CASE STUDY: CAR RECALLS

Table of Contents

1) Car Recalls: A Problem Unique to Toyota or For All Car Makers?

2) Auto recall crisis, framing, and ethical response: Toyota’s missteps

3) Manufacturing defects in the automobile industry, a case study of the remote causes and effects of Toyota’s transmission malfunctions in cars

4) The Influence of Culture Factors on Defective Automotive Recall

5) The effect on stockholder wealth of product recalls and government action: The case of Toyota’s accelerator pedal recall

6) Who is Leading Whom in the General Motors Recall: Understanding Media Impacts on Public Relations Efforts, Public Awareness, and Financial Markets

Summary

References

1)    Car Recalls: A Problem Unique to Toyota or For All Car Makers?

1. SYNOPSIS

Recalls are a consequence of bad quality product by the manufacturer before the distribution and sales in the market. One of the most remarkable car recalls is by Toyota in 2009 and 2010 due to floor mat and sudden acceleration problems. This cost highly to Toyota and its supply chain members and stakeholders. Previous research on product recall focuses mainly on impact on share market and sales, recall process, role of information on recalls, and so on. The US market recall trends research is rarely conducted. Therefore, this study provides an insight of car recalls trends and relevant information. The main objective of the research is to analyse whether the car recalls are a discrete event.

The research uses the historical car recalls data for the US which obtained from recall websites maintained by public and private organisations. For different car models and manufacturer, the study looks at the frequency recalls, recorded customer complaints and yearly sales data. The analysis shows that the majority recalls are initiated by only a few car makers and Toyota are not the only one to experience the car recall problems. Apart from that, the older car models have more recalls than new models. It is found that most recalls are seen during the first five years of the model year. The analysis also shows that the higher the number of customer complaints, the more the car recalls. It is also identified that more customer complaints are experienced by top six popular car makers.

2. CRITIQUE OF QUALITY

This research uses the secondary data from car recall notices archived by National Highway Traffic Safety Administration (NHTSA). The advantages of using this data are better authenticity of the information and widely available data. However, the data from NHTSA are solely based on US. The most popular car makers in US are mainly from US and Japan. Therefore, the car makers from other countries such as European countries and China are not considered in this study. One of the remarkable car recalls from these car makers is by Volkswagen due to diesel emission scandal [1]. Hence, the insight of this research is only limited to US and Japanese car makers. Further studies of the research should include the data from other countries such as China which have larger market.

The main analysis method used in this research is one-way ANOVA analysis. This method is suitable to be used to determine any significant difference among the data [2]. This research only considers mainly three factors, i.e. frequency of recalls, recorded customer complaints and yearly sales data for different car model year and manufacturer. Further research could be conducted by including factors such as the recall processes, volume of car recalls, and key causes of recalls.

The findings of this research will be useful for car makers, insurance companies and government authorities. For instance, the car makers can decide the warranty period for their next product based on this research. The analysis shows that most recalls occur during the first five years of the model year. Therefore, the manufacturers can consider this as a period for any potential recalls.

2)    Auto recall crisis, framing, and ethical response: Toyota’s missteps

1. SYNOPSIS

This study did an analysis to review news coverage concerning Toyota’s recall crises from 2009 to 2012 due to technical problems. The US government criticized Toyota for conducting the recalls late by giving a total of $48.8 million penalties. Toyota faces huge financial loss and damaged reputation due to recalls and Congressional hearings. To relieve crises, strategic communicators should monitor crisis coverage and work with organizations to revise the news frames by giving suitable answers. However, previous studies did not focus on the organizations’ original crisis responses and often ignore the role played by crisis response strategies. The main objective is to combine crisis management research with ethical analyses of Toyota’s moral responsibility during this series of product failures.

Firstly, they collect sample data to examine news coverage concerning the Toyota crisis. Besides, they used 18 dichotomous response questions and adopted a deductive approach to detect the visibility of five generic news frames: attribution of responsibility, human interest, conflict, morality, and economic frame. This research also classified the crisis types and the response strategies by answering true or false questions according to their operationalized definitions. Lastly, they used chi-square and t-tests to do data analysis and qualitative ethical analysis. Analyses show that media and Toyota were identifying the recalls differently and Toyota were slow to accept their mistake and tried to blame others initially. In conclusion, a deontological ethical analysis can be used to analyse the ethics of the recall issues as soon as issues management identifies any problem.

2. CRITIQUE OF QUALITY

This research collect sample data and do analysis on the collected data to obtain the differences between normal media and Toyota website. Then, a pilot-tested code book will randomly select subsample of the data to get an inter-coder reliability of five generic news frames which is attribution of responsibility, human interest, conflict, morality and economic frame. The advantage of this method is that the analysis are done based on the real-time data which has been proven correct. However, the coding may involve coders’ judgments which vary among individuals. The data obtained are not accurate as the online media source are not included in the sample data.

