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An investigative research and analysis to principles of responsible commerce

An investigative research and analysis to principles of responsible commerce

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  • 1.      TOYOTA VEHICLES RECALL SAGA      AN INVESTIGATIVE   RESEARCH AND ANALYSIS   TO  PRINCIPLES OF RESPONSIBLE COMMERCE        November 2010 
  • 2. Table of Contents 1. Introduction 1 2. Impact on Individual, Organization and Society 2 3. Review of Relevant Theories 3.1 Capitalism 3 3.2 Corporate Social Responsibility 4 4. Applications of Relevant Theories 4.1 Capitalism 5 4.2 Corporate Social Responsibility 6 5. Conclusion 7 6. Recommendations 8================================================================= 7. List of References 10 8. Appendix A: Company Profile 11 9. Appendix B: Public and Media Information 17
  • 3. IntroductionAuthorization, Purpose and Scope of ReportOur engagement is one that is to further gather information for Toyota Motor Company onhow this episode affected the society on three levels, namely Individual, Organization andSociety.Our chief source of information is primarily from official online media pressrooms andportals. We will employ these findings, business ethnical concepts and models to betterunderstand the predicament, as well as how can such incidents be avoided, or prevent fromre-occurrence.BackgroundToyota Motor Corporation recalls started at the end of 2009, millions of automobiles aroundthe world were involved due to safety concerns over certain models of Toyota automobilesbeing potentially prone to uncontrollable acceleration.Toyota initiated a total of 3 high profile recalls. Two of which were assisted by the UnitedStates National Highway Traffic Safety Administration (NHTSA). And Toyota was chargedwith a penalty totaling US$16.4 million by NHTSA. (Crawley 2010)The first car recall that took place on October 2009 was to prevent and rectify a suspectedfault of pedal. It took a fatal accident, struck on 28th August 2009 in San Diego to discoverthat there were no retaining clips secured to the mat and the brake hardware requires heavybraking to be consistent with a stuck accelerator. An NHTSA report stated that there was notonly any relieving obstruction allowance on the accelerator pedal hinge but also a shortage ofthe emergency activation in the dashboard for automated pedal release. Further NHSTAinvestigation revealed that that the accelerator pedal was stuck on the floor mat and theelasticity of the accelerator pedal spring was found to be in good operative condition. (Kim &Bailey 2010)A number of car-crash cases were later diagnosed that the cause was not the floor matincursion but a possibility of unintentional acceleration due to mechanical ‘sticking’ of thepedal. As such, Toyota realized then that there was a need for a second recall and it tookplace on 21st January 2010. (Kim & Bailey 2010)Prius, the latest car model and other hybrid cars, were then found to have braking problems.When driving on a slow and steady pace on a rough or slick road surfaces, customerscomplained that they always have an inconsistent brake feeling while the anti lock brakingsystem is activated. In normal operation circumstances, the system would engage anddisengage swiftly in accordance to the system sensors and tire slippage. This third and finalrecall to date happened on the 9th February 2010. (Kim & Bailey 2010) 1
  • 4. Impact on Individual, Organization and SocietyIndividualBoth current and prospective Toyota automobiles are affected. Not only for the car ownersand their passengers, but also the general public, safety is compromised due to the uninitiatedacceleration. Owners who had models that were affected by the accelerator and brake willhave a hard time trying to sell off their cars because many dealers will know that these carsare difficult to sell as no one is willing to pay for something defective, or even suspected tobe defective. Owners will feel unjustified for the high price they had to pay to own the carinitially, now grossly depreciated. Moreover, they had spent both time and money on therepair, service and maintenance of the vehicles. For the owners who had accidents due to thefaults, they may have suffered bodily hurt, as well as penalized for violating traffic laws.More importantly for Toyota, current as well as prospective car owners will see their faithand trust in Toyota’s quality, diminished. They will not want to put their lives and jeopardizelives of others.OrganizationLong known for their quality assurance and reliability of their cars, Toyota’s reputation isgreatly affected. The public announcement of the recalls greatly affected sales and profitduring that period. Large expense of effort, time and money had been exercised to have theaffected models to be recalled and parts replaced. This in turn affected the value of Toyotashares as investors lost confidence.CTS Corporation is engaged by Toyota to manufacture and supply their pedals. AlthoughCTS manufactured the pedals in accordance to Toyota’s specifications and had officiallyannounced that they refused to be blamed for the ‘sticking’ pedal, CTS reputation isadversely affected. Contracts were lost or put on hold with other automobile companies likeFord Motors. (Green & Ramsey, 2010)SocietyInvestigations done by NHTSA on Toyota automobiles made known that the ‘sticking’ pedalhad caused the unintended acceleration. Public unrest was felt for the fear of traffic accidents.Everyone deserves the right to live well and safety for everyone should not be compromised.There was consensus and also a sense of economic instability in the automobile as the publiccommunity fears that when carmakers’ quality is compromised, safety becomes negotiated. 2
