Posted on February 10, 2010 by Dennis Snow
I hit the "Publish" button too soon on yesterday's post, Toyota Recall - The Brand Challenge. Today's news reports that Toyota executives admit they knew about the gas-pedal problem for over a year before taking action. In fact, evidence about unexpected acceleration has been mounting for six years. The firestorm has just begun.
Toyota completely blew Step 1 of how to handle company screw ups:
1. Admit to the mistake quickly
2. Accept responsibility
4. Say what you're going to do to fix the problem
5. Explain what you'll do so the problem doesn't happen again
(For details of each step, link to Toyota Recall - The Brand Challenge)
While Steps 2-5 are in motion, it appears Toyota failed miserably at Step 1: admitting to the mistake quickly. So the perception will be that they took action only because they got caught. It would be one thing if the company didn't know about the problem until the National Highway Traffic Safety Administration notified them, and they immediately took action. But that's not what happened. They knew.
Toyota's credibility is now shot - certainly in the short-run and likely in the long-run. In fact, the company's recall of 437,000 hybrids because of problematic brake systems, announced although the recalled cars "meet safety standards," is being met with skepticism in light of the sticky gas-pedal debacle. Customers are wondering if the recall came quickly only because of increased scrutiny. What could've been a feather in Toyota's cap for quickly admitting the problem is now another dagger in their reputation for quality. Projected hard costs to Toyota for the recall repairs is projected to be in the $billions. The cost to the brand is unknown, but will likely dwarf the cost of repairs.
I've said many times that a company's brand is fragile, built over years and even decades. Trust is the foundation of successful brands. When trust is knowingly violated, the brand (so carefully built) is compromised. Winning back trust is a long, long road.