| Total Recall: Six Ways Toyota Can Avoid a Life | | | | problem. Toyota has estimated that fixing recalled |
| Sentence from the Court of Public Opinion | | | | models takes half an hour each. The company must |
| The world’s #1 automaker is in big trouble. A | | | | make sure that time provision is accurate. |
| massive recall has forced Toyota to halt virtually all | | | | Factories are famous for underestimating how long |
| sales and incur the costs of millions of repairs for car | | | | warranty work will take. So I think Toyota should be |
| owners. Unfortunately Toyota is blowing its chances of | | | | careful in how they compensate dealers for technician |
| a full recovery. Here are a few suggestions for what | | | | time. With the volume of cars needing the fix, I think it is |
| the company must do to survive. | | | | likely that technicians are going to get backed up. Also, |
| By Mark Ragsdale | | | | because of this added volume, dealerships will |
| | | | | encounter time-consuming logistical problems that they |
| Once again a car industry disaster is dominating the | | | | don’t have to deal with on a normal basis. Now is |
| news cycle. But this time it isn’t American car | | | | not the time to shortchange dealers and technicians by |
| companies coming under fire. No, it’s #1 automaker | | | | compensating them based on the most conservative |
| Toyota that is on the chopping block. The company | | | | time estimate possible. Fixing all of these cars is going |
| faces a laundry list of problems: a recall of eleven of | | | | to take time and it’s going to take money. Toyota |
| its models, a halt in sales for those models, negative | | | | corporate needs to get a sense from its dealers what |
| press associated with the recall itself and | | | | a realistic time frame and subsequent compensation |
| Transportation Secretary Ray LaHood’s now | | | | rate truly is. |
| recanted statement advising people not to drive their | | | | Help offset ancillary costs. Dealing with this recall is |
| Toyotas, and allegations from the government and the | | | | going to require more resources than business as |
| American public that it didn’t act fast enough to | | | | usual would require. Dealerships will be staying open |
| protect consumers. | | | | later. Staff members and service technicians will be |
| There’s no denying that Toyota is stuck between | | | | working overtime. Call centers will need to be set up to |
| a rock and a hard place. However, that doesn’t | | | | help dealers field customer calls. Toyota corporate |
| mean there is no exit strategy for the company. If the | | | | absolutely must offset these costs. Dealers are |
| company partners with its dealers to protect the | | | | already losing tons of money in sales and simply |
| brand—an imperative for both parties—they can | | | | cannot provide the service necessary to recover from |
| achieve the service recovery they need to not only | | | | this kind of hit without help from corporate. Toyota |
| get the company back on its feet but to keep the | | | | must remember that the dealers are the ones really |
| dealerships that made the brand great afloat. | | | | being left to clean up this mess. They absolutely must |
| Right now Toyota isn’t treating its dealers like | | | | give them the supplies to do so efficiently and to the |
| partners. In fact, Toyota’s dealers learned they | | | | satisfaction of every customer. |
| needed to pull vehicle inventories off their lots, not via | | | | Provide a commanding public relations presence. It |
| communication from corporate, but by watching the six | | | | seems Toyota’s idea of effective PR is limited to |
| o’clock news. Since that time, Toyota corporate | | | | President and Chief Operating Officer of Toyota |
| hasn’t put any plans in place to help dealers cope | | | | Motor Sales Jim Lentz’s disaster of an interview |
| with the massive economic and public relations | | | | with Today show host Matt Lauer. In the interview, |
| nightmare the company is suffering. | | | | Lentz stated that customers “feeling a certain |
| My guess is the recall will cost the company | | | | sensation” should “get the vehicle right into the |
| approximately $500 million per month as its stock | | | | dealer for repair.” But if customers didn’t |
| plummets by 20 percent. It’s a mess, and one that | | | | “feel” those sensations, they could continue |
| is being poorly managed by Toyota executives. | | | | driving their cars. Statements such as these open up a |
| Many of Toyota’s dealers are in dire financial | | | | Pandora’s Box at the dealership level. Everybody |
| straits. As they struggle to provide customers their | | | | will “feel” something whether there is anything to |
| sole touch point of brand experience, they are losing | | | | “feel” or not. |
| profits. Dissatisfied customers are growing angrier. And | | | | Toyota needs to be very clear about which cars need |
| Toyota’s chances for recovery are diminishing. | | | | repairs and which do not. They need to remind |
| The outlook for Toyota is | | | | customers that they were smart to buy a Toyota. |
| certainly bleak. But the company isn’t down for the | | | | They don’t need to force dealers into a position |
| count…yet. Toyota can survive this massive recall. In | | | | where they are playing middleman between a group |
| order to do so, it absolutely must rally and support its | | | | of disgruntled, worried customers and a corporation |
| dealers—the Toyota brand’s strongest touch | | | | that is trying to get out of incurring as much cost as |
| point with its customers. Here are a few solutions for | | | | possible. It’s not fair to the dealers, and it’s not |
| Toyota that, if heeded, will help it weather the recall | | | | fair to the customers. |
| storm. | | | | Toyota must understand—GM and Chrysler |