Besides, Chi-square tests are used to analyze the answer of the research questions. It can test to see whether distributions of categorical variables differ from each another. But the results obtained are quite limited as it only shows whether the two variables are related or not.

This research can help the organization to handle recalls crisis in more efficient and responsible way. This can bring awareness to the organization so that the welfare of the public are the main concerns for the organization. This can enhance the reputation of the organization and slowly build up the trust of public towards them. This brings benefits to both organizations and public.

3)    Manufacturing defects in the automobile industry, a case study of the remote causes and effects of Toyota’s transmission malfunctions in cars

1. SYNOPSIS

Recall of vehicles has been causing negative impact on the automobile industry over the years. Manufacturing defects have always been attributed for the reason for the recalls. Previous researches on vehicle recall did not focus on finding out the root cause of the manufacturing defects. The objectives of this study are to determine if defects are as a result of Toyota’s manufacturing strategy, to examine the role of suppliers in the manufacture of cars and to determine the role of Toyota’s Just-In-Time manufacturing technique.

In other to achieve this, the number of recalls from various automobile companies was investigated, with a detailed case study analysis, with SWOT and PEST analysis on the case study company. The research is limited to automobile manufacturing in the United States of America, concentrating on Toyota Motor Corporation. The research uses data obtained from interviews conducted, transcripts of Toyota executives appearing before the United States Congress and Senate and the BBC 2 video “The Recall”.

The research found that Toyota’s manufacturing function which handles productivity, service, and quality was not properly taken care of while focusing on achieving higher market share. This resulted in quality issues leading to manufacturing defects. Besides, the growth of Toyota also stretches the supply chain to its limit. When the number of production plants increase, traditional supplier could not meet up with supplies, thus a particular part is being used for several model of cars. As a result, in the event of defects, the number of cars to be recalled increases. Apart from that, the research concluded that the sources of defects are mainly operator errors, process condition changes, composition proportion changes and material distribution.

2. CRITIQUE OF QUALITY

Over the year of 2000 to 2009, Toyota automobile maker have been suffering from a rise in recall units. This issue has called to a need to have a study and analysis on the root cause of the recall issue. The research identified that Toyota Corporation have failed to maintain their quality, which oppose to Toyota’s philosophy, “Toyota Way” to produce reliable products. This research used tools such as case study methodology to study the reasons of the recall issues.

The impact of this journal is that the result will contribute substantially to the automobile suppliers, manufacturers and regulatory agencies in the US by providing a detailed analysis on the root causes of defects. The research also recommends ways that to ensure automobile manufacturer produce their products are within the process control limit.

The strength of this research is that the data that is used in the research is sourced from credible sources and directly from people related with the industry. The methodology used was able to effectively identify the cause and effects of the recall problem in a short period of time.

The weakness of this research is its data is sourced from only the US’s car data and it is limited to Toyota Motor Corporation’s car. If more data from various geographical region can be collected and more automobile company’s data can be included in the analysis, the research can provide a better insight on the true root cause of the reason of recalls. Another weakness is that the data for the research was obtained from interviews conducted, transcripts, BBC 2 video “The Recall” and case study methodology. These methods are qualitative studies and often rely on hypothesis during the studies. If quantitative studies can be included, the data and analysis of problem can be more accurate.

4)    The Influence of Culture Factors on Defective Automotive Recall 

1. SYNOPSIS

To some extent culture influence automobile recall in China, not only affect the rise and development of automobile recall, but also affect the recall strategy choice of manufacturers and government or consumer behaviour of automobile recall.

The article analyses the reason of the influence of culture factors on the result and decision of automotive recall. The analysis is based on the statistics made up from recall time, recall quantity, recall situation and recall proportion. The time period of the statistics is from 2004 until 2010.

This article also mentions some relevant measures to avoid the negative influence of culture factors. There is fine tuning analysis of the influences of cultural factors on defective car recall. Nicholas [3] thinks that the game of car recall has two stages of incomplete information. In the process of recall, the government, consumer and manufacturers are in the information asymmetry situation, because manufacturers do not share some information with the government and consumers, it is also called incomplete information game. The impact of recall decisions also stated in the paper.

2. CRITIQUE OF QUALITY

This paper has a very good structure of analysis. On the first phase, it includes the statistics of car recall. The statistics is made up from various variables such as the quantity, situation and the proportion. The time period for the variables is constraints between 2004 until 2010. From the statistics, the research paper comes out with an analysis. The analysis is completed with graph and functions. Based on the paper, the information given is very significant. The graphs show clearly the comparison between US and China. However, the research paper must be more globally rather than focusing on US and China only. Other factors can be included into the statistics.

