Toyota’s Reputation Still Needs Repairing After $1 Billion Settlement

In 2009 and 2010 Toyota faced a doozy of a crisis when some customers reported that the cat company’s vehicles were accelerating without warning, causing accidents, injuries and deaths.

The accusations sent Toyota’s sales reeling, while its reputation as a maker of safe and dependable cars took a nosedive.

Now, nearly four years later, Toyota has announced a $1.1 billion settlement from a class-action suit filed by car owners who claimed economic loss because of the unintended acceleration of Toyota’s cars.

In announcing the settlement, Toyota took pains to state that it wasn’t admitting fault; both the National Highway Traffic Safety Administration and NASA were unable to find any defects in Toyota’s source code that could cause problems.

Not surprisingly, between 2009 and today, the company has been under intense scrutiny by safety regulators. In 2011 Toyota President Akio Toyoda went before Congress to pledge better quality control. Embarrassingly, the problems continue.

Earlier this month, the NHTSA fined Toyota a record $17.4 million for failing to quickly report floor-mat problems with its Lexus vehicles. And in November, Toyota recalled 7.4 million cars due to a power window problem that poses a fire risk.

Yet, according to CNNMoney, Toyota is set to pass General Motors and reclaim “the world’s biggest car maker” title for 2012, following a bumper year of sales both at home and overseas.

In a way, Toyota’s crisis arc reminds me of the BP crisis. That company was down in the dumps after the Gulf oil spill in 2010, but today has rebounded nicely on the balance sheet.

Toyota will have to answer some questions if it wants to get back on track, such as what effect will the massive settlement with consumers have on its reputation? Another question for communications executives is: How many more fines and product recalls can the company allow before loyal customers start fleeing for other car brands?

Not only do many of its cars need repairing, but so, too, does Toyota’s crisis response strategy.

Follow Scott Van Camp: @svancamp01

  • Linda Locke

    Agree. The next crisis will establish a pattern. The settlement is likely to become a proof point for bad corporate decision-making and ineffective crisis management. And the positioning that they are not admitting fault may satisfy lawyers but it may raise more questions among the general public. A rebounding balance sheet can mask underlying skepticism that will surface in the next crisis – unless Toyota has thoroughly addressed the decision-making that led to the problem. Good PR cannot hide bad decision-making.

  • Rich Klein

    Good piece. On The Crisis Show in 2012, we discussed many auto recalls in the news. Toyota may have paid out the most but Hyundai, Honda and Ford are today also under major recalls and have serious reputation problems. Sadly, the NHTSA has failed to adequately notify the public about the dangers of driving these vehicles. One problem I noticed is that NHTSA allows the auto companies to send out recall notices by mail to current owners, sometimes a month or months after the recall is announced. That puts too many people in danger and hope it is addressed by the Department of Transportation here in the U.S. and by Congress. Finally, these big auto companies have social media sites but fail to use them to inform about the recalls. What’s worse, is that they promote/advertise the very vehicles that are being recalled.