Toyota Case Study: A Strong Reputation Is Worth the Expense

MEGAWEB (Showroom of Toyota)

We previously highlighted how Toyota utilized innovative social media strategies to repair its reputation following recalls in 2009 and 2010, but more problems, including recalls in both October and November of this past year, have threatened to undo that progress. Toyota attributed these recent recalls to “its increased diligence toward quality and safety” and “fought vigorously in recent years to defend itself against claims that its vehicles were prone to speeding out of control with no warning,” according to Forbes.

The Value of Trust

Despite the historic size of the recent settlement—and the fact that the acceleration issues have not been scientifically confirmed—Toyota appears to have decided that the benefits to its reputation outweigh the cost. As the Wall Street Journal points out, the settlement “includes no admission of fault or unlawful conduct by Toyota and allows the company to avoid the risks associated with battling a lengthy trial.”

By offering support and compensation for both current and former owners of affected vehicles, Toyota is seeking to win back the trust of some of its most important customers. “This settlement is a nod to loyal Toyota owners whose car resale values were hurt by the unintended acceleration issue and the intense publicity that followed,” auto industry analyst Michelle Krebs told Forbes. Additionally, allocating $30 million “to finance automotive safety research related to driver behavior and unintended acceleration” allows Toyota to underscore its broader dedication to safety. “We concluded that turning the page on this legacy legal issue through the positive steps we are taking is in the best interests of the company, our employees, our dealers and, most of all, our customers,” said Toyota’s Christopher P. Reynolds. “This agreement marks a significant step forward for our company, one that will enable us to put more of our energy, time and resources into Toyota’s central focus: making the best vehicles we can for our customers and doing everything we can to meet their needs.”

An Expensive Solution

With its stock on the rise and the automaker set to once again become “the world’s biggest car maker,” Toyota appears to be faring quite well. “Toyota’s outstanding performance this year is proof that consumer sentiment for the company’s products has already recovered to a degree as if nothing ever happened,” TrueCar.com’s Jesse Toprak told Forbes. But as Pepperdine University School of Law professor Richard Cupp warns in a Reuters article, “lawsuits like these could become increasingly common, even where there is not provable physical injury on large scale.” On Business Insider USC Marshall School of Business marketing professor Ira Kalb offers some valuable advice, pointing out how better crisis management and communication could have lessened Toyota’s woes. “To keep the top spot,” Kalb says, “making a better car is not enough.”

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