  • 5. Review of Relevant TheoriesCapitalismCapitalism can be described as an economic system in which the means of production arelargely in private hands, and the main incentive of economic activity is the accumulation ofprofits. (Schaefer, 2008, p193)Capitalism patterns, in a particular way, economic activities in a society. It can be definedalong two primary aspects - its class relations, and the mechanisms of economic coordinationas its central plan. (Wood, 1996. p250)Class relations refer to the social relationships through which power is exercised over the useof production means. In capitalism, human laboring activity is provided by workers who donot own the means of production and who, in order to acquire an income, are hired bycapitalist firms to operate the means of production. The fundamental class relation ofcapitalism therefore is the social relationship of capitalists and workers. (Wright, 2000)Economic coordination in capitalism is accomplished primarily through mechanisms ofdecentralized voluntary exchange by privately contracting parties within a free market –through which the prices and quantities of the things produced and transacted are determined.The famous metaphor of the invisible hand captures the basic idea, that each individual andfirm, simply pursuing their own private interests, and uncoordinatedly engages in bargainingexchanges with other individuals and firms. (Wright 2010, p22-23)The combination of these two features of capitalism – class relations defined by privateownership and property-less workers, and coordination organized through decentralizedmarket exchanges – generates the characteristic competitive drive for profits and capitalaccumulation of capitalist firms. Each firm, in order to survive over time, must competesuccessfully with other firms. Firms that innovate, lower their cost of production, andincrease their productivity can undercut their rivals and thus expand at the expense of theother firms. Each firms faces these competitive pressures, and thus in general all firms areforced to innovate in order to survive. The resulting relentless drive for profits generates thestriking dynamism of capitalism relative to all earlier forms of economic organization.(Wright 2010, p22-23) 3
  • 6. Corporate Social ResponsibilityThe entirety of CSR can be discerned from the three words contained within its title phrase:‘corporate,’ ‘social,’ and ‘responsibility.’ Therefore, in broad terms, CSR covers theresponsibilities corporations (or other for-profit organizations) have to the societies withinwhich they are based and operate. (Werther & Chandler 2010, p5)More specifically and contextually, CSR involves any business organization identifying itsstakeholder groups and incorporating their needs and values within the strategic and decision-making process.CSR is employed as a mean to analyze the inter-dependent relationships that exist betweenbusinesses and economic systems, and the communities within which they are based. CSR isan instrument to discuss the extent of any obligations a business has to its immediate society;a way of proposing policy ideas on how those obligations can be met; as well as a tool bywhich the benefits to a business for meeting those obligations can be identified. (Asongu2007, p20)Understanding that profits are necessary for any business entity to exist, businesses rely onthe society within which they operate and could not exist or prosper in isolation. They needthe infrastructure that society provides, its source of employees, not to mention its consumerbase, and in cases, natural resources. (Werther & Chandler 2010, p94)Werther & Chandler (2010, p94) noted that CSR is the recognition of that inter-dependenceand a instrument of delivering on that obligation, to the mutual benefit of businesses and thesocieties within which they are operate in.CSR advocates point out that no organization exists in isolation. They believe that businesses,without exception, have an obligation to contribute to the community, on which they rely soheavily. (Werther & Chandler 2010, p94) 4
  • 7. Applications of Relevant TheoriesCapitalismA pivotal aspect of the pursuit of profits by capitalist firms centers on laboring activity ofemployees. Capitalist firms hire workers to use the means of production to produce the goodsand services, which the capitalist firm then sells. The difference between the total costs ofproducing those goods and services and the price at which they are sold constitute the profitsof the firm. In order to maximize profits, such firms face a double problem with respect tolabor: on the one hand, hiring labor is a cost that takes the form of wages and capitalists wantto keep these costs (like all costs of production) as low as possible. The lower the wage costs,the higher the profits, all other things being equal. On the other hand, capitalists want workersto work as hard and diligently as possible, since the more effort workers expend, the morewill be produced at a given level of wages. The more that is produced for a given level ofcosts, the higher the profits. The economic interest of capitalists – the profits which theycommand – therefore depends upon extracting as much labor effort from workers at as littlecost as possible.Procuring parts of lower quality, and the stress on low cost is as intense as it has ever beenfelt in Toyota. The manifestation of these capitalistic pressures had reared its ugly head. Withtrillion yen worth of internal reserves, Toyota has been paying its worker unfair wages,replaced full-time regular workers with contingent labor under the pretext of internationalcompetition. It has exported low-cost vehicles abroad as a result of its all-out cost-cuttingeffort in order to increase profits. Toyota has not performed its due diligence in ensuring thesafety of its products prior to launching and has continued to produce defective vehicles,endangering lives. The manifestation of capitalistic pressures has reared its ugly head inToyota’s relentless pursuit of the position as the world’s number one carmaker. 5
