
2011 Case Study Competition

Table of Contents

I. Case Study

1. Overview 3

2. A Brief History of Toyota Motor Co.
2.1 Toyota Motor Company Background 3
2.2 Continued Success 3
2.3 Corporate Philosophy 4
2.4 Corporate SocialResponsibility 4

3. The Issue of Sudden Unintended Acceleration
3.1 A Sticky Situation 4
3.2 A Trip Down Memory Lane 4
3.3 Back to the Future 5

4. Chronology of the Toyota SUA Case: August 2009-August 2010 6

5. Repercussions
5.1 Media Response 9
5.2 Consumer Response 9
5.3 Economic Impact 9
5.4 Government Criticism and Investigation10

6. Internal Discord
6.1 The Toyota Way 11
6.2 A Crisis Made in Japan 11

7. Responses of Toyota
7.1 Denial and Deception 12
7.2 Action Promised but Not Delivered 13
7.3 A Clearer Picture 13
7.4 Marketing Actions 14

8. The Toyota Way Back – What the Future Holds
8.1 Weathering the Storm 15
8.2 Critical Acclaim and Media Coverage15
8.3 U.S. Government Developments 15

9. Toyota’s Challenge 16

II. APPENDICES 17

III. REFERENCES 28
I. CASE STUDY

1. Overview
Newly appointed President and CEO Akio Toyoda, grandson of Toyota Motor Company’s founder, would unknowingly soon be faced with the biggest crisis in the company’s history a few short months after taking the reins. Itstarted with a single, horrifying car crash in southern California in August 2009.1 And after two separate vehicle recalls attributed to hundreds of consumer claims of Sudden Unintended Acceleration covering 10 million vehicles, the company was forced to announce it was suspending the sale of eight of its best-selling vehicles, a move that would ultimately cost the company and its dealers aminimum of $54 million a day in lost sales revenue at its peak.2 How did a company that became the world's largest automaker on the back of a rock-solid reputation for quality and dependability find itself at the center of the biggest product recalls in company history?3 And what does this mean for Toyota's brand image in the United States, its largest and most profitable market?

2. A Brief Historyof Toyota Motor Co.

2.1 Toyota Motor Company Background
The Toyota Motor Co. Ltd was first established in 1937 as a spin-off from Toyoda Automatic Loom Works, one of the world's leading manufacturers of weaving machinery.4 Toyota Motor Sales Co., Ltd. was later established in 1950, and the first Toyota cars arrived in the United States in 1957 which would lead to the founding of Toyota MotorSales, U.S.A., Inc. on October 31st in the same year. Toyota began manufacturing operations in the U.S. by 1972 and expanded to include vehicle production in 1986.5
Toyota Motors is a publicly traded company on the New York Stock Exchange (NYSE), the Tokyo Stock Exchange and the London Stock Exchange under the symbol TM. The company’s principal competitors within the industry are Ford MotorCompany, General Motors Corporation, and Honda Motor Co., Ltd and as of 2010, Toyota held over 16% of the U.S. market share. 6 With more than 1,500 Toyota, Lexus and Scion dealers in the U.S. alone and a world-wide employment of over 320,000, Toyota sells vehicles in 170 countries and is currently regarded as the world’s largest automobile manufacturer by both sales and production.7

2.2 ContinuedSuccess
Over the past 25 years, Toyota has had a steady increase in both sales and market share within the automotive industry. By the end of the 1980s, Toyota had garnered the reputation of being a powerful and exceptionally well-run car company.8 After a decade of consistent growth, the company stood atop the Japanese automobile industry and ranked number three worldwide.9
By the...