Toyota: A Battered Giant

Last Friday in a hastily arranged press conference, Akio Toyoda, Toyota’s president and grandson of the company’s founder, made his first formal public apology to consumers, admitting, “We are in a crisis.”

The car company’s image meltdown began on Jan. 21 when it announced a global recall of certain models because of accelerator problems. At the time, the company did little PR damage control while the news media and consumers online set off safety alarms. Competitors like General Motors, Chrysler and Hyundai, meanwhile, were quick to offer incentives to customers trading in certain Toyota models.

Toyota’s problems were then heightened just before Toyoda’s apology, when consumers learned of possible brake problems with 2010 models of the company’s Prius, the world’s best-selling gas-electric hybrid.

Given the traditional strength of Toyota’s brand image and customer loyalty, few think the Japanese automaker is irreparably wounded. However, as a result of its hesitancy to publicly address its issues, say some PR experts, the company has yet to gain control of the situation and urgently needs to take the upper hand in a situation in which others have so far defined the perceived severity of its problems.

“The response so far has not been in keeping with a brand of Toyota’s stature,” said Harlan Loeb, evp, Edelman’s U.S. Crisis and Issues Management practice. “A public apology is a step in the right direction, but there’s been no follow-through, no substantial step that would give Toyota’s critical stakeholders — customers, dealers, vendors — evidence that Toyota is committed to a specific solution or direction going forward. While it’s impossible to predict how long this will go on or the reach of consequences, the trust and confidence of consumers have been seriously mortgaged.”

As a case study in successful crisis management, Loeb cites the 2000 recall of defective Firestone tires on popular Ford models like the Explorer, which had resulted in deadly crashes. Within days of the news, Ford’s then-CEO Jacques Nasser appeared in newspaper and TV ads reassuring customers and offering his personal guarantee that the problem was being resolved. “Ford got their CEO out there quickly and consistently, and fully engaged the company with consumers and their concerns,” said Loeb.

While Toyota Motor Sales USA addressed the Jan. 21 recall on its Web site, it wasn’t until Jan. 31 that the company spoke more directly to consumers with an ad in major market newspapers. On Feb. 1, a video featuring an apology from U.S. head Jim Lentz was posted on YouTube and later that day he began his media tour on news programs and participated in a Twitter Q&A session.

Last week brought more bad news with U.S. Transportation Secretary Ray LaHood telling Americans to “stop driving” their recalled Toyotas (he later withdrew that instruction) and news of a U.S. government investigation into Prius. By week’s end, Toyota posted a new Lentz video where he talked more specifically about the recall and a repair demonstration was shown and Digg announced he would answer questions sent in to the social news Web site last Friday.

Doug Frisbie, national marketing manager at Toyota USA, said that within a few hours well over 500 questions were posted. “It’s important to fully understand the issues” when dealing with social media, said Frisbie, in addressing why it took some time to respond online. “Our top priorities are, No. 1, to listen to consumers and No. 2, getting them the information they need.”

Celeste Migliore, a Toyota U.S. rep, said the company is “assessing the situation daily,”  but declined to give specifics. Advertising for Toyota’s new 2011 model of the Sienna, which is not part of the recall, will launch on Feb. 12 as planned and will not be altered, she said.

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