  • 8. Corporate Social ResponsibilityDespite the sluggishness in reaction, it is important that Toyota had performed the recall andsuspended sales of models suspected of the publicized defect. Toyota owed both the carowners, as well as the general public, a responsibility of safety and order.That being said, Toyota had deemed undecided on releasing their findings from theinvestigations. There had been inconsistent speculation on the cause of sudden acceleration.Specifics of recalls were not made very explicitly clear, and investigation has beenunrealistically lengthy, if not drag-like.It is shocking to know that Toyota is aware of the accelerator issue, long before the recallsand announcements. Toyota has enjoyed a longstanding reputation not only for businessprowess but also for social responsibility. This revelation made it all the more scandalous.Toyota, of course, had fostered this image. Toyota has sought harmony between people,society and the global environment, as well as the sustainable development of society.However, it took the escalating number of complains and car crash fatalities to trigger aresponse action from Toyota. After the announcement was made, closet complains flooded. Itreflected on the level of severity of the issue, not made known until the defect became public.Toyota’s more laudable stances on sustainability is further compounded by its corporatepolicies to have successfully kept unions out of its heavily-subsidized American plants andhas taken advantage of contingent works to keep down costs in those operations. This currentsafety scandal shows Toyota puts its business interest ahead of the safety of its customers andother with whom they share the roads. 6
  • 9. ConclusionThe Toyota recall had impacted individuals, especially current owners, who will feel injusticefor the risk they had been put under, and to a lesser extent, for economic reasons due to repairand re-sale.Both Toyota and their business associates, as organizations took a heavy blow from thisincident. They saw their reputation tarnished, sales revenue and value declined.It is too, apparent that the society is enraged for Toyota’s indifference and lack of prudence inensuring road safety of its vehicles, for the public.Toyota found itself under great capitalistic stress. There were sales to be made, costs to becut, profits to be earned and social stratum to be pursued. It is no coincidence that it tookdisgruntled workers, as well as sub-graded parts to manifest this ugly facet of cost-cuttingmeasures for profit-maximizing. This analysis made recommendation is the following chapterto underline the paramount importance of both human resource and product costmanagement.Toyota has long been regarded as a company with commendable record of demonstratingCSR. In this context, Toyota has failed to be forthright and decisive to react promptly toresolve the problem. In this delayed response, lives of many continued to be at risk. It isalarming to know that Toyota found safety became an entity to be negotiated for bettermonetary returns. This tactlessness and disregard for social responsibility is inexcusable.The CSR concept must be re-educated in Toyota, as proposed in the next chapter. 7
  • 10. RecommendationsTo regain public trust in Toyotas’ products, the rebuilding should start from the internal ofToyota – re-fostering quality-first culture, revamping corporate policies as well as reflectingon its social responsibilities amidst capitalistic stress. Only then, the public can gradually bewon over and confidence recovered. And when this happens, a win-win situation for both theToyota stakeholders and the rest of general community can be achieved. 1. Promote quality first culture It is imperative to instill into all employees what the company values. Run campaigns and exhibitions to advocate the emphasis on quality. If they believe in it, they will perform in accordance. 2. Avoid unnecessary downsizing intrinsically to cut cost. Over-working of employees may cause them to compromise on quality in production/engineering in order to meet up with the work demands. Health issues may arise due to insufficient rest for the employees. Downsizing should be moderated to avoid overburdening a reduced workforce. Employees will be more focused at work and desired performance can be better achieved. 3. Appropriate adjustment in employee’s remuneration for motivation Low wages for high volume of work will cause resentment. Resentment in turn will lead to indifference. Employees should be encouraged to be vigilant to report and feedback suspicion of faults. Pay adjustments should be based on the quality of work produced, to motivate. 4. Providing training to enhance work performance To guarantee all employees are equipped with the essential soft skills and knowledge for their scope of work, relevant and effective training programs are to be in place. With improved knowledge and skills, engineering and production can then be carried out at an advanced professional level. 8
  • 11. 5. Treat all employees equally to promote fairness and loyalty Employees from the developing countries and developed countries are to be paid equally accordingly to their knowledge and skills. Exploitation should not be present as resentment to the company will grow and therefore quality products and services will not be obtained.6. Employ specialists to improvise quality standards Specialists are able to identify as well as improve production and engineering with their knowledge, experience and skill. Quality and safety can be guaranteed with their expertise and supervision.7. Avoid purchasing low quality parts to intensify profits Quality should not be compromised at the expense of customers’ safety. Customers’ satisfaction will promote long term sales interest and profits.8. Create online portal for customer to reinforce customer service This is to ensure fast acknowledgement and reaction to customers’ problems and provision of solution to their queries. This will provide a centralized hub to enhance information flow and knowledge sharing. 9
