Review: Toyota Under Fire

Toyota Under Fire: Lessons for Turning Crisis into Opportunity, by Jeffrey K. Liker and Timothy N. Ogden. New York: McGraw-Hill, 2011. 237 pp. $20 (Kindle edition).

Already battered by slowing automobile sales due to the 2008 recession, Toyota faced a second crisis: claims that its management had put short-term profits ahead of their customers’ safety. With commentators in the United States harshly criticizing the Japanese car manufacturer, Jeffrey K. Liker felt compelled to rise to Toyota’s defense.

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Liker is the author of six books on the company, including the international best seller The Toyota Way, which shows readers the principles and operations that enabled Toyota to become both highly regarded by its customers and one of the most consistently profitable companies ever. In short, Liker knows Toyota more intimately than most, and the claims he was hearing in 2009 didn’t correspond to that knowledge.

But before he rushed to defend the company, Liker paused. A friend reminded him that blindly defending the company wasn’t “the Toyota way,” and he had to agree.

The Toyota Way demands that any problem be thoroughly investigated before any conclusions are reached. It demands that problem solvers “go and see” the problem firsthand and not rely on abstract, thirdhand reports. It demands thoughtful and critical reflection to find root causes and develop effective solutions. Most of all, it demands that every team member openly bring problems to the surface and work to continuously improve what is within their control. I wasn’t doing any of these things. Whether Toyota was living up to its principles or not, I wasn’t. (loc 165)

So Liker set aside his defense of Toyota and set out to investigate what happened at Toyota during these crises; Toyota Under Fire: Lessons for Turning Crisis into Opportunity presents his findings. Together, Liker and coauthor Timothy N. Ogden went to plants across America and Japan to see whether Toyota was still the same company that Liker profiled in his earlier books—a company living up to its principles. As it turned out, Liker was glad he paused.

Toyota had changed. For one, it was a much larger company than the Toyota Liker first wrote a book about in 2003. There was another difference, a big one. After automobile sales collapsed in 2008, Toyota reported a $4 billion loss, its first since 1950. And nobody at Toyota was resigned to its being anyone’s fault but their own.

[T]he Toyota Way does not allow the company to blame others or even conditions that are seemingly beyond the company’s control for problems. The focus is always on finding ways to improve the company so that even external events can be appropriately handled without major damage to the company. (loc 742)

In reflecting on the cause of the collapse in sales and the damage it did to the company, Toyota leaders were unflinching. They pointed out the reasons they should have seen a bubble in demand and highlighted the fact that their inventory had been growing throughout 2008 despite the company’s philosophy of building only what the market demands.

According to Liker and Ogden, the response to these failures and to the recession as a whole was radical—“there were no fired executives, no massive layoffs, and no plant closings” (loc 743). Instead, as their book shows, Toyota responded “by getting more aggressive about what it had always done: continuous improvement, investing in people, and trusting those people to find and implement solutions that would cut costs and improve quality and productivity” (loc 848).

Liker and Ogden show that the company stayed true to its view of employees as appreciating assets and, while other auto companies suffering from the U.S. recession were firing workers, Toyota was investing more in theirs. Even as assembly lines stood idle, Toyota had employees report to work and focus more carefully than ever on their work, to search for ways to make the cars safer, to produce them more quickly, and to reduce waste.

The challenge for Toyota’s U.S. operations then became an opportunity—“to match the quality, flexibility, and cost-effectiveness levels of the best Toyota plants in Japan” (loc 946). Liker and Ogden show the many small ways that Toyota employees seized this opportunity—from repurposing equipment from old assembly lines to mastering their jobs, to improving their problem-solving skills and using those skills, for instance, to discover and remove the cause of dings made in the production process.

As 2009 approached its close, Toyota had a much stronger—meaning more loyal and more highly skilled—workforce. Owing to the many small reductions in waste and to the innovations its employees implemented, the company had lowered operating costs and returned to profitability.

Then a tragic accident in San Diego involving Toyota’s luxury Lexus line launched the company into another crisis and set “the stage for a remarkable series of events that ultimately proved to be the greatest threat to Toyota since the company’s near-bankruptcy in 1950” (loc 1178).

On August 29, 2009, in San Diego, California, Mark Saylor and his wife, daughter, and brother-in-law were killed when their Lexus, on loan from a dealer who was servicing the family’s own vehicle, careened out of control at more than 100 mph, collided with another vehicle, and crashed into a ravine, setting the car ablaze. The family’s high-speed tragedy was recorded live for all to hear via a 911 call. Such a dramatic event understandably captured the nation’s attention—especially since Mark Saylor was a veteran California Highway Patrol officer. If a police officer couldn’t save his family from an out-of-control car, many hearing the news felt, no one could. If it could happen to them, it was impossible not to think, it could happen to me. (loc 1166)

Following this paragraph, Liker and Ogden do what the media should have done, namely, relay what the police report said: The cause of the accident was “a floor mat from the wrong vehicle, incorrectly installed in the Saylors’ car by the Lexus dealer who loaned it to the family” (loc 1191). Further, the report stated, another customer had used the same loaner car just days before and complained to the dealership’s receptionist that the accelerator pedal got stuck under the mat, causing the car to accelerate dangerously before he was able to free it (loc 1217).

