Toyota Venza Recall: Quality Safety Advisory Board

After a disappointing earnings call where Toyota’s profit dropped by 18%, Toyota announces that they will be recalling 420,000 vehicles because of a crankshaft problem. Specifically,

The safety recall to replace the crankshaft pulley on the V-6 engine affects 283,200 Toyota and 137,000 Lexus vehicles in the U.S., the company said. Worldwide it covers 550,000 cars. [1. source: LA Times, http://www.latimes.com/business/autos/la-fi-autos-toyota-recall-20111110,0,4042639.story]

This means that total safety recalls by Toyota will bring that number to over 9 million cars recalled. This is disappointing indeed.

In a previous post, we discussed some of Toyota’s global centralization and decentralization challenges as a root cause of their quality problems, today we’ll discuss the second of the findings from the Toyota Quality Advisory Panel. In their opinion, the attention given to outside complains held less importance than complains from within the company.

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Please read our series on the findings from the Toyota Quality Advisory Board:

1. Toyota North American Quality Advisory Panel Conclusions: The high-level summary of the findings from the quality advisory panel.
2. Balance Between Local and Global Management Control: How can Toyota best balance decision making between Toyota Motor Corporation in Japan and its regional operations in the North America and the world?
3. Responses to Problems Raised by Internal and External Sources: The panel found that problems raised by sources external to Toyota were not treated as seriously as those found within Toyota. The panel claims that this violates the tenets of the Toyota Production System.
4. Management Responsibility for Quality and Safety: Because Toyota treated Safety as a subset of Quality, the panel believes that this has led to the blurring of the lines and makes the question Who is Responsible? more difficult to answer; consequently, this has led to the old adage of if everyone is responsible, then nobody is accountable.
5. The Challenges of Integrating Electronics and Software: Has the integration of software led to safety problems?
6. Management of Supplier Product Quality: As Toyota becomes more and more decentralized, has Toyota maintained the rigorous supplier quality requirements it once had?

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According to the Panel, Toyota held outside feedback in less esteem than feedback from within. In the Panel’s words,

The Panel has observed that Toyota did not adequately apply the key principles of the TPS (Toyota Production System) and the Toyota Way to its management and decision-making practices. The Toyota Way is founded on the core pillars of continuous improvement and respect for people. A fundamental principle of continuous improvement is genchi genbutsu, which means that one must go and see the source of the problem in order to determine its root cause. The Panel feels that Toyota applied this and other aspects of the TPS and the Toyota Way too narrowly in two respects.

Apparently, hubris and pride on Toyota’s part had to do with why feedback was treated differently depending on the source:

First, while it is clear that Toyota applies the TPS process and the Toyota Way to problems or flaws found internally, Toyota does not appear to treat feedback from external sources, including customers, independent rating agencies, and regulators, the same way. For example, it doesn’t appear that Toyota applied genchi genbutsu as quickly and thoroughly as it could have in investigating and seeking out the root causes of customer complaints regarding issues such as UA. On the vehicle assembly line in Toyota factories, when a problem on a vehicle is spotted, any line worker can pull a rope called an andon cord to stop production so that the problem can be quickly fixed. But when external sources have complained about quality and safety issues, it has often taken Toyota too long to pull a metaphorical andon cord and quickly try to solve the problem. Instead, Toyota initially reacted to consumer complaints such as UA, sticky pedals, and other issues with a degree of skepticism and defensiveness.

Continuing, the quality advisory panel points out that Toyota failed to apply TPS to its decision making process, allowing defects in its vehicles to continue despite outside feedback that was largely met with doubt:

Second, Toyota did not apply the principles of TPS and the Toyota Way adequately to identify and avoid repeating management decision-making errors with the same thoroughness and dedication with which it applies them in its manufacturing process. Although Toyota is in the car manufacturing business, it”like most modern corporations”is also a decision factory. Toyota’s reputation in North America increasingly will be based as much on the quality of its decision making as on the quality of its vehicles.

The above conclusion from the quality advisory panel is both pointed and cuts to the core of Toyota. On the one hand, Toyota is well known for its manufacturing rigor, yet on the other hand, the principles the Toyota Production System is founded upon wasn’t applied outside of manufacturing, leading to poor quality problems to continue.

In the next part of our series, we’ll explore the panel’s conclusion on Toyota’s worldview regarding Management Responsibilities for Quality and Safety.