  • 12. List of ReferencesCrawley, J 2010, ‘UPDATE 1-Toyota Motor pays $16.4 million U.S. safety fine’, Reuters, 18May, accessed 21/10/2010, http://www.reuters.com/article/idUSN1813964220100518Kim, SY & Bailey D 2010, ‘Timeline: Toyota from rise to recall crisis, hearings’, Reuters, 22February, accessed 25/10/2010, http://www.reuters.com/article/idUSTRE61M0IT20100223Green, J & Ramsey, M 2010, ‘Toyota Pedal Maker CTS in Spotlight as Recalls Widen(Update3)’, Bloomberg Businessweek, 01 February, accessed 28/10/2010,http://www.businessweek.com/news/2010-02-01/toyota-pedal-maker-cts-thrust-into-spotlight-as-recalls-widen.htmlSchaefer, RT 2008, Sociology: A Brief Introduction, 4th edn, McGraw-HillWood, JC 1996, Karl Marx’s economics: Critical Assessment, RoutledgeWright, EO 1997, Class Counts: Comparative studies in class analysis, CambridgeUniversity PressWright, EO 2010, Envisioning Real Utopias, Verso BooksWerther, WB & Chandler, D 2010, Strategic Corporate Social Responsibility: Stakeholdersin a Global Environment, Sage Publications.Asongu, JJ 2007, Strategic Corporate Social Responsibility in Practice, GreenviewPublishing 10
  • 13. Appendix A: Company Profile | WORLDWIDE | Top Page > Company > History of Toyota 1867-1939 Toyota’s Business Activities 1940-1949 Information on Toyota’s businesses including the 1950-1959 automobile business. 1960-1969 1970-1979 Questions that Toyota 1980-1989 regularly receives from The AA Sedan Koromo Plant Older building of 1990-1999 customers have been (currently Honsha Plant) Toyota Head Office organized into an FAQ. 2000- * Detailed information can be found by selecting the topics listed in the left-side menu. 1867 Birth of Sakichi Toyoda 1924 Sakichi Toyoda invents Toyoda Model G Automatic Loom 1929 Automatic-loom patent is sold to a British company 1930 Kiichiro Toyoda begins research on small gasoline-powered engine 1933 Automobile Department is established at Toyoda Automatic Loom Works, Ltd. 1935 The Toyoda precepts are compiled 1936 The AA Sedan is completed 1937 Toyota Motor Co., Ltd. is established 1938 Honsha Plant begins production 1950 Company faces a financial crisis; Toyota Motor Sales Co., Ltd. is established 1951 Suggestion System is begun 1955 The Toyopet Crown, Toyopet Master and Crown Deluxe are launched 1957 The first prototypes of the Crown are exported to the USA Toyota Motor Sales U.S.A., Inc. is established 1959 Motomachi Plant begins production 1962 Joint Declaration of Labor and Management is signed 1965 Toyota wins the Deming Application Prize for quality control 1966 The Corolla is launched Business tie-up with Hino Motors Ltd. begins 1967 Business tie-up with Daihatsu Motor Co., Ltd. begins 1974 Toyota Foundation is established 1975 The prefabricated housing business begins 1982 Toyota Motor Co., Ltd. and Toyota Motor Sales Co., Ltd. are merged into Toyota Motor Corporation 1984 Joint venture with GM (NUMMI) begins production in the USA 1988 Toyota Motor Manufacturing, USA, Inc. (present TMMK) begins production 1989 The Lexus brand is launched in the USA 1992 Toyota Motor Manufacturing (UK) Ltd. begins production 1997 The Prius is launched as the world first mass-produced hybrid car 1999 Cumulative domestic production reaches 100 million vehicles 2000 Sichuan Toyota Motor Co., Ltd. begins production in China 2001 Toyota Motor Manufacturing France S.A.S. begins production in France 2002 Toyota enters Formula One World Championship Tianjin Toyota Motor Co., Ltd. begins production in China 2004 The Toyota Partner Robot is publicly unveiled 2005 The Lexus brand is introduced in Japan 2008 Worldwide Prius sales top 1-million mark Copyright/Terms of use | Privacy Policy | FAQ | Sitemap 11http://www2.toyota.co.jp/en/history/index.html 2010/11/3
  • 14. | WORLDWIDE | Top Page > Company > Vision & Philosophy > Toyota Traditions > Mar-Sep 2010 Guiding Principles CSR POLICY : Contribution towards Sustainable Development Toyota Code of conduct Toyota Production System The Corolla Philosophy With the establishment of new Customer First training centers around the world in July, Toyota Motor Corporation (TMC) is Toyota Design taking definitive steps towards improving the way its global associates relate with the people who purchase and drive Toyota Globalizing and Localizing vehicles. While these centers are an innovative addition to TMC, the philosophy behind them has been a driving force within Manufacturing Toyota since the companys early days. Toyota Traditions Mar-Sep 2010 In October 1936, with the addition of the Model AA passenger car to Toyotas production line, the company initiated a Dec2009-Feb2010 program to visit customers in cooperation with domestic dealers in each region of Japan. The announcement of the start of Aug-Nov 2009 the service in Toyotas internal newsletter said, "Increasing benefits for customers, dealers, and manufacturers is the desire May-July 2009 that the three parties have in common." With this new program, the root of Toyotas "Customer First" philosophy was born. Mar/Apr 2009 To this day, putting the customers needs ahead of everything else has always helped the company manufacture quality products and provide good service. Nov2008-Feb2009 Sep/Oct 2008 Jul/Aug 2008 Another clear declaration of the "Customer First" policy came in May 1946, when Toyota invited representatives of dealerships across the nation to the Koromo plant (the present head factory). It was in his speech, "A Concept of Sales May/Jun 2008 Policy and Structure," that Shotaro Kamiya, the first President of Toyota Motor Sales Co., Ltd., recognized the progress of Mar/Apr 2008 the U.S. automotive industry by stating that "their sales method adopts an organization which directly connects customers Jan/Feb 2008 and manufacturers, which makes it possible to reflect the general customers experience with cars." Nov/Dec 2007 Sep/Oct 2007 Kamiya called for an end to Japans wartime distribution system, which was preventing the voice of the customers from Jul/Aug 2007 being heard. He concluded, "Progress and development of vehicles are impossible unless vehicles are improved. Both sales May/Jun 2007 methods and structure need to be formulated from this point of view. To put it in another way, based on the recognition that Jan/Feb 2007 dealers cannot live without customers, and manufacturers cannot live without dealers, we are thinking of