Professional Documents
Culture Documents
Rahim Ejaz
M. Rahim Ejaz
Follow steps for handling ethical dilemmas brought to you by subordinate employees.
Identify criteria used to handle ethical issues where all solutions violate ethical
principles.
Simulation Overview:
Follow steps for handling ethical dilemmas brought to you by subordinate employees.
M. Rahim Ejaz
Simulation Overview:
M. Rahim Ejaz
Company Overview
The Toyota Motor Company received its first Japanese Quality Control Award at the start of
the 1980s and began participating in a wide variety of motorsports. Due to the 1973 oil crisis,
consumers in the lucrative U.S. market began turning to small cars with better fuel economy.
American car manufacturers had considered small economy cars to be an "entry level"
product, and their small vehicles employed a low level of quality in order to keep the price
low.
By the early sixties, the US had begun placing stiff import tariffs on certain vehicles. The
Chicken tax of 1964 placed a 25% tax on imported commercials vans. In response to the
tariff, Toyota, Nissan Motor Co. and Honda Motor Co. began building plants in the U.S. by
the early eighties.
In 1982, the Toyota Motor Company and Toyota Motor Sales merged into one company, the
Toyota Motor Corporation. Two years later, Toyota entered into a joint venture with General
Motors called NUMMI, the New United Motor Manufacturing, Inc, operating an automobilemanufacturing plant in Fremont, California. The factory was an old General Motors plant that
had been closed for two years. Toyota then started to establish new brands at the end of the
1980s, with the launch of their luxury division Lexus in 1989.
In the 1990s, Toyota began to branch out from producing mostly compact cars by adding
many larger and more luxurious vehicles to its lineup, including a full-sized pickup, the T100
(and later the Tundra); several lines of SUVs; a sport version of the Camry, known as the
Camry Solara; and the Scion brand, a group of several affordable, yet sporty, automobiles
targeted specifically to young adults. Toyota also began production of the world's best-selling
hybrid car, the Prius, in 1997.
With a major presence in Europe, due to the success of Toyota Team Europe, the corporation
decided to set up TMME, Toyota Motor Europe Marketing & Engineering, to help market
vehicles in the continent. Two years later, Toyota set up a base in the United Kingdom,
TMUK, as the company's cars had become very popular among British drivers. Bases in
Indiana, Virginia and Tianjin were also set up. In 1999, the company decided to list itself on
the New York and London Stock Exchanges.
Toyota Deutschland's headquarters in Cologne
In 2001, Toyota's Toyo Trust and Banking merged to form the UFJ, United Financials of
Japan, which was accused of corruption by the Japan's government for making bad loans to
alleged Yakuza crime syndicates with executives accused of blocking Financial Service
Agency inspections. The UFJ was listed among Fortune Magazine's largest money-losing
corporations in the world, with Toyota's chairman serving as a director. At the time, the UFJ
was one of the largest shareholders of Toyota. As a result of Japan's banking crisis, the UFJ
was merged again to become Mitsubishi UFJ Financial Group.
M. Rahim Ejaz
In 2002, Toyota managed to enter a Formula One works team and establish joint ventures
with French motoring companies Citron and Peugeot a year after Toyota started producing
cars in France.
Toyota ranked eighth on Forbes 2000 list of the world's leading companies for the year 2005.
The company was number one in global automobile sales for the first quarter of 2008.
On December 7, 2004, a U.S. press release was issued stating that Toyota would be offering
Sirius Satellite Radios. However, as late as January 27, 2007, Sirius Satellite Radio and XM
Satellite radio kits were not available for Toyota factory radios. While the press release
enumerated nine models, only limited availability existed at the dealer level in the U.S. As of
2008, all Toyota and Scion models have either standard or available XM radio kits. Major
Lexus dealerships have been offering satellite radio kits for Lexus vehicles since 2005, in
addition to factory-equipped satellite radio models.
In 2007, Toyota released an update of its full size truck, the Tundra, produced in two
American factories, one in Texas and one in Indiana. "Motor Trend" named the Tundra
"Truck of the Year," and the 2007 Toyota Camry "Car of the Year" for 2007. It also began the
construction of two new factories, one to build the RAV4 in Woodstock, Ontario, Canada and
the other to build the Toyota Prius in Blue Springs, Mississippi, USA. This plant was
originally intended to build the Toyota Highlander, but Toyota decided to use the plant in
Princeton, Indiana, USA, instead. The company has also found recent success with its smaller
models the Corolla and Yaris as gas prices have risen rapidly in the last few years.
In 2009-2010, the company was heavily in debt and had to request a loan of more than $3
billion from a bank backed by the Japanese government.
