Atop the Mountain, Toyota Facing Questions

Taking criticism from many angles, automaker wrestles with questions on quality and process for root cause analysis.

The plan was ambitious, but few believed it to be reckless. Back in 2002, Fujio Cho, president of Toyota, set a goal that would see the automaker take a 15% global market share by 2010. At the time, Toyota had already captured 10.7% of the market, and had new plants on the way in the United States, China and throughout Asia, along with dozens of new models already in development.

Within six years, Toyota would emerge as the largest automaker in the world and the standard by which the industry judged efficiency, quality and manufacturing excellence.

But the last year has seen Toyota's preeminent position undermined by a dramatic drop in global sales, which fell 26% in 2009 amid a prolonged economic recession, along with a worldwide recall of 7.6 million vehicles, spread across five continents.

Toyota now is under fire from U.S. lawmakers and the Transportation Department, who are asking for proof that problems that could cause its cars to speed up unexpectedly were limited to floor mats and sticking pedals -- and not its computer systems.

This has created a groundswell of negative publicity, with reports in the media suggesting that Toyota's focus on rapid growth came at a cost to its reputation for quality.

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Toyota's recall is certainly significant, but the conclusions drawn are wildly off-base, says Jeffrey Liker, a professor of industrial and operations engineering at the University of Michigan and the author of the best-selling book "The Toyota Way.

"What you're seeing is hasty generalizations," says Liker. "Basically, people are hearing something that is somewhat vague, they don't know the details and so they're generalizing a broader phenomenon. The reality is a lot of those generalizations seem almost silly."

As a case in point, Liker cites Toyota's issue with accelerator pedals. Two auto suppliers, CTS and Denso, manufactured these components. CTS, however, is the only supplier to have had these problems.

According to several reports, the sticky pedals are caused by the material of one part of the pedal and how it responds to humidity and wear over a period of time. Mathematically, Liker points out, the problems have been highly rare when accounted by incidents per one million vehicles.

The bigger problem, he says, was rubber all-weather mats that weren't clipped down. These mats, sold by dealers, can slide around and jam the gas pedal. This isn't a problem limited to Toyota, he says.

Toyota responded by cutting the size of the gas pedal for existing cars and then designing a software system that that will cause pressure on the brake to override the gas pedal and cut off the gas.

"Does all this mean there's been significant change in quality for the whole company, no," says Liker. "The design decision on the gas pedal was made maybe between five and 10 years ago and they went through a rigorous process of inspection. I don't see what that has to do with the rest of the company today."

What is questionable is Toyota's speed of recognition. According to the National Highway Traffic Safety Administration (NHTSA), complaints date as far back as 2002 about sudden, unintended acceleration in Toyota and Lexus vehicles. At that time, no action was taken.

Toyota's recall could highlight a broader issue for the auto industry. According to Joe Barkai, practice director for IDC Manufacturing Insights, the automakers need to develop better tools for early warning and better root cause analysis.

"I think the industry overall has not developed enough tools or taken the time to understand the opportunity given by these tools, for early warning signs," says Barkai. "Toyota was very active in the development of early warning standards, so they're clearly interested in it. But you look at this case and it took them seven or so years to come to the conclusion that the problem is pervasive. Clearly they haven't done enough in that area."

Such issues can easily arise, says Barkai, from the inherent disconnect between automakers and their suppliers, who are often not made aware of failures or complaints until fairly far along in the process.

"The only thing suppliers can see typically is warranty claims, but by the time they see these claims, it's totally void of context," says Barkai.

The issue, he believes, is one of organization and documentation. When an auto component comes under scrutiny, manufacturers have to sift through massive amounts of data, from warranty claims, to field visits, to repair records and testing cycles.

"It should not take months to figure out what is the reason for this failure," says Barkai. "Even right now, their supplier (CTS) is still denying their responsibility for most of these incidents. I don't know if they're right or wrong. But Toyota needs to have better objective context. It's not about blaming someone. It's about finding the root cause much, much faster, and within a better context."

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