setting up Jul/Aug 2006 dealerships which directly link customers and Toyota." May/Jun 2006 Mar/Apr 2006 Realizing that dealers and distributors strengthen the bond between the customer and manufacturer, Kamiya made a pledge Jan/Feb 2006 that summarizes the spirit of Toyota today. "The priority in receiving benefits from automobile sales should be in the order of Nov/Dec 2005 the customer, then the car dealer, and lastly, the manufacturer. This attitude is the best approach in winning the trust of Sep/Oct 2005 customers and dealers, and ultimately brings growth to the manufacturer." Jul/Aug 2005 May/Jun 2005 Customer trust can only be built upon a dependable, well-made product, and Toyota understands that cultivating superior human resources is essential to ensuring reliable quality. Just as TMC has established Global Production Center training Mar/Apr 2005 facilities around the world to transfer manufacturing skills and expertise to its associates, the Customer First training centers Jan/Feb 2005 will better equip Toyota associates with the knowledge and abilities to steer the companys quality-improvement program in Nov/Dec 2004 the years and decades ahead. Sep/Oct 2004 Jul/Aug 2004 May/Jun 2004 Mar/Apr 2004 Jan/Feb 2004 Nov/Dec 2003 Sep/Oct 2003 Jul/Aug 2003 May/Jun 2003 Mar/Apr 2003 An exhibition was held in Tokyo to Shotaro Kamiya, the first commemorate addition of the Model AA Jan/Feb 2003 President of Toyota Motor passenger car to Toyotas production line, Nov/Dec 2002 Sales Co., Ltd., was the September 1936. The following month the A diorama in the Toyota Kuragaike Commemorative Hall Exhibit first Toyota executive to Sep/Oct 2002 company initiated a program to call upon Room recreates the April 1936 story of when Toyota founder publicly declare that the Jul/Aug 2002 customers at their homes Kiichiro Toyoda (right) rushed out to help the driver of a G1 truck, primary focus of the car which had broken down. Toyoda and staff of the local dealership manufacturer must made repairs to the vehicle, displaying their commitment to the always be the customer customer Copyright/Terms of use | Privacy Policy | FAQ | Sitemap 12http://www2.toyota.co.jp/en/vision/traditions/mar_sep2010.html 2010/11/3
  •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
  • 16. CSR POLICY: Contribution towards Sustainable DevelopmentWe, TOYOTA MOTOR CORPORATION and our subsidiaries, take initiative to contribute toharmonious and sustainable development of society and the earth through all business activitiesthat we carry out in each country and region, based on our Guiding Principles.We comply with local, national and international laws and regulations as well as the spirit thereofand we conduct our business operations with honesty and integrity.In order to contribute to sustainable development, we believe that management interacting withstakeholders as described below is of considerable importance, and we will endeavor to build andmaintain sound relationships with our stakeholders through open and fair communication.We expect our business partners to support this initiative and act in accordance with it. Customers Based on our philosophy of “Customer First”, we develop and provide innovative, safe and outstanding high quality products and services that meet a wide variety of customers’ demands to enrich the lives of people around the world. Guiding Principles and We will endeavor to protect the personal information of customers and everyone else we are engaged in business with, in accordance with the letter and spirit of each countrys privacy laws. Guiding Principles Employees We respect our employees and believe that the success of our business is led by each individual’s creativity and good teamwork. We stimulate personal growth for our employees. Guiding Principles We support equal employment opportunities, diversity and inclusion for our employees and do not discriminate against them. Guiding Principles We strive to provide fair working conditions and to maintain a safe and healthy working environment for all our employees. Guiding Principles We respect and honor the human rights of people involved in our business and, in particular, do not use or tolerate any form of forced or child labor. Guiding Principles Through communication and dialogue with our employees, we build and share the value “Mutual Trust and Mutual Responsibility” and work together for the success of our employees and the 14
  • 17. company.We recognize our employees right to freely associate, or not to associate, complying with the lawsof the countries in which we operate. Guiding PrinciplesManagement of each company takes leadership in fostering a corporate culture, andimplementing policies, that promote ethical behavior. Guiding Principles andBusiness PartnersWe respect our business partners such as suppliers and dealers and work with them throughlong-term relationships to realize mutual growth based on mutual trust. Guiding PrinciplesWhenever we seek a new business partner, we are open to any and all candidates, regardless ofnationality or size, and evaluate them based on their overall strengths. Guiding PrinciplesWe maintain fair and free competition in accordance with the letter and spirit of each country’scompetition laws. Guiding Principles andShareholdersWe strive to enhance corporate value while achieving a stable and long-term growth for thebenefit of our shareholders. Guiding PrinciplesWe provide our shareholders and investors with timely and fair disclosure on our operatingresults and financial condition. Guiding PrinciplesGlobal Society/Local Communities EnvironmentWe aim for growth that is in harmony with the environment by seeking to minimize theenvironmental impact of our business operations, such as by working to reduce the effect of ourvehicles and operations on climate change and biodiversity. We strive to develop, establish andpromote technologies enabling the environment and economy to coexist harmoniously, and tobuild close and cooperative relationships with a wide spectrum of individuals and organizationsinvolved in environmental preservation. Guiding Principles CommunityWe implement our philosophy of “respect for people” by honoring the culture, customs, historyand laws of each country. Guiding PrinciplesWe constantly search for safer, cleaner and superior technology that satisfy the evolving needs ofsociety for sustainable mobility. Guiding Principles and 15
