Toyota headquarters in Japan (Wikipedia).... Toyota headquarters in Japan (Wikipedia).

Six months after Toyota president and CEO Akio Toyoda went before a U.S. congressional committee to answer questions about his company's response to allegations of covering up defects that led to unintended acceleration, we paid a visit to Toyota's headquarters in Japan to see what the company has been doing about it.

Tarnished Reputation

Over the past year, Toyota has experienced the painful lesson that while it can take decades to nurture a positive reputation, this can be destroyed overnight. Despite some stumbles over the past decade, like sludge problems in some of its engines and broken camshafts in early-build 2008 Tundras, Toyota managed to retain its standing for building some of the highest quality, most reliable cars on the market.

However, beginning in late 2009, Toyota was stung with a series of recalls that shook consumer confidence to the core. The death of a California police officer and his family in a Lexus captured the attention of the mainstream media when it was reported that the crash was the result of sudden unintended acceleration. You know the rest of the story, which we've been covering for months. Yet even after agreeing to pay a $16 million federal fine, Toyota still hasn't seemed to be able to shake the recall bug.

After spending the first half of 2010 propping up sales through incentive spending, Toyota is now actively trying to rehabilitate its image. Early on in the crisis, the company began running television and print ads targeted at convincing consumers that it was recommitting to its quality philosophy. Obviously a 30-second TV spot can't get into much detail on exactly how that will be achieved.

To help get a more nuanced message across, Toyota invited a group of American media to its Japanese headquarters for a quality and safety seminar. We were given unprecedented -- for Toyota at least -- tours of its test facilities. Over the course of our visit more than a dozen managers and executives spoke about Toyota's product development and quality assurance processes and how they were being modified in order prevent a recurrence of the problems that have occurred in the past year.

After three days of listening to Toyota managers and executives discuss how they plan to recover from this year's recall crisis, we've got two major takeaways. First, Toyota has come to the realization that its engineers don't know everything about how customers use its products. The automaker is thus working on improving the ways it listens to customers and incorporates feedback into its testing regimen. The second is that Toyota will be renewing its commitment to quality. To a large extent this means learning how to implement lesson one about listening, but it also means some key structural changes.

Problem Solved?

The first concrete implementation of the automaker's new voice of the customer strategy was the establishment in April of its Swift Market Analysis Response Teams (SMART). Product engineers, field technical specialists and specially trained technicians were assigned to SMART and tasked with following up on all customer complaints of "unintended acceleration."

Since being established, the teams have investigated over 3,600 complaints from the National Highway Traffic Safety Administration (NHTSA) defect-reporting database. According to Toyota, none of the cases have shown any actual evidence of acceleration that was attributable to causes other than the floor mats or the sticking accelerator pedal that has already been recalled.

What the teams did discover is that there is insufficient granularity in the NHTSA categories. Unintended acceleration is lumped into the "speed control" category along with countless other problems including rough transmission shifts, complaints about the rate of acceleration (both too fast and too slow) in cruise control, and throttle response. Out of these thousands of complaints only a few hundred were actually specific to the car taking off unexpectedly, said Toyota.

While this sounds like Toyota is still denying the extent of the unintended problem, the automaker insists that this is not the case. In the future Toyota plans to continue monitoring and investigating all complaints coming in to the NHTSA database promptly, and then incorporating real issues into future product robustness testing. This is a marked change from the past, when Toyota has mainly relied on reports from dealers and warranty claims to become aware of such complaints.

The Floor Mat Conundrum

Over the past three decades, Toyota has grown to become one of largest and most profitable automakers in the world. Having access to all that cash means that Toyota has among the most modern and extensive test facilities in the industry. Unfortunately, as the events of recent months have shown, a tool is only as good as the operator. Having the ability to test cars won't take an engineer far if he doesn't understand what to evaluate.

A prime example Toyota offered is its floor mats. Toyota developed all-weather floor mats meant to be sold by its dealers as an aftermarket accessory. Apparently it never occurred to anyone that customers and dealers would simply stack the heavy rubber mats on top of the original carpet mats, rather than replacing those original mats. It was also assumed that the asymmetric mats would be installed on the correct side of the car so that the shape conformed to the corresponding foot-well. It turns out that both assumptions were wrong, resulting in a spate of consumer complaints that accelerator pedals were hanging up on incorrectly installed mats. This may seem like a relatively simple oversight on Toyota's part, but it has had the potential to be tragic.

Company officials acknowledge that over the past decade the automaker grew too fast and employees at many levels were not adequately trained in the Toyota way of ensuring quality at every step of the design and manufacturing process. So, in order to prevent problems like this from recurring, Toyota will be insert a new layer of management into its system to help address the issue. This move has come after Toyota looked at other groups that have grown "too large." The rationale is that personnel have not received adequate on-the-job training and oversight, so a new group of assistant managers will work more closely with members of each team -- particularly younger engineers -- to help them understand that quality has to be designed in to avoid defects rather than corrected after the fact.

A New Quality Organization

While these new assistant managers will attempt to reinforce the quality message, there is another organizational change at Toyota that may actually serve to undermine it.

On March 31 of this year, the first meeting of the new Global Quality Emergency Meeting took place at Toyota headquarters. From that meeting a new Design Quality Innovation Division headed by Katsutoshi Sakata was created. The new division came into effect on May 1, and over 1,000 employees have been reassigned from product development activities to address quality issues at a higher level than ever before. This new layer of oversight will slow the development cycle and Toyota has acknowledged that it will add an average of about four weeks to each program.

This presents quite a challenge to the Toyota way, as ever since the earliest days of the company, quality has been the responsibility of every single associate. It was driven from the bottom up. Moving "ownership" of quality to this new organization could be a double-edged sword. While the new quality teams are likely to stem the current recall tide in new products, a potential unintended consequence is that the company's traditional quality ethos will be undermined by fostering an attitude among lower level employees that ensuring quality is no longer their responsibility. If that happens it could lead Toyota down the same path to mediocrity that plagued Detroit automakers some 30 years ago.

Ultimately the bottom line is that Toyota has come to realize its products are not as perfect as it had thought – or its reputation suggested. Nothing can be done about the vehicles already on the road other than rapidly addressing any new issues that arise. Whether or not Toyota's new processes and organizational changes will be enough to restore its image, only time will tell.

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