Faces In The News
Toyota's Watanabe Downshifts A Gear
Chris Noon, 08.25.06, 11:45 AM ET
How many fiascos does it take to ruin a reputation?
Toyota Motor's president Katsuaki Watanabe, who admitted Friday that the automaker's mission to improve quality control and reduce recalls could delay some of its models, is discovering that rapid expansion can be dangerous.
Watanabe, who denied that there was a decision to delay models across the board, saying that the development of individual vehicles would be decided case-by-case, is said to be considering slowing the development of some new models by as much as half a year because of quality problems.
The Japanese automaker's sterling reputation for manufacturing safe and reliable cars, the cornerstone of its success over the past decade, may have been compromised by a litany of recalls. In May 2005, Toyota issued a recall to replace faulty mechanical components that will end up involving around one million cars worldwide, over half of them in Japan. Later the company announced the recall of some 400,000 sport-utility vehicles (SUVs) in the U.S. More recently, Toyota said that it will recall over 20,000 Crown sedans made in China because of defective rubber strips that seal the windshields.
"Toyota's reputation for mechanical reliability and component quality is second to none and it is unusual for the company to announce such a wide-ranging, albeit minor, recall," writes Global Insight analyst Thomas Ryard.
"It will take an awful lot to dent that reputation," Ryard's colleague, Paul Newton, tells Forbes.com. "But a classic case in point is Mercedes. They had an excellent reputation and they successfully managed to ruin that."
Mercedes-Benz is a division of DaimlerChrysler.
There is also a sense that Toyota is a victim of its own success.
"Recalls are also rising because carmakers are introducing more new vehicle models than at any time in the past decade, and almost all carmakers have accelerated new product programs and are seeking to enter almost every product segment to gain market shares," Ryard points out.
"At group level, Toyota sales have increased 60% over the past ten years to reach almost 8 million units in 2005."
Speaking in Tokyo, Watanabe denied the recalls occurred because Toyota rushed the development of some models. "I feel we are making progress," Watanabe told reporters. He also said he did not know of any specific models that could be delayed by the changes.
His decision to slow product launch cycles may be prudent. It is an indication that Toyota wishes to check its breathless global expansion in order to maintain sustainable growth. Watanabe recently said that "the world-class quality that we've built is our lifeline. There will be no growth without an improvement in quality. This is the biggest task that this management team must undertake."