  • 18. We do not tolerate bribery of or by any business partner, government agency or public authorityand maintain honest and fair relationships with government agencies and public authorities. Guiding Principles Social contributionWherever we do business, We actively promote and engage, both individually and with partners,in social contribution activities that help strengthen communities and contribute to theenrichment of society. Guiding Principles 16
  • 19. Appendix B: Public and Media InformationDiagram B.1 Toyota World-Wide Recalls Overview 17
  • 20. Diagram B.2 Toyota Recall List of Models and Parts Involved (2005-2009) 18
  • 21. Diagram B.3 Toyota Floor Mat Recall TimelineSource: Jalopnik.com 19
  • 22. Diagram B.4 Toyota Faulty Pedal Recall Overview Source: Chicago Tribune 20
  • 23. Advertisement YOU ARE HERE: LAT Home → Collections → Business Ads by Google Toyota workers raised safety concerns with bosses in 2006 memo Safety Coordinator The notice told of worries about employees and vehicles over the automakers push to trim costs and Jobs boost production. Companies are Hiring March 08, 2010 | By John M. Glionna in Singapore Submit Resume & Apply Reporting from Toyota City, Japan — All six Toyota veterans around the table agreed: The memo they were about to Now! send to senior management could damage their careers. www.monster.com.sg The workers had recognized a troubling trend. In recent years, the automaker had kicked into high gear to fill the Safety First - Argo booming U.S. demand for smaller, more gas-efficient vehicles. ATV Safe, Low Rollover, Ads by Google Advertisement Soft Footprint Large Carrying Capacity & Floats! www.Olsen.ArgoATV.com Improving Safety Culture Helping you manage your safety culture more effectively. www.safetyperformance.com Toyota Used Cars For Sale Buy Used Toyotas in Singapore! See The union men had watched the company take what they believed were dangerous safety and manpower shortcuts to Models & Prices at lower costs and boost production. ST701 Cars. Cars.ST701.com/UsedToyota Alienating bosses could make the men company pariahs. But they knew they had to sound the alarm. From 2000 to 2005, their memo pointed out, Toyota had recalled more than 5 million cars -- 36% of all sold vehicles, a rate higher FIND MORE STORIES ABOUT than other companies. • Business Toyotas failure to act, the two-page notice warned, may "become a great problem that involves the companys • Auto Industry survival." They added: "We are concerned about the processes which are essential for producing safe cars, but that ultimately FEATURED ARTICLES may be ignored, with production continued in the name of competition." Toyota Mans conformist ways come They presented theletterto management and held their breath. But they neednt have worried. Toyota never under fire responded. March 22, 2010 Tense times in Toyota City "They completely ignored us," recalled Tadao Wakatsuki, 62, a veteran assembly line worker who formed the union. March 4, 2010 "Thats the Toyota way." Over the years, even before the recent worldwide recalls, Toyota was warned about declining product quality and worsening working conditions at its Japanese plants. The warnings came not only from Wakatsukis union, but from the widow of a 30-year-old Toyota worker who dropped dead at his desk and from an auto industry activist known as the Ralph Nader of Japan. In 2008, the National Labor Committee, a U.S. human-rights advocacy group, released a 65-page report titled "The Toyota You Dont Know," detailing what it alleged were serious human-rights violations. The report linked Toyota to human trafficking and sweatshop abuse in connection with its importing of foreign guest workers from China and Vietnam to work in its Japanese factories. Many are pressured to work overtime without pay, the report claimed, adding that there were signs similar practices were emerging in the United States. "Toyota is imposing its two-tier, low-wage model at its nonunion plants in the south" of the U.S., the report read, "which will result in wages and benefits being slashed across the entire auto industry." Toyota officials said they could not confirm they received the memo but declined to comment further. Ads by Google Workers Laws Employment Law helps Find out more at TAFEP Website! fairemployment.sg 1 | 2 | 3 | Next 21 Copyright 2010 Los Angeles Times Index by Keyword | Index by Date | Privacy Policy | Terms of Servicehttp://articles.latimes.com/2010/mar/08/business/la-fi-toyota-canaries8-2010mar08 2010/11/3
  • 24. Advertisement YOU ARE HERE: LAT Home → Collections → Business Ads by Google Toyota workers raised safety concerns with bosses in 2006 memo Mine Seals, & Grout The notice told of worries about employees and vehicles over the automakers push to trim costs and Bags boost production. Inflated Shaft & March 08, 2010 | By John M. Glionna Tunnel Seals,Grout Bags, Packers (Page 2 of 3) Standard & Custom www.pipeplug.com/groutbagstun "Communication is the backbone of our labor-management relations," company spokesman Paul Nolasco said in nelsea Tokyo. Best Beauty Assembly line worker Wakatsuki has seen what he calls the deterioration in working conditions and product quality. Treatments Get Right Beauty Tips Ads by Google Advertisement From Experts. Find Solutions For Healthy Skin. www.phillip-wain.com/sg Safety Coordinator Jobs Companies are Hiring in Singapore Submit Resume & Apply Now! www.monster.com.sg Safety First - Argo ATV Safe, Low Rollover, In an interview, he listed a litany of concerns, including outsourcing key design work and shortening the trial-and- Soft Footprint Large error period for new cars. Carrying Capacity & Floats! "We used to test every one of our cars