What We Could Learn From Akio Toyoda’s Toyota Debacle

Toyota Motors President Akio Toyoda smil

Things couldn’t are better for Toyota because it heads into its annual shareholders meeting on Friday. It is back on top because the world’s best-selling carmaker. Profits are returning. New models, like the redone Camry and expanded Prius family, are flying from showrooms.

But inside the company, the debacle that shook the company 36 months ago still resounds. Memories of the beating Toyota took from countless recalls, slumping sales and billion-dollar losses are still fresh. Despite his enthusiasm for all those things on wheels, CEO Akio Toyoda is never likely to forget the need to sit before Congress in 2010 and apologize to investors, dealers and customers.

With Toyoda set to lead his third annual meeting since becoming CEO, here are three hard lessons he learned from Toyota’s experience.

You can’t be global and keep all power in Japan. Toyota gave a lot of lip service through the years to the concept that it was delegating authority to individuals in various parts of the world. Nevertheless the crisis revealed just the opposite. The power seemed to coagulate in Nagoya and Toyota City, as Toyota got bigger. Although Toyota had a mantra of “genchi genbutsu,” or go and see, the truth was just the alternative. “If half your production is outside Japan, you can’t sit in Nagoya and play genchi genbutsu,” says Ulrike Schaede, professor of Japanese business at the University of California at San Diego, Ca. Toyoda, trained and educated in the United states, has taken steps to allot more power across the company’s global regions.

You can have millions of customers and no one in your corner. At the height of the recall crisis, Toyoda saw for himself a very uncomfortable truth. Despite all of its years of donating millions of dollars to local communities, hiring workers, cultivating individuals Congress and repeating that effort worldwide, when the safety of its cars was in question, it was equally as much a foreign carmaker as it was when it began to export cars from Japan. Of course, he was called to Washington in the wake of the bankruptcies at General Motors and Chrysler, there was more than a little protectionist sentiment at play. It also taught him who Toyota’s friends were.

You have to earn your reputation every minute. Run every one of the ads you would like, point to all the quality statistics you can, and insist that you have loyal buyers. But the evidence of whether a vehicle company is successful comes in two fundamental ways: is it getting people to buy its cars, and is it making money accomplishing this? Since the recalls and financial disaster, Toyoda finds out why his company has no choice but to keep improving. The past may create your reputation, but you also have to live up to the promise you make by using it. When you hope to overcome the obstacles that have been thrown in your way, more than that, you must exceed it.

It’s unlikely Toyoda is ever going to look as grim as he did with the 2010 shareholders meeting, his first after being named CEO. Back then, he bowed deeply, saying, “I apologize for the concerns we have caused. We believe our most important task is to regain consumers’ trust.”

But Schaede says Toyoda could have taught his very own company a lesson: have someone at the top who loves what it really makes. Toyoda is well known for his passion for racing and also for spending time each and every month at the company test track. “If he could, he’d drive from morning until evening,” Schaede says. “The previous CEOs, I didn’t have the impression that they liked to get – or that they could drive by any means.”

Santa Paula Chevrolet