A Case of Toyota: Determining the Actions of Responsible Leaders At the end of 2009, Toyota was a clear and differentiated leader in the auto industry. Yet, within months, it had to recall over 8 million vehicles worldwide to address issues of “unintended acceleration,” suspend production of some of its most popular models, testify before Congress, and face the national limelight. Analysts estimated that costs from its recall crisis would top $5 billion and sales slid by 16 percent. There were 3 separate but related recalls of automobiles by Toyota Motor Corporation that occurred at the end of 2009 and the start of 2010—Camry & Corolla. Due to that incident, as a responsible leader, Mr. Toyoda initiated the recalls, the first two with the assistance of the U.S. National Highway Traffic Safety Administration (NHTSA), after receiving numerous reports that several vehicles experienced unintended acceleration. As of January 28, 2010, Toyota had announced recalls of approximately 5.2 million vehicles for the pedal entrapment/floor mat problem, and an additional 2.3 million vehicles for the accelerator pedal problem. On a global scale, the total number of cars recalled by Toyota stood at 9 million. Sales of multiple recalled models were suspended for several weeks as a result of the accelerator pedal recall, with the vehicles awaiting replacement parts. As of January 2010, 21 deaths were alleged due to the pedal problem since 2000, but following the January 28 recall, additional NHTSA complaints brought the alleged total to 37. As a result of the ‘car-recall,’ Toyota experienced several key impacts—1) economics–i.e. undergo recession, sales decreasing, the low exchange rate from yen to US dollars, the resale value of used cars will be affected, 2) manufacturer changes –form a new global quality committee–against their philosophy because the recall was not due to factory errors or quality control, but design issue and 3)competitor reactions–One day after Toyota’s announced sale suspension General Motors began offering a US$1,000 cash rebate targeted toward Toyota owners. By February 1, 2010, Ford, Chrysler and Hyundai were offering similar incentives. Media coverage and criticism–The New York Times, Washington Post, USA Today, and others) as well as network television (ABC, CBS, NBC, and others), the Toyota recalls were the #5 most reported story on U.S. News for the week of January 25–31, 2010, at 4% of all coverage. Consequently, the key question is: ‘what happened to the public image of Toyota?’ They also faced litigation and settlement with the US government. Toyota and the US Justice Department had reached an agreement- Toyota would pay a US$1.2 billion criminal penalty in exchange for deferred prosecution of wire fraud charges & independent monitoring of its safety procedures. 1. Considering the different actions taken by Mr. Toyoda in the above case, briefly discuss and evaluate TWO (2) impacts/consequences of his actions on different stakeholders. (8 marks) 2. Based on ethical dimensions of leadership, discuss THREE (3) recommendations in relation to the following question: “As an accountable and responsible leader, what can Mr. Toyoda do to rectify the ‘recall-car’ issues faced?” (12 marks)
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