M. Rahim Ejaz
In a situation like this it is easy to see that something went wrong, but how can things go so
wrong. Toyota is a company that has a mantra of "kaizen," or continuous improvement.
Instead they somehow found a way to justify negotiating with the government to make their
problems disappear.
However, consumers have found themselves victims of a PR spin game in which Toyota
would recall a limited amount of vehicles at certain times of the year to avoid a massive
recall. At the same time, Toyota was producing new vehicles with known safety flaws and
advertising their vehicles to be the safest and highest quality vehicles on the road.
A further look into the documents reveals several other reports entitled "Wins for Toyota &
Industry," including "favorable recall outcomes," "secured safety rulemaking favorable to
Toyota" and "vehicles not in climate legislation." Another page lists "key safety issues,"
including "Sudden acceleration on ES/Camry, Tacoma, LS, etc."
What this goes to show is that Toyota conspired with NHTSA, the government department
responsible for crash test ratings, to falsely improve Toyota's safety record while hiding the
fact that NHTSA and the Department of Transportation were neither adequately staffed nor
compensated to deal with influx of safety concerns raised by consumers.
The larger problem with this scandal is that it has created a precedent for corruption and
unethical behavior when it comes to the safety of vehicles that so many of us use and depend
upon everyday. We now have a situation, in which we must now question the validity of all
safety scores given out not only to Toyota vehicles but to all motor vehicles.
Every company that engineers and manufactures a product strives to save costs, so this
doesn't blow us away. What does shock us is how irresponsible and uncaring the U.S.
government that we employ to represent and serve us, continues to f*ck us over.
This problem is reminiscent of what tobacco companies did to smokers during the latter half
of the last century. Tell the consumer your product is safe, make them feel at ease while using
it, and derail the government and whistle-blowers who are trying to show just how dangerous
your product is.
M. Rahim Ejaz
injured, fired, and they disappear from the compensation pay roll. This happens at a rate of
400 Americans per year working at Toyota. Toyota builds their plants in the poorest states to
take advantage of the lowest wages in the country. Many workers have been kept on as
temporary workers for over 4 years.
Their goal is to lower the average wages in America, and Honda seems to be backing them.
Toyota is one of the worlds most profitable corporations, yet the more profits they make, the
more they lower worker wages.
So essentially Toyota uses the cheapest materials, and the poorest workers to manufacture
them.
M. Rahim Ejaz
clients case, He [Gomez] was held hostage for 20 miles on a Bay Area freeway by a 2007
Camry traveling more than 100 mph. Gomez was unable to turn off the engine or shift into
neutral and then burned out his brakes before slamming into another car and killing that
driver.
According to The National Highway Traffic Safety Administration there is still an open
investigation into sudden acceleration events involving Toyota vehicles.
M. Rahim Ejaz
M. Rahim Ejaz
New automobile component technologies (more electronic and less mechanical) should have
led to new quality systems and far more careful attention to drivers experiences than Toyota
provided. Whether it was over-confidence in its historical quality systems or pressure to keep
production and profits rolling as demand grew, internal forces precluded a relentless drive to
fine-tune internal systems to Toyotas value promise as technology changed.
This drive to align everything to the value promise while generating profitability should be
front and center in any strategic leaders agenda. Instead, Toyota maintained its brand
promise in external communications, but failed to align internal decisions with its value
promise.
Another piece of evidence that Toyota lost an internal focus on its value promise comes in
Toyotas reactions to its quality issues. Toyota fixed new cars being produced without
recalling cars in the field, delayed communicating quality issues to customers and regulators
and made many misstatements to the public. Toyotas historic value promise for sure didnt
drive these decisions. Rather, Toyotas reactions have raised frustration and reduced
perceived reliability of the Toyota brand, the opposite of its value promise.
The lesson
Growth often destroys brands. As companies get larger, C-Suite leaders lose the pulse of the
business at the same time that communication channels to the C-Suite become convoluted or
blocked. Growth and profits become aims, while delivering on the value promise becomes
secondary or even forgotten. A disconnection arises between what is promised and what is
then delivered that erodes brand equity.
Hopefully Toyota will learn the lesson that a business value promise must drive all internal
actions and decisions. It will take an incredible communicator to instill a singular focus on
the value promise all over again, a focus Toyotas founder created and his son and grandson
lost. Meanwhile, Ford and Hyundai are driving their cars and messaging right through the
hole Toyota left in the market.
Do you regularly ask or hear in meetings, What should we do in light of our value promise?
If not, make sure everyone in your organization knows your companys value promise and
get busy with alignment. Your Toyota moment may not be as public. But the lost reputation,
revenue and profits will nevertheless be substantiated.
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M. Rahim Ejaz
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