What Toyota must say to Congress

Toyota executives, led by CEO Akio Toyoda, seek to revive the company's flagging image when they appear at congressional hearings this week.

By TheStreet Staff Feb 22, 2010 5:08PM

TheStreetBy Ted Reed, TheStreet


Toyota (TM) Chief Executive Akio Toyoda can’t just apologize and accept responsibility for the carmaker's mistakes.


That much is expected when Toyoda and other executives appear at two congressional hearings this week. Toyoda will testify before the House Oversight Committee on Wednesday, but other Toyota executives will attend the Tuesday session of the House Energy and Commerce Committee.


"It's not enough to say he's sorry," says Satish Jayachandran, associate professor of marketing at the University of South Carolina. "In Toyota's case, the issue goes to the root of the car, so they have to show clarity to explain the problem and to address what's being done."


After turning over documents to oversight committee during the weekend, Toyota said Monday it has received subpoenas seeking documents about unintended acceleration and related matters from both a federal grand jury and from the Los Angeles office of the Securities and Exchange Commission. The problems have caused the company to recall several popular models.


Bing: More on Toyota's recalls


To underscore its commitment to safety and reliability, the automaker should extend its warranties to 10 years, says John Wolkonowicz, senior auto industry analyst at IHS Global Insight. "If the cars are as good as they say they are, it won't cost much," he says.


On Friday, golfer Tiger Woods apologized for his mistakes and accepted responsibility, but he refused to take questions from reporters. Toyoda has already faced the media during multiple news conferences in Japan, and will not encounter tough questioning from Congress. "He has to be very contrite, and not give them any fodder," Wolkonowicz says.


When auto executives appeared before Congress in November 2008, perhaps the most overwhelming impression they made was one of wealthy guys who prefer to travel in private jets. Toyoda would be wise to travel to the US on a commercial flight.


Appearing before Congress carries risks, given the propensity for grandstanding and the serious safety issues facing the company. At the same time, Toyota has friends in Congress because it’s a major employer in several states.


Already, the governors of Alabama, Indiana, Kentucky and Mississippi have signed a letter supporting the company. And Toyota employees and dealers have been lobbying.


Not being a native English speaker could help or hurt. “People will give him the benefit of the doubt if he doesn't entirely understand," Jayachandran says. "But it's not that significant. The important thing he has to communicate is that he stands behind the product."


Jayachandran added that while Woods has probably lost his image as a role model, Toyota is likely to regain its status. "Trust is easy to lose and difficult to regain, but Toyota has a chance," he says, if it takes steps like extending the warranty.


"We all screw up," says Mitch Free, CEO of MFG.com, an online marketplace for manufacturers and a contributor to TheStreet. "Companies are judged not by their screw-ups, but by how they recovered. The elegance is in the recovery."


In the Japanese culture, says Free, apologies are real: people accept responsibility and "work hard to make it right." The maintenance-related 1985 crash of a Japan Airlines flight, which killed 520 people, led to the resignation of the airline's president and to the suicide of a maintenance manager, says Free, a one-time maintenance executive at Northwest Airlines.


Toyota was known as "the poster child for lean manufacturing, which is built around exposing problems, figuring out how to solve them and listening to the customer," he says. "But they started focusing on being the biggest. They have to get back to where they were. The customer doesn't really care if they are the biggest."


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