What Toyota learned from its recall crisis

Toyota's Jim Lentz: "You have to be able to listen to your customers, not just hear them."

UPDATED: 5/26/14 9:50 am ET - clarification

Update clarifies that plaintiffs attorneys in the multi-district litigation class-action suit haven’t been able to substantiate accusations that engine software glitches could trigger uncontrollable acceleration.

LOS ANGELES -- Four years ago, Toyota Motor Corp. found itself in the same position General Motors is now -- hauled before Congress for a public flogging over defects in its cars and at the mercy of regulators and plaintiff attorneys who smelled blood.

Might any of the lessons Toyota learned from its unintended acceleration crisis help GM?

In an exclusive interview with Automotive News last week, Toyota North America CEO Jim Lentz spoke to the best practices that are now in place at the Japanese automaker following its recall crisis -- and that might help GM navigate its own crisis.

While declining to comment directly on GM's circumstances, Lentz said Toyota's recall crisis taught the automaker to be "much more transparent, both inside and outside the company."

"You have to be able to listen to your customers, not just hear them, but listen to what they're telling you -- and be quick about it," Lentz said. "In our case, it is all about transparency and speed and listening."

Already, it appears that GM is following Toyota's can't-be-too-careful credo in recalling vehicles for issues that previously may have warranted a mere dealer service bulletin. So far this year, GM has recalled 13.8 million vehicles in the United States and 15.8 million worldwide. From late 2009 through 2010, at the peak of its crisis, Toyota recalled 16 million vehicles worldwide for various faults.

"Everybody has a much better antenna today," Lentz said. "We have a better ability to dig down and define the issues before they become issues. That's why there are more recalls. Some of them might have happened anyway, but through analytics, we can take data and connect the dots. We are recalling cars earlier because we're connecting the dots faster."

Although Toyota eventually recalled more than 6 million vehicles to make changes to its floor mats and sticky accelerator pedals, the slowness of its response resulted in a $1.2 billion settlement with the Justice Department and three fines totaling nearly $50 million from the National Highway Traffic Safety Administration.

The agencies accused Toyota of burying knowledge of safety defects. As part of a deferred prosecution settlement with the Justice Department, Toyota admitted "that it misled U.S. consumers by concealing and making deceptive statements about two safety issues affecting its vehicles, each of which caused a type of unintended acceleration."

While Toyota admitted to faults with floor mats and pedals, it strongly denies accusations that engine software glitches could trigger uncontrollable acceleration -- claims that plaintiff attorneys haven't been able to substantiate in the multi-district litigation class-action suit.

Although the recall crisis wasn't cited as a factor in Toyota's decision announced last month to move its headquarters, there is a connection, Lentz said. The consolidation of sales, marketing, manufacturing and engineering executive operations at one location will speed interdepartmental communication so that crises like 2010 won't happen in the future, Lentz said.

"Your speed has to improve" with customers and regulators, he said. "What we're doing today versus back then ... we've shown tremendous improvements. We're listening more closely to understand what's going on, and not just spending time on technical issues."

You can reach Mark Rechtin at mrechtin@crain.com -- Follow Mark on Twitter: @markrechtin



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