More than 13 years ago, as I sat in the library of my business school, I read a book that would change my perspective forever.  The book was entitled The Machine That Changed The World. 

It was based on the Massachusetts Institute of Technology’s study on the future of the automobile, and offered a groundbreaking analysis of the worldwide move from mass production to lean production.  The Toyota motor company and its Production System were the stars of this movement, and Toyota would be admired by practitioners of Quality and excellence in production & operations for decades to come…

Cut to January 2010.  MotorTrend writes:

It started with a single, horrifying car crash in southern California last August. And this week, after two separate recalls covering 7.5 million vehicles, Toyota was forced to announce it was suspending the sale of eight of its best-selling vehicles, a move that will cost the company and its dealers a minimum of $54 million a day in lost sales revenue.

According to a recent AFP article:

There is a saying in Toyota’s hometown that when the auto giant sneezes, the whole city falls ill. But the symptoms of its recall crisis look set to be felt far beyond “Japan’s Detroit”… the group’s influence extends well beyond the city limits, and concerns are mounting across Asia’s biggest economy that Toyota’s massive global safety recalls will tarnish the brand image of Japan Inc as a whole.

WSJ talks about what it means for Toyota, specifically:

This has been a public-relations nightmare for Toyota, as its brand name has been synonymous with quality and reliability. Crisis management does not get any more woeful than this and the cost of this bungling so far – the initial $2 billion recall and the loss of 17% of share value since Jan. 21, when the gas-pedal recall was announced – is only a down payment on the final tally. The recall will surely expand, including cars produced in Japan. Lawsuits are being filed and an expensive settlement looms. And then there are the idle factories and empty showrooms to account for.

Ironically, in such cases, the “recalling of a product” – a response mechanism created to help restore faith in a company – itself becomes a fuel for the fire… The more the recall, the worse the brand reputation suffers.

As an expert in Six Sigma and Business Process Reengineering, I don’t know how to react!  As a customer who’s admired Toyota and its products for as long as I can remember, there is even more confusion.  I’d hate to be in the shoes of anyone who needs to explain to a bunch of management students or quality professionals why they should not be discarding every thing they’ve come to learn about JIT and TQM and the Toyota Production System in response to this crisis.  And let’s not forget, Quality is the only position Toyota occupies in the minds of customers across the globe!

My best guess is that the Toyota organization was tempted by the numbers race.  In running that race, it forgot, like many of the best organizations do, that the cultural context in which its Quality movement thrives may not have been transferred across the shores to a US workforce that was raised differently.  Whether I’m right in my analysis or not, I only hope Toyota is able to recover from this soon.

Update : 24th Feb 2010

An HBR article offers some insights into the potential causes behind the crisis:

 Toyota, under President Okuda, in 1998 set and pushed hard toward the target of doubling its global market share to 15%. It was understood by those in the industry that this meant surpassing GM as the global volume leader. Toyota has been remarkably successful in that quest. Yet, it is difficult for any organization which elevates quantity to be a number one goal to simultaneously hold on to a focus of providing the highest quality. Organizational incentives, both formal and informal, have a way of skewing to the primary target. For example, in this environment, quality mantras like Toyota’s “Customer First,” have a way of morphing from institutionalized commitments to empty slogans.

It is a testimony to the strength of the Toyota production system (for example team-based design) that more problems did not occur earlier. Yet, there are limits to how much stress you can subject even an admittedly powerful production system, before it starts to buckle under those pressures. Even the exalted Toyota production system could not handle hyper growth in volume, under conditions of growing complexity.

Read the entire piece, here.