| Keep them informed. There has never been a more | | | | didn’t go out of business by having too many |
| important time for communication between Toyota | | | | dealers. However, Toyota itself may fail from having |
| corporate and its dealers. The company needs to be | | | | too few. A customer leaving one of its dealerships |
| updating dealers daily about what is going on with the | | | | feeling neglected or angry will not tolerate inheriting the |
| recall. It needs to tell them what its plans are moving | | | | same aggravation from another Toyota dealer across |
| forward and how the news should be communicated | | | | town. Instead, he or she will simply defect to another |
| to customers. Dealers need to be just as in the loop | | | | Asian transplant manufacturer, or perhaps even a |
| about what is going on as the Toyota executives are. | | | | domestic. Toyota must get in front of this issue by |
| Not only does doing so make the dealers feel like they | | | | getting behind its dealers in a very public way—not |
| are true partners with the company, but it also allows | | | | by Mr. Lentz creating a stampede. |
| the dealers to more effectively communicate accurate | | | | Let dealers know right now how they will be |
| information to customers. | | | | compensated for lost sales. Toyota should not wait |
| Help your dealers understand the power of service | | | | another second to provide dealers with a plan for how |
| recovery. There’s no denying that Toyota has | | | | the company will compensate them for lost sales. |
| dropped the proverbial ball with its initial handling of the | | | | Under the Federal Safety Act, Toyota is required to |
| recall. However, the company still has an opportunity to | | | | pay dealers 1 percent of their acquisition cost each |
| mend relationships if it recognizes it has dropped the | | | | month until the remedy is implemented. So for a |
| ball and actively makes changes to fix it. Dealerships | | | | $26,000 vehicle a dealer will receive $260 per month |
| already have ongoing relationships with their | | | | from Toyota. The company should consider |
| customers, but Toyota needs to make sure its dealers | | | | compensating dealers further. And it must let them |
| understand how to use those relationships to speed up | | | | know the possibilities for compensation immediately. |
| the service recovery process. Toyota should: | | | | For some dealers this recall is a death sentence. |
| Ensure dealers and staff are properly trained. Remind | | | | Others will barely survive. But they deserve to know |
| all dealers about the importance of understanding | | | | what their chances are sooner rather than later. Doing |
| customer service protocol. Provide a refresher tutorial | | | | so will help them focus on fixing cars and providing |
| that can be accessed online. | | | | customers some TLC, instead of worrying about |
| Give them the answers for tough questions. Many of | | | | remaining solvent. Of course, this expense could be |
| the questions customers are asking are difficult for | | | | mitigated by offering customer trade loyalty incentives |
| dealers to answer because A) they don’t want the | | | | for dealers to work with. Dealers do have unaffected |
| answer given to upset the customer further, and B) | | | | product in stock to sell. Give them the tools to keep |
| they don’t want to say anything that doesn’t | | | | their customers, as competing automakers apply |
| align with what customers may be hearing on the | | | | special programs to pick-off potential refugees. |
| news from Toyota executives. Toyota corporate can | | | | As more troubles for Toyota loom, these issues |
| solve this problem by providing dealers with the | | | | must be acted upon quickly. The U.S. Department of |
| answers they should give to tough questions. Not only | | | | Transportation is looking into whether Toyota’s |
| will doing so provide service staff with the confidence | | | | unintended acceleration issues can be traced back to |
| they need to handle these situations properly, but it will | | | | electronic defects. If documentation is discovered |
| help the company ensure that everyone is speaking | | | | indicating Toyota has hidden known causes, it will need |
| with one voice. | | | | a viable, published plan that gives consumers as much |
| Provide dealerships with factory reps. Toyota might | | | | security and the least amount of guesswork possible. |
| want to consider putting a factory rep on every lot to | | | | In the past, Toyota has received high satisfaction |
| help dealers handle tough customer questions. | | | | ratings from its dealers. The company has a positive |
| Realistically, dealership staff can’t be prepped to | | | | history with its dealers. But to continue that good |
| answer every possible question a customer might ask, | | | | reputation, it has to do right by them now, when it |
| but having an easy-to-access factory rep on staff | | | | counts most. Toyota’s focus now should go to its |
| provides them with an instant go-to guy (or gal!) who | | | | dealers. Not only are they the branch of the company |
| can help them satisfy customer needs quickly. | | | | who will physically be fixing these cars, they are the |
| Toyota still has a chance at significant service | | | | brand’s most constant and easy-to-access touch |
| recovery. But if already irritated customers aren’t | | | | point with customers. Without a strong viable dealer |
| treated well or given the answers they want from | | | | network to get this one behind them, the court of public |
| their dealers, they’ll flee to a competitor in an | | | | opinion will order a hanging. Toyota must give its |
| instant. | | | | dealers what they need. |
| Be realistic about what it’s going to cost to fix the | | | | |