Parts commonality bites Toyota back
8th February 2010 8:00

It wasn't so long ago that Toyota's progress seemed rather relentless. The company posted one set of record results after another. There has been something of a rude awakening lately on quality.

Maybe the firm has tried to grow a little too quickly. And there have been pressures to cut back on cost – which perhaps partly explains what has been going on with the recall.

One of the striking things about Toyota's accelerator pedal problem is just how many vehicles are affected. The component is common across many Toyota models globally.

That's how you get cost down, by employing vast scale economies on parts like that which can be described as 'commodities' – a part of the vehicle that is unseen and makes no difference to the end-product in terms of customer perception. It doesn't need to be specified differently according to model, as an interior trim component that the customer sees and feels might be. The lower the cost, the better.

That's all fine and dandy when there are no problems with the component or its design. But if anything goes wrong, the commonality of supply that got the unit-cost of the part so low becomes a double-edged sword: the fallout is wide.

I would guess that some other manufacturers are looking on with mixed feelings. Yes, they are probably feeling that Toyota taking a hit like this one provides a market opportunity for them, at least in the short-term. But they may also like to reflect on the dangers of global sourcing and scale economies.

The pressures for 'cost-down' have never been as big as they are these days and Toyota's experience provides a warning on the risks that come with that.

ANALYSIS: Growing pains and 'Throttlegate'

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Toyota troubles
4th February 2010 9:44

I heard Toyota GB's PR man Scott Brownlee on the radio this morning being interviewed over the accelerator pedal recall. He gave a decent performance, responded clearly and confidently to the potentially awkward questions and it occurred to me that for the PR people at Toyota, it maybe feels a little bit like soldiers going off to the front line for the first time. No more phoney war. This is it; this is what we trained for. Helmets on.

This global recall on a safety-critical component has blown up like a squall out of nowhere to become the perfect storm that some commentators reckon will do great damage to Toyota. It is clearly a serious problem not to be belittled, but I wonder whether it will really do much long-term damage to Toyota sales. A lot depends on how quickly this issue is dealt with and how quickly a sense of business as usual at Toyota can be restored.

Can a reputation for industry leading quality and reliability built up over decades really be ruined overnight? A few people in the media are jumping on this particular bandwagon (and predictably taking some knee-jerk investors with them), but I'm not so sure.

For many, the idea that Toyota equals quality and reliability, even if it comes with a little blandness of product, is very deeply ingrained. It's almost a given and it will take a fair bit of shifting. I'm not saying that cannot happen, just that we're not there yet. 

If Toyota can ride the initial bad PR (no escape from that) and get the pedal problem fixed quickly, the car-buying public may well view it as an outlier or blip, a one-off that was very effectively dealt with. It could even end up being viewed as a positive, a case study on how companies handle product-based PR nasties. In this admittedly optimistic scenario Toyota's image is hardly dented and a short-term hit to sales is contained.

The eventual outcome may, of course, fall somewhere in the middle with the costs and sales fallout turning out worse than Toyota is planning for, but not as bad as the worst fears. By next year it's becoming a fading bad memory; Toyota still a brand associated with generally good quality and reliability.

That word 'containment' is important. Any sense that there is more going on than just the accelerator pedal, that there are underlying quality and reliability issues at Toyota, would certainly impact long-term sales. Keep an eye on that Prius brakes situation. And things got ratcheted up a notch in the US yesterday with some politicians' comments (always be wary of politicians wading in publicly over something like this).

Toyota has perhaps had its aura of invincibility on quality punctured a little in recent years with other recalls, but it is hardly a company devoid of good processes, a laggard among its peers or one that is instantly associated with poor quality product - far from it.

We're too early into this recall to say that Toyota has royally screwed up and that's done it, reputation for quality now in tatters. Crisis management and shaping perceptions will be key. It is all still to play for, Toyota's managers and PR people very much in the heat of the battle.