The cultural factors influence the car recalled in all ways. The largest part is negative effect, therefore it must be a system and understand the characteristics of the international automobile. The advantages must be carried out and avoid the disadvantages. This is very essential to give the best service for traffic safety, people’s lives and property.

5)    The effect on stockholder wealth of product recalls and government action: The case of Toyota’s accelerator pedal recall

SYNOPSIS

In 2009, Toyota recalled some of it automobiles due to unintended acceleration leading to the death of innocent people. This is due to the problems with the gas pedal mechanism that causes the accelerator to become stuck. The problem commenced when one duty police officer and his family died in the crash of his Lexus ES350 back in August 2009 after their car unexpectedly accelerated, crashed into another vehicle. However, this issue has begun in 2007 when the National Highway Traffic Safety Administration (NHTSA) began an investigation in response to consumer complaints of unintended acceleration in Toyota’s Lexus ES 350 model but Toyota blamed on the floor mats which interferes on the pedal. This led Toyota to recall the all-weather floor mats on 55,000 Lexus and Camry models on September 2007. The objective of the paper is to study the effect of Toyota’s faulty accelerator pedal on stockholder wealth. The analysis shows that not all events harm reputation and firm value. The 2007 minor recall had no significant effect on Toyota’s returns and illustrates that some recalls are normal business for the auto industry. The negative news event of the highway crash did not have a significant impact on share prices either. But the 2010 recall that involved 4.6 million vehicles, including the acknowledgment from the company of a potential design flaw, had a significant impact on Toyota’s returns with a negative 19 percent change.

2. CRITIQUE OF QUALITY

Based on the study, it is clearly in the journal was used the data from credible website and information was collected from Toyota’s national website as well as other private sites. The analysis method used was effectively identify the event gives significant effect on the stock returns of the Toyota Motor Corporation.

However, this study only focuses on events regardless of vehicle model.  Researchers need to go further to examine the actual number of vehicles related by models to see which of these models were affected the most.

6)    Who is Leading Whom in the General Motors Recall: Understanding Media Impacts on Public Relations Efforts, Public Awareness, and Financial Markets 

1. SYNOPSIS

Most agenda-setting research focuses on the process in which the media leads the public to think what is important at a point in time [4]. Accordingly, the agenda building research discusses how information institutions such as corporations have the power of setting the media agenda [5]. However, agenda-setting and building theories originated from political election studies.

This study investigated the antecedents, process, and consequences of news coverage in the 2014 General Motors (GM) recall [6]. Relationships among media coverage on GM and its products, share price, GM press releases, public awareness, and financial indicators such as trade of volume are examined. Data were collected throughout year 2014 from four searchable database including public awareness on Google trends, news coverage from Factiva [7], press releases on the GM official website, and trading volume and share price on Yahoo Finance.

In short, results revealed that GM lacked influence on media coverage. Several contingent factors such as restructuring of the company, changes in corporate culture, and the high cost of recalls restrained GM from an active and timely response to the ignition-switch problem.

2. CRITIQUE OF QUALITY

The study covered a comparatively short period of time within the long period of GM’s recalls since 2001. Future research could include a longer time-span for analysis of relationship between the organization, media, and publics. Since current principal theories of communication were primarily developed in a Western cultural context, it might be problematic in explaining the communication behaviour of non-Western people adequately. Multinational comparative study could be conducted to further explore the found media’s agenda-setting and building power in non-democratic countries. Understanding how media emerged as a powerful agenda setter or builder in different contexts would be an important step to explore the agenda-setting or building process in the contemporary world of today.

Summary

The six articles chosen for this case study are generally fall into two categories. The first category is related to massive Toyota car recalls in 2009 and 2010, whereas the second category consists of other studies rather than Toyota car recalls case. Table 1 and 2 summarises the research articles in both categories.

Table 1: Research articles related to Toyota car recalls.

Title	Author and Year	Objective
Auto recall crisis, framing, and ethical response: Toyota’s missteps	Bowen and Zheng (2015)	To combine crisis management research with ethical analyses of Toyota’s moral responsibility during this series of product failures
Manufacturing defects in the automobile industry, a case study of the remote causes and effects of Toyota’s transmission malfunctions in cars	Lucky and Takim (2015)	To determine if defects are a result of Toyota’s manufacturing strategy, to examine the role of suppliers in the manufacture of cars and to determine the role of Toyota’s Just-In-Time manufacturing technique
The effect on stockholder wealth of product recalls and government action: The case of Toyota’s accelerator pedal recall	Gokhale et. al (2014)	To study the effect of Toyota’s faulty accelerator pedal on stockholder wealth

The three research articles in Table 1 analyse the Toyota car recall cases in three different aspects. Bowen and Zhang [8] carried out research on the crisis management of Toyota and ethical analyses of Toyota’s moral responsibility during the period of their product failures. The analysis shows that Toyota were slow to accept the mistake and try to blame others initially over the incident. Meanwhile, the work by Lucky and Takim [9] shows that manufacturing defects in Toyota product was due to their failure to maintain the quality. Gokhale et. al [10] shows that there is no significant impact on Toyota’s returns and share prices from the product recall due to faulty accelerator pedal in 2009.

