A company’s reputation is arguably one of the most valuable of its intellectual properties. When a company delivers the powerful strategy of product leadership and operational excellence, they offer an strong edge in their market that other companies usually will not be able to easily compete with. When a company lets down its customers by producing products with defects and doesn’t take accountability for unnecessary injuries or death that they cause, the demand for its products will drastically decline.

Toyota is a company that, for many years, has operated under the strategy that they can provide high quality and safe vehicles at a reasonable price. Toyota is the biggest Japanese auto maker and last year they took the title of the world’s biggest auto maker away from General Motors, another giant in the world automotive industry. Until recently, they had successfully retained this title. Now Toyota is in the midst of many lawsuits based on unnecessary deaths due to defects with eight of its products.

In April of 2009, a Toyota spokesperson is quoted with saying, "People are so under stress right now; people have so much on their minds. With pagers and cell phones and IM, people are just so busy with kids and family and boyfriends and girlfriends. So, you're driving along and the next thing you know you're two miles down the road and you don't remember driving, because you're thinking about something else." At this time, Toyota was already being investigated by the NHTSA for alleged sudden acceleration problems with their Tacoma truck model. When a spokesperson makes a careless claim like this, and a CHP officer and his family  are killed (August 2009), the reputation of your company is forever damaged. So will customer confidence and demand for your product. There have been 19 alleged deaths in the last decade due to the acceleration problem.

In September of 2009, the Feds called for the recall of 3.8 million of Toyota’s vehicles. Since the government got involved, Toyota changed its tune and decided in late November of 2009 to recall 4.26 million of its vehicles off the road. Consumers are advised to contact their dealer or manufacturer if they own one of the recalled models. Originally, the acceleration problem was thought to be due to the floor mat, but now it has come to light that the problem is with the gas pedal for sure.

Every recall effected model will need to be taken in to their dealer and have these parts replaced by a mechanic. Toyota will have to provide a large supply of gas pedals to each of their service centers and the mechanics will have to provide their time and parts, free of charge to each of these recalled vehicles. This supply of parts will take some time to distribute to each of these service centers. In order to achieve this goal Toyota has suspended the manufacture of its products until an effective solution has been met for all of its customers.

The suspension of manufacture of Toyota vehicles will drastically reduce the available supply on the open market. Of course, the demand for Toyota products will inevitably decrease during this incident as well. Toyota is expected to see a 12% sales increase this year, and this is not due to the economy as other car manufacturers are seeing an average of a 16% increase in sales. It is apparent by this forecast that the demand for Toyota products has severely dropped. It is only predictable that amid this decline that Toyota will need to decrease its supply as they will not have any place to keep all the vehicles that no one wants to buy.

 Donald Hughes

Works Cited:

CNN  - Situation room (Wolf Blitzer)

Toyota: Too Big, Too Fast
Paul Ingrassia
http://online.wsj.com

Matt Hardigree
http://jalopnik.com/5415394/timeline-toyota-reacts-to-floor-mat-fiery-death-problem

Jim Jelter
http://www.marketwatch.com