For years, the American automakers studied Toyota, trying to mimic its engineering and manufacturing success as their own sales plunged. Now, Detroit may finally be able to teach its Japanese rival something in return.
Toyota's legendary quality control has obviously slipped, with the worldwide recall of more than 8 million vehicles for problems ranging from minor to dangerous. But Toyota also seems to have some cultural and leadership problems that are making its predicament worse. For the past month, since American regulators forced a huge recall to address "sudden acceleration" in eight popular models, Toyota has failed to make a convincing case that it has the situation under control. Headlines demonize the automaker, even though it can still boast more satisfied customers than most of its competitors. And executives in suits making meek apologies seem tone-deaf to what people really want to hear: contrition, yes, but also some passion about their product and a fighting spirit.
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Guess who's faced nearly the same set of problems: Every one of the Detroit automakers, some of them more than once. So maybe Toyota should spend a few minutes studying General Motors, Ford, and Chrysler. Here are a few things it might learn:
Charisma counts for a lot. Bland technocrats can effectively lead a company, but when there's a problem, personality matters. Lee Iacocca saved Chrysler in the 1980s partly by making himself the face of the troubled automaker and linking his own fate to that of the company. He seemed gutsy and convincing, and customers returned. GM is now doing something similar with its new CEO, Ed Whitacre, whose no-nonsense drawl plays well in commercials and frequent press conferences. And GM's freewheeling Bob Lutz, brought in to be the "car czar" in 2001, helped re-energize engineers and designers stifled by years of management by committee. Toyota, by contrast, has always been a company that emphasized teamwork over individual stars, with executives who have been more or less anonymous, at least in the United States. They're paying a price for that now. The Japanese CEO, Akio Toyoda, has been diffident and scarce. That hamstrings American executives reluctant to one-up the boss. Toyota's entire executive suite probably needs to pop some corporate Viagra and start courting the public and press with passion and unfettered access.
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Corporate royalty isn't sacred. Toyoda, the grandson of the company founder, is known in Japan as "the Prince." Big whoop. Does that make him qualified to lead one of the world's biggest and most complex companies? Maybe not. Ford Motor Co. learned a similar lesson after appointing Bill Ford, great-grandson of company founder Henry Ford, as CEO in 2001. The company struggled under his leadership and lost billions, which led Bill Ford himself to seek a replacement and become executive chairman. The CEO who replaced him in 2006, Alan Mulally, has managed to accomplish the turnaround that his predecessor couldn't. Maybe Toyota needs similar intervention.
Sometimes a fall guy is necessary. When Rick Wagoner resigned as GM's CEO in 2009, it provided the political cover for a $51 billion federal bailout. After GM declared bankruptcy, reforms didn't happen fast enough, so Wagoner's successor, Fritz Henderson--like Wagoner, a GM lifer--had to go, too. Many company directors rightly resist firing a CEO just for the sake of producing a scalp. But sometimes it opens the door to necessary change. And the U.S. Navy has it right: When something happens to a ship, the skipper is responsible, no matter what. Toyoda has suggested that since he took over the company only last summer, much of the current trouble isn't his fault. He should ask President Obama how well that kind of excuse works.
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It pays to toot your own horn. Toyota has mostly let its vehicles speak for themselves, with almost no chest-thumping by executives. That's admirable. But a bit of American braggadocio can't hurt. For the past several years, for example, GM execs have been telling anybody who will listen that their cars are better than their reputation. Their pleas seemed plaintive at first, when quality was still sketchy. But as road tests and surveys began to show genuine quality improvements, the chorus of executive insistence helped draw attention to the heightened performance. Despite the safety recalls, Toyota still has a very strong stable of reliable vehicles, and when the company's embarrassed leaders are done apologizing, they should start reminding everybody they talk to that their cars remain among the best in the world.
Outsiders aren't as dangerous as they seem. For most of its history, the Detroit automotive universe was ruled by insiders who grew up in it. They became so insular that they nearly sank an entire industry. Now look who runs the Detroit auto companies: GM's Whitacre, the former CEO of AT&T, had no experience in the auto industry until he became GM's interim CEO last year at the age of 68. Same with Ford's Mulally, who spent most of his career selling airplanes at Boeing. Chrysler, now part of Fiat, is run by the Italian lawyer-accountant Sergio Marchionne, who also got into the car business late in his career. Ford and GM are now overcoming a lost decade and becoming competitive once again, while Chrysler would probably be gone if not for Marchionne. If anybody saves Detroit, it will end up being outsiders. Toyota, on the other hand, stills seems to believe that only one of its own can turn the company around. Realizing that's probably not true may mark the moment when Toyota truly begins to recover.