The Last Word: ‘Big' Problems For Toyota

December 22, 2009
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Is bigger always better? It creates more revenue. It results in larger market share. It requires more people to be employed. On the surface, growing your company is a beneficial activity. However, increasing in size, manufacturing more products and garnering more market share does have its pitfalls, and often the shortcomings of rapid growth appear first in quality.

For Toyota Motor Corp., 2008 was a pivotal year. The company surpassed General Motors as the world’s largest carmaker, as measured by sales volume. However, coming on the heels of that accomplishment, 2009 showed Toyota that being the biggest comes with quality problems. Close to 4 million cars are being recalled for gas pedals that stick in floor mats, resulting in sudden acceleration. More than 100,000 Toyota Tundras are being recalled for rust problems that can jeopardize braking. Earlier in 2009, Toyota recalled nearly 100,000 Scions, Matrixes and Corollas for poor stopping in low temperatures.

It wasn’t too long ago that Toyota was number one in quality reputation. They have lost that position, according to an April 2009 study from U.S. Global Quality Research System, and are tied with Ford Motor Co., which is smaller in sales, but has steadily been improving car quality. According to a Sept. 30, 2009, article in BusinessWeek, “Toyota has had some recalls for engine sludge, bad ball joints, etc. Its own management has admitted that it grew too fast, especially in the United States, and took its eye off the ball in terms of quality amidst all that growth.”

According to Martin Zimmerman of the Los Angeles Times, “It’s a humbling comedown for an automaker that in the early years of this decade routinely had the fewest recalls among the six largest players in the U.S. auto market. In 2000, for example, Toyota recalled a mere 8,379 vehicles, according to government data.”

In 2005, the automaker had to recall more than 2.3 million vehicles. Among the problems were steering defects in certain pickup trucks and SUVs and a software glitch that could cause some Priuses to stall or shut down. In 2007, Toyota settled a class-action lawsuit filed by customers who complained of oil sludge buildup in their vehicles’ engines.

These quality defects are not publicly being attributed to any particular part of the Toyota process, but it seems that designers, purchasing agents and process engineers will be the first ones who will have to answer for some of these issues. Quality and manufacturing professionals also will be pushed for answers on how they let some of these defects pass.

A look at car manufacturer Ferrari would seem to further corroborate the idea that managed volume results in better quality. A recent program on The National Geographic Channel spotlighted the company’s facility in Maranello, Italy, focusing on the fabrication and assembly of the Ferrari 599. Defective parts simply are not allowed to proceed through the manufacturing process. From casting the aluminum engine block through the hand-stitched leather dashboard and trim, Ferrari pays excruciating detail to all aspects of production. The result is none of the problems the large manufacturers face with quality and recall issues.

Granted Ferrari is only selling about 250 of the 599s per year at a sticker price of $260,000, while Toyota sold nearly 9 million cars worldwide during 2008, with an average sticker price of more than 10 times less than a single 599. However, with Ferrari tolerating no defects in its products, the company can keep much of the nearly $65 million they generate on 599 sales alone each year. The tab in dollars and cents for Toyota is yet to be determined, but the damage to its reputation to quality could be more far reaching.

“There’s nothing else to the brand [Toyota],” said John Wolkonowicz, an analyst with consultant IHS Global Insight. “It’s not built on eye-catching design. It’s not built on a cutting-edge driving experience. It’s not built on performance. It’s built on quality and low-cost of ownership.”

Sometimes bigger isn’t always better.

Share your thoughts with me at williamst@bnpmedia.com, or share your thoughts with other Quality Magazine readers at the Quality Magazine LinkedIn Group page at http://www.linkedin.com/groups?gid=1876808.

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