On the other hand, the three research articles in Table 2 look into research rather than Toyota car recall case. In 2012, Ahsan [11] shows that the recalls were only initiated by few car makers and the problem was not unique to Toyota. Besides, it is also shown that car model year and customer complaints are two main factors to affect the frequency of car recalls. The work by Lanxiang et. al [12]discussed various negative impact of culture factors on the car recall in China such as high complaint cost, low car recall illegal fine and punishment measures. Cheng [13] revealed that with the context of the GM recall, media coverage was a useful predictor, playing a strong role as an agenda-setter, and could lead to setting of public and organizational agendas.

Table 2: Research article rather than Toyota car recall case

Title	Author and Year	Objective
Car Recalls: A Problem Unique to Toyota or For All Car Makers?	Ahsan (2012)	To analyse whether the car recalls are a discrete event
The Influence of Culture Factors on Defective Automotive Recall	Lanxiang et. al (2012)	To analyse the reason of the influence of culture factors on the result and decision of automotive recall
Who is Leading Whom in the General Motors Recall: Understanding Media Impacts on Public Relations Efforts, Public Awareness, and Financial Markets	Cheng (2016)	To investigate the antecedents, process, and consequences of news coverage in the 2014 General Motors (GM) recall

References

[1] B. L. Jr. and C. Wang, “Volkswagen to recall 83,000 vehicles to settle allegations of cheating emissions tests,” CNBC, 20-Dec-2016.

[2] “One-way ANOVA – An introduction to when you should run this test and the test hypothesis.,” Laerd Statistics. [Online]. Available: https://statistics.laerd.com/statistical-guides/one-way-anova-statistical-guide.php. [Accessed: 24-Apr-2017].

[3] N. G. Rupp, “Essays in automotive safety recalls,” Texas A&M University, 2000.

[4] Ji.-H. Zhu and B. Deborah, “Media Agenda-Setting Theory : Telling the Public What to Think About,” Emerg. Theor. Hum. Commun., pp. 88–114, 1997.

[5] J. R. Freeman, “Granger Causality and the Time Series Analysis of Political Relationships,” Am. J. Pol. Sci., vol. 27, pp. 327–358, 1983.

[6] O. H. Gandy, Beyond agenda-setting: Information subsidies and public policy. Norwood, NJ: Ablex, 1982.

[7] H. D. Wu, R. L. Stevenson, H.-C. Chen, and Z. N. Guner, “The Conditioned Impact of Recession News: A Time-Series Analysis of Economic Communication in the United States, 1987-1996,” Journal. Q., vol. 14, pp. 19–36, 2002.

[8] S. A. Bowen and Y. Zheng, “Auto recall crisis, framing, and ethical response: Toyota’s missteps,” Public Relat. Rev., vol. 41, no. 1, pp. 40–49, 2015.

[9] B. O. Lucky and S. Takim, “Manufacturing defects in the automobile industry, a case study of the remote causes and effects of Toyota’s transmission malfunctions in cars,” Int. J. Eng. Appl. Sci., vol. 2, no. 8, pp. 15–29, 2015.

[10] J. Gokhale, R. M. Brooks, and V. J. Tremblay, “The effect on stockholder wealth of product recalls and government action: The case of Toyota’s accelerator pedal recall,” Q. Rev. Econ. Financ., vol. 54, no. 4, pp. 521–528, 2014.

[11] K. Ahsan, “Car Recalls: A Problem Unique to Toyota or For All Car Makers?,” Proc. 2012 Int. Conf. Ind. Eng. Oper. Manag. Istanbul, Turkey, pp. 2027–2036, 2012.

[12] L. Lian, G. Li, X. Chen, and C. Hu, “The influence of culture factors on defective automotive recall,” Proc. 2012 24th Chinese Control Decis. Conf. CCDC 2012, pp. 3420–3424, 2012.

[13] Y. Cheng, “Who is leading whom in the General Motors recall: Understanding media impacts on public relations efforts , public awareness…,” Res. J. Inst. Public Relations, vol. 3, no. 1, pp. 1–25, 2016.