The information Liker and Ogden relay here is far different from that delivered by the media, which for the most part claimed that the vehicle’s electronic throttle control was to blame for the “sudden unintended acceleration”—even though there has “never been a proven case of sudden unintended acceleration caused by a [vehicle’s electronic system] or a software defect in the electronics of a vehicle” (loc 1412). These false reports, coupled with claims that Toyota was slow to respond to complaints about similar problems, did much to damage Toyota’s reputation.

However, Liker and Ogden show that matters soon became worse. Since 2008, Toyota’s European operations had known that pedals in certain European-manufactured vehicles could be sticky at times, although they could not re-create the problem in the lab until mid-2009. A few months later, they learned that pedals in U.S.-made Toyotas behaved similarly on rare occasions, even though no related accidents had been reported in either region and were highly unlikely to occur as the pedals returned to normal when the driver applied the brakes.

When Toyota’s American executives first heard of this in late 2009, they argued that the company should “give a fully detailed public announcement as soon as possible.” However, according to Liker and Ogden, “the Japan-based executives, who did not consider the sticky pedals to be a safety defect, felt there was no urgent need to issue a recall or make technical details public” (loc 1680). That turned out to be a costly mistake. When Toyota finally decided to recall the pedals, the company appeared as if it had been covering up something and was not being completely honest with its customers. “With Toyota’s recall, the story that Toyota vehicles were dangerous and were killing people, while Toyota moved sluggishly and without concern for customer safety, seemed to be validated” (loc 1744).

After showing each of those claims against Toyota to be false, Liker and Ogden focus on how the company responded moving forward. The pace of the book picks up at this point, and valuable lessons on how to respond to crises come one after another. Readers also see how Toyota’s earlier investments during the recession—for example, its investment in a new computer system for its call center and in creating more highly skilled and loyal employees—helped the company to get through the recall period more smoothly. And readers will come to understand what kind of man Toyota’s new CEO, Akio Toyoda, is. A glimmer of this point can be seen as Toyoda describes his goal in communicating with the public and his customers:

I wanted to make people understand that Toyota is not perfect, [we] admit that sometimes we make mistakes, we have defects. But once we know there are defects or problems, we stop and everybody joins forces and we try to fix the problem. And . . . I decided I would never point fingers at somebody else. . . . We were committed to safety and quality and would take responsibility for fixing any problems. (loc 2107)

Under Toyoda’s leadership, the company was able to regain trust quickly and to further strengthen the loyalty and trust of employees.

Liker and Ogden relay a telling scene in which Toyota worker Steve Angelo ran into Akio Toyoda “in the Cincinnati airport just after he was appointed [CEO] in February 2010, when the recall crisis was raging and questions about Toyota’s electronics systems were still rampant.”

[Steve] took the opportunity to ask Toyoda and Inaba [another top executive] about the allegations of electronics problems directly. After reassuring him that there was no evidence of problems, [Steve] described how, “Akio Toyoda looked me in the face, and said, ‘But a key element of the Toyota Way, Steve, is genchi genbutsu. You can’t just take my word for it. You can’t just look at a report. You’ve got to go see and look for yourself.’ And then Inaba-san said, ‘Steve, take every rock and every stone, lift it up and see what’s under there. You’ve got to look for yourself and make your own judgment. Don’t just take our word.’ That’s the essence of genchi genbutsu.” (loc 2928)

Fans of Toyota may cheer as they read this, because it demonstrates that Toyota’s current leadership truly believes in the philosophy that led to the company’s success—even in the midst of a crisis and without cameras flashing.

Taking this idea seriously and going himself to see and understand what was happening in the United States led Toyoda and his team to implement a variety of changes regarding how information is relayed between different people at the company and between customers as well as how quickly that gets done.

But the specific actions the company took are likely to be of less interest to readers than the broader reasons for them that are detailed in Toyota Under Fire. Take one of the most important that Liker and Ogden mention:

A company that is simply trying to survive a crisis, to get back to the status quo ante, is never going to do better than that. A company that is dedicated to continuous improvement, to constantly moving the goalposts to a higher level of performance, will expect much more of its crisis response. In fact, the crisis becomes less of an obstacle to be overcome and more another tool in the arsenal of continuous improvement. With that perspective, it’s far more likely that a firm will do more than just endure a crisis. It will conquer crisis after crisis and emerge stronger from each. (loc 3283)

Such advice is useful for both organizations and individuals—and there is much more in Toyota Under Fire, too much even to indicate in a review. This usefulness more than compensates for a few dry moments in the middle of the book (such as when the authors discuss electronic throttle monitors).

In short, Liker and Ogden’s portrayal of a company “facing [its] problems with brutal honesty” and “using [a] crisis as an opportunity to push itself further toward its long term goals” is informative, inspiring, and full of practical ideas for anyone who has or could come under fire (loc 220).