Good article - below link - from special agent Coolbear looking at 'Throttlegate'. He makes some very good points concerning Toyota's overall strategic direction, cost-cutting dangers, the risks inherent in parts/design commonality across model ranges and the new emerging markets model - Etios.

ANALYSIS: Growing pains and 'Throttlegate'

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Peugeot's 'Mu'
1st February 2010 16:29

There's an interesting scheme called 'Mu' that Peugeot has got going in France that is coming to Britain. On the face of it, it sounds like a bit like a car club - but with more choice of vehicle on offer (so long as it's a Peugeot - you can get a scooter, a bicycle or a van, for example, as well as a car).

It could be a mobility solution for some, especially in cites where outright car ownership is a hassle as well as costly. There's a bit more to it that that though: the idea is to build brand loyalty and help lift car sales in the long run. In the preferred Peugeot scenario, people are still buying cars and acquiring Mu points for other transportation purposes which could include short-term vehicle rentals or bike rides.

It will be interesting to see how it goes with Peugeot's scheme and whether other makers will try something similar. There's a good description of 'Mu' in an article from yesterday's Sunday Times (below link).

No wheels? no worries — a whole fleet awaits you

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Anand Mahindra in Davos
28th January 2010 20:03

Some helpful folks at the FOX Business Network have sent me a link to a clip of Anand Mahindra being interviewed at Davos. He delivers some interesting views on how the Mahindra & Mahindra Group of companies is organised - it's a 'federation not a conglomerate'.

And the dramatic setting for the interview - the backdrop - is about as good as it gets.

Did you know Mahindra is going to be making Embraer-style jets? It has picked up cheap aerospace company assets in Australia. An advantage with conglomerates is that they can be in a position to quickly add value to a new business through utilising synergies/infrastructure with other parts of the group. Mahindra fingers are clearly going into quite a few pies these days. 

Can't be a bad life for Anand Mahindra washing up at places like Davos to do a bit of PR and marketing (I like his candid comments about getting his IT services company in front of international big business leaders).

Anand Mahindra in Davos

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Thoughts on UK economy
27th January 2010 8:29

Well, there you have it folks. Recession over. Please resume normal working; it's business as usual. Er, no, not quite. Official figures show that UK GDP actually grew by a none-too-sprightly 0.1% in the fourth quarter of last year. Technically, the economy may have stopped contracting (though the margin is so slim it could be wiped out by future revisions to the data) but to many it will not feel like things are very much better.

This has been one heck of an economic dip and, even if things have stabilised, the future is clouded by debt and the need to repair balance sheets – households, businesses and, let's not forget, governments that have spent big to mitigate the effects of recession and prevent an even more serious economic slump. Many say that more economic weakness is ahead.

As Robert Baker at the SMMT pointed out last week, the volume of GDP has gone way down, so any recovery is coming off a very low base. The absolute level of GDP will struggle to regain pre-crisis levels until 2013. This year will likely see the UK car market contract by around 10%. Party time it ain't.

I'm expecting to hear plenty on the economy/market environment later today at a lunch I'm attending hosted by Automotive PR. Professor Garel Rhys will be there and is sure to broach the subject at some point.

Actually, Royalty will be present also (the one who looks like Tsar Nicholas II).

Etiquette comes into play on these occasions. On first introduction I need to remember to refer to the main man as 'Your Royal Highness' and he should subsequently be addressed as 'Sir'. Fair enough – a quaint bit of tradition and I'm all for that in this world of constant, and frequently unsettling, change. I just hope I don't lose it and corpse badly. I do have some form. I once caused mayhem in a serious meeting because I just couldn't stop laughing when something struck me as absurdly ironic and very, very funny. I could not stop laughing and, after a period of stunned bemusement around the table, that triggered others off.

But there's nothing funny about the Royal family is there? Jeez, let's not go there. Thank goodness today it's the guy who looks like Tsar Nicholas II and not the comically outspoken 'Phil the Greek'. That really could push me over the edge.

UK: UK car market to decline by 11% in 2010 – SMMT

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