for safety and quality," said the rail-thin Wakatsuki, a 45-year Toyota veteran. www.Olsen.ArgoATV.com "Now we do maybe 60%. The old 100% is a thing of the past." Believing that Toyotas unions were too compliant with management, Wakatsuki in 2006 formed the All Toyota Labor FIND MORE STORIES ABOUT Union, which opened its ranks to contract and part-time workers ignored by the major labor group. • Business • Auto Industry He created a website to publicize his views. Then, in the fall of 2006, six founding members drafted a memo warning Toyota about an impending disaster. After consulting technicians around the company, they also provided a detailed plan of action. FEATURED ARTICLES "Our responsibility as a labor union was to point out these problems that Toyota should have known about. People Toyota Mans conformist ways come were overworked; some were committing suicide," he said. "Of course, Toyota did nothing, but looking back we see under fire how important this was. We just told them what we saw." March 22, 2010 Tense times in Toyota City Hiroko Uchinos complaint with Toyota wasnt over its products. She believes its workplace environment killed her March 4, 2010 husband. In 2002, at age 30, the father of two collapsed at his desk of sudden heart failure. It was 4:30 a.m. and Kenichi Uchino had finished his assembly line shift hours earlier. But as a team leader, he was responsible for completing his paperwork on his own time. The pattern had long concerned Uchino, who routinely worked 14 hours a day. In his final month, his wife says, he worked 144 hours of unpaid overtime, a common practice known as "service to the company." In 2007, a Japanese court ruled Uchino had died from karoshi -- he had literally worked himself to death. In an interview, Hiroko Uchino described the pain of watching her husbands energy ebb, how he went right to bed after work rather than play with his children or wash and wax his precious van. "He used to tell me Im tired, Im tired, but what can I do? Theres no way out. He used to be such a happy person. But in the end, he stopped smiling," she recalled. Two years ago, Uchinosneakedinto a Toyota stockholders meeting to confront then-President Katsuaki Watanabe. Ads by Google Mercedes-Benz Models Pure Elegance & Safety Design. Visit Mercedes-Benz Showroom Now! www.Mercedes-Benz.com.sg Prev | 1 | 2 | 3 | Next Copyright 2010 Los Angeles Times Index by Keyword | Index by Date | Privacy Policy | Terms of Service 22http://articles.latimes.com/2010/mar/08/business/la-fi-toyota-canaries8-2010mar08/2 2010/11/3
  • 25. Advertisement YOU ARE HERE: LAT Home → Collections → Business Ads by Google Toyota workers raised safety concerns with bosses in 2006 memo Automobile Seat The notice told of worries about employees and vehicles over the automakers push to trim costs and Covers boost production. SGs top rated car March 08, 2010 | By John M. Glionna accessories & parts suppliers listings & (Page 3 of 3) more. www.inSing.com/business-search During a Q&A session, she got her chance: Without mentioning her husband by name, she challenged Watanabe about unpaid overtime. Opto Mechanical Equipment "He didnt have an answer," she said. "He just turned to an underling and said they would look into it." Easy and secure Ads by Google Advertisement purchase with your own account. Register with us now! www.EdmundOptics.com Safety First - Argo ATV Safe, Low Rollover, Soft Footprint Large Carrying Capacity & Floats! www.Olsen.ArgoATV.com Toyota Used Cars For Sale Buy Used Toyotas in Nolasco said the company takes the death serious and said Toyota was "committed to strengthening measures meant Singapore! See to prevent work-related injury or harm" but did not elaborate. Models & Prices at ST701 Cars. Cars.ST701.com/UsedToyota One of Toyotas most vocal critics is automobile consumer advocate Fumio Matsuda, often called his nations Ralph Nader, who in 1970 formed the Japan Automobile Consumer Union. FIND MORE STORIES ABOUT Now 84, the former Nissan quality control engineer has spent decades monitoring Toyota and Japans other • Business carmakers. • Auto Industry He calls Toyotas business practices the most secretive of all. In the past, he said, Toyota sponsored "secret recalls," asking owners to visit dealers for vehicle checkups, a ploy that FEATURED ARTICLES allowed them to replace defective parts and then charge the owner for the work. Toyota Mans conformist ways come under fire "Everything Toyota does is hidden," he said. March 22, 2010 Matsuda said he believed that Toyota also knew of defects involved in the most recent recall long before going public. Tense times in Toyota City March 4, 2010 "I believe there will eventually be criminal charges," he said. "They knew there were problems with their cars, but they didnt do anything until they were pressured." john.glionna@latimes.com Ads by Google Workers Laws Employment Law helps Find out more at TAFEP Website! fairemployment.sg Prev | 1 | 2 | 3 Copyright 2010 Los Angeles Times Index by Keyword | Index by Date | Privacy Policy | Terms of Service 23http://articles.latimes.com/2010/mar/08/business/la-fi-toyota-canaries8-2010mar08/3 2010/11/3
  • 26. Our CommitmentTo CustomersHistory shows that great companies Third, we’re taking steps to ensure that we learn from this experience – and operate in a more open and transparent way.learn from their mistakes. That’s why all172,000 people working for Toyota and - We’ve launched a top-to-bottom review of our quality controlsour dealers are doing more than ever to worldwide – design, production, sales and service.make things right for our customers - We are assembling a group of distinguished independent safety experts to help ensure that these quality controls meettoday and for the future. or exceed industry standards. - We’re listening more closely to our customers, gathering information faster and responding more effectively whenFirst, we are xing the vehicles covered by our recent recalls. there’s an issue.