Naked Driving Gives New Meaning To Toyota Crisis

New interesting information regarding Toyota.

Commentary by William Pesek

Feb. 9 (Bloomberg) -- You know Japan’s world is upside down when the fabled Toyota Motor Corp. is a global laughingstock.

A name once synonymous with quality has fallen so far that Americans are actually rushing out to buy Detroit’s clunkers. You have to love a corporate scandal that boosts General Motors Co. and Ford Motor Co. and gins up consumer advocate Ralph Nader in one fell swoop.

Toyota President Akio Toyoda has done just that and it’s time for him to resign. He must go not because of the company’s biggest-ever and growing recall, but to take responsibility for how pathetically he is handling the crisis. Thanks to unsteady leadership, Toyota’s market value has lost the equivalent of Latvia’s annual gross domestic product since Jan. 21.

Last week’s hastily arranged press conference with Toyoda changed nothing. This is still a textbook case of how not to tackle a public-relations debacle. Toyota’s strategy -- denial, downplaying problems, avoiding the media -- turned a safety problem into a scandal that M.B.A. students will study for years. It also sheds light on where Japan finds itself in 2010.

Toyota needs to reverse course, and fast. Too bad the “For Dummies” book publishers have yet to add “PR-crisis” to their stable of how-to titles. Toyota needs all the help it can find.

As this costly tale unfolds, it’s worthwhile to take stock of some early lessons for corporate Japan. Here are five.

1. The cover-up can be worse than the problem itself. Design glitches happen. The key is to act quickly and boldly, especially when you are dealing with personal safety and negative newspaper coverage around the globe. Toyota is stuck in a crisis of its own making.

There’s a perception that Toyota dragged its feet on its sudden-acceleration and braking-system woes. And it seems well deserved. The fact the company’s president has largely avoided public statements smacks of guilt. That U.S. Transportation Secretary Ray LaHood is spending more time at the microphone than top Toyota officials demonstrates how poorly the company is playing things.

2. Beware driving naked. It’s hard not to conclude that one of history’s most-trusted brands has just been found unclothed in the Warren Buffett sense.

The reference here is to the oft-cited Buffett comment that it’s only when the tide goes out that you learn who has been swimming naked. First, the global credit crisis hammered the mightiest of carmakers as liquidity and demand dried up. Next came the recall crisis.

Toyota may eventually come back from the brink. It isn’t about to ask for government lifelines, as General Motors Co. and Chrysler Group LLC did. Yet who knew Toyota had been driving with its shorts down all these years?

3. Don’t make your competitors’ day. Toyoda has his work cut out for him as he tries to steer around the biggest crisis since his grandfather founded the company in 1937. Judging from how ineptly and non-transparently he has handled things, Toyoda’s management abilities aren’t commensurate with the reverence with which Japanese hold his family name.

That, no doubt, has executives from Detroit to Seoul dancing in their offices. A year ago, GM, Hyundai Motor Co. and the world’s other big automakers quaked at Toyota’s success. Now they marvel at the extent to which a once bullet-proof competitor is shooting itself in both feet. Corporate leaders stumble from time to time. The key is not delivering a massive windfall to rivals.

4. Don’t become a national microcosm. Japan’s economy is about to become No. 2 in Asia as deflation worsens. Like Japan, Toyota succeeded in its headlong drive to become No. 1, got there and then let the forces of complacency seep in.

Sadly for the economy, Prime Minister Yukio Hatoyama’s Democratic Party of Japan is in disarray. Fund-raising scandals tied to the party’s No. 2 official, Ichiro Ozawa, are rapidly sinking the government. Ozawa should step down, and fast. One wonders if Toyoda will be far behind.

Just as Toyota needs to reverse course, Japan must get serious about retooling the economy. A country and an automaker make for a bumpy comparison. Even so, much of what’s wrong in the halls of Japanese power -- denial and becoming too big for your own good -- is wrong with Toyota. Coasting is no longer an option for either.

5. Things can only get worse. When North America President Yoshimi Inaba was called to testify before Congress on Feb. 10, Toyota’s top brass should have seen it for what it is: a shot across Toyota’s bow. There are midterm elections in Washington this year, and many officials will slap Toyota around for political gain.

Sure, the U.S. media is hyping Toyota’s woes, and some consumers are overreacting. Yet Toyota must work hard to repair a brand that has been badly dented globally. If not, where will Toyota find itself? Driving naked and relegated to fighting for second or third place.