Toyota crisis should teach us

Poor Toyota. The crisis Toyota Motor Corp. faces over the safety of its cars is of epic importance – and they are struggling to get ahead of the reputational meltdown.

Investor relations professionals and corporate communicators should be taking notes on this story as it unfolds – and learning from Toyota’s woes – because sooner or later a crisis like this may strike your company.

A “Squawk Box” discussion on CNBC today highlights the reputational crisis Toyota faces – and the direct hit that the change in public perception will have on sales and profits going forward.

Particularly interesting to me are comments by Jeffrey Sonnenfeld, professor at the Yale School of Management, who grades Toyota’s response as “C-minus and falling” and adds, “They’ve lost the leadership moment.”

Asked what he would advise if he were in Toyota’s crisis management “war room,” Sonnenfeld says these actions would be his top priorities:

  • Put CEO Akio Toyoda front-and-center in the public responses to the crisis. “He should get out there like Jim Burke of Johnson & Johnson, Bob Eckert at Mattel more recently and David Neeleman at JetBlue. These guys controlled the story – with facts,” the prof says. “He’s new on the job. Well, this is trial by fire. He’s got to learn to articulate and reassure the public with facts.” I might add this is a time to communicate the right values – and facts.
  • Respond in the blogosphere and social media. It’s a tsunami of talk, and Toyota needs to be answering, giving its viewpoint, correcting errors, responding to rumors, expressing a caring approach. The “Recall Information” link on the Toyota homepage is hardly adequate. Toyota ought to speak out in words and on video – and it should be very proactive online. Of course, you have to learn to engage in social media before the crushing wave rolls over you.
  • Embrace the critics rather than hiding. Hard as it may be, Toyota management should be side-by-side with the regulators and opinion leaders (in Washington or elsewhere) to demonstrate its concern and active response, keep the facts in line, and be a part of the dialogue. “Rather than disparage them, let’s embrace them as part of the flow of communications,” Sonnenfeld says.
  • Share with competitors what’s going on as the crisis unfolds. Counter-intuitive, but Sonnenfeld points out other automakers aren’t above safety problems or recalls, and some may even share suppliers with Toyota. Good time to reach out and enlist competitors’ sympathy and perhaps help – because in the long run the automakers all face similar issues.

This isn’t just a product or branding issue – the crisis is a major financial and capital markets setback for Toyota. The stock has tanked 20 bucks or 22% (looking at the ADS) since the mid-January peak before the recall. When the core value of your only product becomes a target of late-night comedians, it’s trouble.

Of course, Washington is dealing out public floggings daily – and these will continue and increase. Given the prevailing populism, which thrives on attacking big business, companies need to get much sharper at reputation management. When someone like the Obama Administration’s secretary of transportation tells Americans who own Toyotas to stop driving them – he later “clarified” that he meant something else – it’s ugly. (Does the US government in 2010 have a conflict of interest as the majority shareholder of GM, Toyota’s biggest competitor?)

Out in the blogosphere, people are equally carried away. One post by a public relations guy who writes anonymously under his Twitter handle @PRdude asks: “Should Toyota change its name?” And suggesting a name change may be the nicest thing a blogger is saying about Toyota.

Unlike the Yale prof or the anonymous “dude,” I don’t have solutions to offer Toyota today. But my advice to all of us at other companies is to watch this one – and learn.

Any thoughts? Please share your comments below.

© 2010 Johnson Strategic Communications Inc.

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