LOGISTISC AND SUPPLY CHAIN MANAGEMENT

[pic 1] 

 Peruvian University of Applied Sciences 

WINTER SCHOOL  

LOGISTISC AND SUPPLY CHAIN MANAGEMENT

Toyota: The accelerator Crisis

Professor 

Phd. Ronald Mesía 

STUDENTS:

• Maria Elena Roque 
• Jimmy Meza Cuba 

• Milko Céspedes Gómez 
• Andres Gutierrez Santillan 
• Harry Flores Campos 

 2018 

INDICE

1.        Executive summary        2

2.        Background        3

3.        Problem Statement        5

4.        Analysis.        5

5.        Conclusions.        9

6.        Recommendations.        9

7.        References and Charts        10

1. Executive summary

1. Background

Toyota Motor Corporation was founded on September 23, 1933 when Toyoda Automatic Loom created a new division dedicated to the production of automobiles under the direction of the founder's son, Kiichiro Toyoda. Soon after, the division produced its first Type A motor in 1934, which was used in the first A1 model in May 1935 and the G1 truck in August 1935. The AA model production began in 1936. Although the Toyota group is better known today for its automobiles, it is still present in the textile businesses.

Toyota began to expand in the 1960s with a new research and development facility, in Thailand a division was established, the ten-million model was produced, a Deming Award and partnerships with Hino Motors and Daihatsu were also established. By the end of the decade, Toyota had established a global presence, since the company had exported million units. The expansion continued throughout the 1970s. The company was awarded its first Japanese Quality Control at the beginning of the decade and a presence in automobile industry was established.

In 2008, Toyota became the fifth largest company in the world. In the 2006, became the twelfth largest company in the world in Forbes Global 2000. It has consistently been gaining market share in the United States, while reducing Ford and General Motors sales in the United States. In March 2009, Toyota cut its production by more than 50%, to reduce its inventories and face the fall in sales due to the problem it had in one of its car models.

Toyota announced the recall of more than eight million vehicles worldwide when a failure in the accelerator pedal was discovered in eight of its most popular models and admitting problems in the brakes of the hybrid Prius model. Among the affected models are three of the most sold in the US market: the Camry, the Corolla and the Rav4 SUV, which together accounted for 57% of sales of the brand in the United States in 2009. Five of its North American plants will stop producing these units.

All this began just in the fall of 2009 when a Lexus ES350 went out of control on a highway in San Diego, California and killed 4 occupants. At that moment, Toyota revealed that the cause of the tragedy was the carpet under the seat of the driver that slipped and ended up blocking the accelerator pedal. Then the Japanese manufacturer warned that the call for repair would not look beyond that horizon. However, the National Highway Traffic Satefy Administration (NHTSA), in its traditional role as prosecutor against the automakers, suspected that the issue could be related to the accelerator pedal, its mechanism, and even the ignition system of the car.  

In the first place, Toyota could not control the situation of its problem. It did not define enough information from the suppliers that delivered the parts of the car and there was no clear positioning by the brand. Likewise, the company started with the crisis, if the cause of the problem had been detected. Therefore, reliable and concise information on the part of its suppliers of pedal failures would have been provided. Therefore, not so much media disorder would have risen and so many accidents and deaths could have been avoided.

Second, we must emphasize the disinterest of Toyota saying that it was a technical problem in their vehicles. Therefore, instead of looking for information to find the problem, he devoted himself to denying any type of technical failure. Another big mistake that his suppliers made was not communicating quickly about the faults of the pedals. Toyota only made unfounded statements after some tragic event occurred or when it was accused by some means or agency. As we have seen in the hypothetical framework, it is very positive when managing a crisis to actively provide information to the media to allow for less speculation about our problem.

One of the main solutions was to shorten the length of the pedal so that it would not get stuck in the carpet as long as the new ones arrived, which were shorter. It was also considered the replacement of the carpets, on which it was advised that, until the arrival of those of different design, tie them with a cord to prevent their detachment.

At one point in history, under the perception that Toyota was lost and that they really did not know for sure where the problem was. This doubt became certain when the company announced the installation of software to prevent uncontrolled acceleration in all models of Toyota, Lexus and Scion.

The causes of Toyota crisis:

• Toyota paid fines of 48.8 million dollars.

• Toyota paid the full cost of the repair of the retirement cars.

• Toyota stopped selling all models of cars for some time

• Several customers died due to pedal failures of the car

1. Problem Statement  

 
“The main problem was the poor communication within the supply chain, where Toyota prioritized volume to the production quality of its vehicles. Originating faults in the accelerators of several models of cars, giving rise to the biggest crisis of the company.”

1. Analysis.

The Toyota crisis focused on the economic loss, the fall of the image of the corporation and the reduction of its sales. After having to take different market models, face legal problems with customers and pay for repairs with amounts exceeding 500 million dollars. Toyota was in charge of looking for the causes of these problems, which were the aggressive policy of reducing costs to face the rise in prices of raw materials, the rapid growth of sales, the acceleration of the design and production processes, the need for continuous innovation due to greater complexity in vehicles and pressure from shareholders for greater profitability.

The pressure by volume to the limited organizational structure generated a significant number of vehicles with faults forcing Toyota to make calls for review (recalls) and consequent repairs. In addition, it had to temporarily paralyze the production and sale of vehicles and withstand strong media pressure, which caused economic losses, loss of market share and damage to the image of the company. With a scenario of low sales, reduction in net income, together with a cooling process of the economy, caused that the results were not in line with market expectations, where investors expected the company to maintain its level of growth and, with it, the earnings per share.

...