If you have followed my blogs, you will recall that about a month ago I praised Toyota for recalling all of their cars and indicated that they were demonstrating a commitment to the customer by putting their brand and reputation ahead of short-term profits. It turns out that I may have been wrong. We are seeing inexorable damage to a once great brand and it seems to be their short-term focus that killed it.
The hearings in Washington with the CEO of Toyota USA were awful to watch. Toyota is not up to the challenge in dealing with this crisis. Their CEO seemed clueless, like a salesman trying to explain what happened at headquarters--but, that is exactly what is happening. Jim Lentz is a super salesman, a country representative, not a real CEO. Decisions at Toyota seem to be made in Toyota City, Japan. It is now becoming public that the management style of Mr. Toyoda, the CEO, was not conducive to open discussion and contradiction. He is, after all, a direct descendant of the founder and is referred to as "the Prince". We will see what type of person he is when he faces the furor of the US Congress that is both angry and grand-standing over this, egged on not only by scared and angry Toyota owners, but also I'm sure by plaintiffs attorneys, Detroit car makers, and their own reelections in 2010. It will be a circus.
It now appears that Toyota may have focused more on becoming the #1 car maker in the world than maintaining their quality and reliability. They now appear to have known about this situation far longer than they might have wanted to admit. They bragged about making a deal with the US government that saved them $100 million in recalls.
Now, this is my view of what they face from a brand perspective. Draw a perceptual map of the car industry before this crisis, one with two axes: price and quality. Toyota was in virtually everyone's upper right hand quadrant--the best perceived value for the money in terms of quality. Now, draw a second perceptual map and plot Toyota today. They are now judged as being worse than the other car makers. I'm not certain that anyone will be able to claim the quality and reliability differentiation that Toyota once could claim. Quality and reliability have no longer become differentiators, but are now points of parity. Ford has been improving on this perceptual map. I do not believe that GM has moved, but now Toyota is moving back toward them. They have taken a great brand, highly distinguished, and relegated it to the "all others" category--commodity status meaning that price will now become more of a factor than it ever was before.
Pedro, one of the followers of this blog, pointed out that Toyota resale values are already suffering. Who wants to buy a Toyota right now? Not many. How many want to get rid of their Toyota? A lot. The math is not good. When someone considers a car--new or used--they will consider alternatives. Toyota will be out of the alternatives list for at least the next cycle and it will be difficult for them to convince many buyers to consider them again. Loyal Toyota buyers are questioning their perceptions of the company and having their perceptions questioned by others.
That is how bad this is becoming. We may be witnessing the crippling of a once great brand. They may not die, but they could if they do not right the ship quickly. We may see Toyota need to pull back considerably from the US market for a while to regain its confidence and quality before it can come back. This happened to Audi when it had its acceleration problems in the 1990s. They handled the situation terribly, blaming drivers and not accepting responsibility. They virtually withdrew from the US for many years and then reentered once the "dust had settled". I was considering a Lexus next year when the lease on my current car expires. I will not longer be looking at Lexus.
Toyota has created a lot of "dust". It will take a long time for it to settle. I cannot believe how wrong I was about the company in my original assessment. It seems that the company may have "overshot its own headlights", a very dangerous situation when a company becomes so focused on success and its own hype that they keep moving quickly without refocusing the organizational capabilities that made them great and are needed to keep them great. They were a company of substance; they became a company of hype.
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