We read shocking news today that Toyota has suspended sales of 8 popular models in the United States due to a problem with the throttles sticking open. The news comes after a series of other indicators over the past two years which have demonstrated slippage in Toyota's once-vaunted quality record. What happened to Toyota, renowned for its exceptional quality? It appears that the rapid growth of the past few years, as other automakers stumbled badly, may have stressed the organization to a breaking point of sorts. Perhaps, too, Toyota has finally hit a point at which certain diseconomies of scale began to become more pronounced. In the automotive business, every executive seems to have bowed at the altar of scale economies for years, yet it seems that many failed to see how powerful diseconomies of scale can be.
What should we watch for as Toyota tries to minimize the damage from this move? First and foremost, it will be critical for Toyota to communicate often, and in a myriad of ways, with consumers to educate them about why they have made this move and how they are fixing the situation. Second, Toyota has to do all it can to expeditiously correct the problem on models already sold. Third, Toyota must have a well-orchestrated campaign for re-launching these models in the United States.
What does the Toyota decision mean for its rivals? At first glance, this news does appear to be very positive for firms such as General Motors and Ford. However, each of the rivals must take great care in their response. After all, they too have their share of quality issues from time to time. Will Toyota set an expectation for suspensions of sales that these rivals will not want to emulate? Will people begin to ask questions about why rivals aren't "taking quality issues as seriously as Toyota did?" In the end, Toyota may have raised the bar for everyone in the industry when it comes to handling quality concerns.