- Our technicians are repairing up to 50,000 vehicles a day. At Toyota, building safe cars is what we’ve been doing for 50- Many dealers are extending hours – some of them working years – and we are committed to continuing that legacy for around the clock – to x your cars quickly and conveniently. decades to come.Second, Toyota engineers have rigorously tested our Sincerely,solutions – and we are con dent that no problems existwith the electronics in our vehicles.- We’ve designed our electronic throttle control system with multiple fail-safe mechanisms to shut off or reduce engine Jim Lentz power in the event of a system failure. And they work. President and Chief Operating Of cer- But we’re not stopping there. We’ve asked a world-class Toyota Motor Sales, U.S.A., Inc. engineering rm to conduct a comprehensive, independent analysis. Their interim report con rms that our fail-safe To learn more about what we’re doing features work. for customers, please visit:- Toyota will make the results of this comprehensive, independent evaluation available to the public when it is completed. toyota.com©2010 Toyota Motor Sales, U.S.A., Inc. Toyota Customer Experience Center: 1-800-331-4331 24
  • 27. | WORLDWIDE | Top Page > Company > Company Profile > Message from Top Management Message from Top Management Guiding Principles Overview Executives Business Activities Design, R & D / Manufacturing I would like to begin by offering my profound gratitude to all of Toyotas customers, shareholders, employees and other Market / Toyota Sales and stakeholders for their ongoing support. Production History of Toyota In recent months we have given Toyota and Lexus vehicle owners, as well as our shareholders and other stakeholders, Toyota Today cause for concern with respect to the quality and safety of our vehicles, and for this I offer my heartfelt apologies. During the congressional hearings in the U.S. and various briefings both in Japan and abroad, I received much support in my attempt to uphold Toyotas reputation for good quality. That support came in the form of constructive criticism and encouragement, for which I am extremely grateful. When I assumed the position of president of Toyota in June 2009, I said that we were setting sail into very challenging business conditions. This year has indeed been a challenging one, a year where we could not afford to relax in the slightest. It was also a year in which we had to make many difficult decisions, such as withdrawing from the Formula One World Championship and ending our production orders to NUMMI (New United Motor Manufacturing Inc.), the joint venture company we established with General Motors. However, even in such a difficult period for Toyota, I am sincerely grateful to our dealers and suppliers who remained fully committed to providing people with cars, and to our employees worldwide for their efforts in working together so that the company will return to stability as soon as possible. And finally, above all, I am sincerely grateful to the more than 7 million people around the world who newly purchased Toyota and Lexus vehicles. Together with your help, Toyota managed to achieve an operating income of 147.5 billion yen on a consolidated basis for the year ending March 31, 2010. Returning to the black so quickly bodes well as we try and foresee what the next hundred years holds for the automotive industry and devise strategies for future growth. I have positioned FY2010 as the year for a fresh start for Toyota, and as such I intend to steer the company toward new strategies for growth. Regarding one of Toyotas central growth strategies, we announced a tie-up with Tesla Motors, Inc. in May 2010, to develop electric vehicles. During a visit to the U.S. earlier this spring, Tesla CEO Elon Musk kindly gave me an opportunity to drive one of Teslas electric vehicles. Simply put, I felt the wind of the future. I gained an understanding of Teslas technological prowess, and the energy enabling them to make that technology a reality in such a short time. Initiating a once-in-a-century turning point in technology cannot be done by a large corporation like Toyota alone; it also requires the spirit, quick decision-making and flexibility of a venture capital company. Toyota was once a venture capital company, before growing into the global corporation it is today. It is my strong hope that in working with Tesla, all of us at Toyota will be reminded of the pioneering spirit that founded our company and be inspired to take on the challenges that lie ahead. We intend to fulfill our founding mission of contributing to society through automobiles and services. Customer requirements and societys expectations change with time. I believe that the continual changes that occur over time are what define growth, and I am determined that Toyota, as well as myself, shall continually grow in step with these temporal changes. To do that, I believe that it is important that all of Toyotas stakeholders—customers, shareholders, local communities, dealers, suppliers, and employees alike—share in the faith that Toyotas continual growth is good for all concerned. My objective is not simply to achieve growth in terms of expanding Toyotas size:My aim is to maintain sustainable growth by ensuring that all Toyota employees are committed to paying the utmost attention to each and every vehicle that is produced as we endeavor to deliver safe and high-quality cars at affordable prices to people the world over. Despite the difficult business environment in which Toyota finds itself, I am determined to cultivate a shared mindset among everyone involved in Toyotas businesses and strive to live up to the "always better cars" motto. In this quest, I ask for your continued support. July, 2010 Akio Toyoda President Toyota Motor Corporation Copyright/Terms of use | Privacy Policy | FAQ | Sitemap 25http://www2.toyota.co.jp/en/about_toyota/message/index.html 2010/11/3
  • 28. Diagram B.5 Toyota’s full-page advertisement to announce their temporally shut down plan for certain plants due to massive recalls. 26
  • 29. DigramB.6 Public CriticismsSource: Reddit and DiggSource: caglecartoons.com 27