Special Story 1

The Quality Issue: Background and Future Prospects - Seeing the Quality Issue as an Opportunity for Renewal and Improvement / Firm Action Throughout Its Operations in Each Field

Product Quality - How Toyota's Mainstay Became an Issue and How It Will Be Addressed Moving Forward

Toyota has been able to achieve strong growth, positioning product quality as its corporate mainstay and earning acceptance in markets throughout the world, based on the reliability of its products. However, as Toyota grew, its customer base expanded and diversified, and customer expectations increased. At some point, we believe that the company was not sufficiently aware of these elevated customer expectations. These factors form the backdrop for the recent problems related to safety and confidence. Toyota views these issues as an opportunity for renewal and improvement and every single employee will participate proactively in meeting the challenge of redressing the problems.

Background on Quality Issues

Customers' Expectations/Demands

Customers' Expectations/Demands

During the last decade, Toyota expanded its production and made advances in order to satisfy the needs of worldwide customers buying Toyota vehicles. As the business grew, the company contributed jobs and trade to the local economies in each country and region it entered, enabling it to reinvest the profits earned from growth into green technologies and other development initiatives for the future. However, it appears that the company's growth at times outflanked the available management skills, as seen in the company's overstretched logistics and imperfect human resource development.

As Toyota grew, its customer base expanded and diversified, and customer expectations increased. As an automaker, Toyota has made continued efforts to understand safety and confidence objectives from a technological and professional standpoint and was able to achieve them in material terms. However, because of a disconnect between the manner in which the company and its customers defined these requirements, Toyota was not always able to fully respond to customer expectations.

With regard to the recent issues, efforts to ascertain the accuracy of customer opinions, which were at odds with results in past cases, were forestalled by the company's initial engineering-oriented approach. As an automotive company focused on engineering, this initial focus was understandable and typical. Nonetheless, there was an unrecognized gap in perspectives between the automaker and its customers. We believe this gap was caused by a lack of systematic efforts to share information by staying close to the customer; it was an adverse effect of business globalization. The inertia and bureaucracy that characterize many big firms impeded internal and external communications and resulted in slow responses to emerging customer concerns. We believe these obstacles all came to a head as we were preparing to address the recent safety issues. As a result, the company failed to meet its customers' expectations for safety and confidence. Toyota views this issue as an opportunity for renewal and improvement; we will encourage every employee to address the issues proactively by re-examining and recommitting to principles such as Customer First, the Customer's Perspective and Genchi Genbutsu (on-site, hands-on experience). Specific actions are outlined by segment in the chart at right. People have grown older and society has changed over the last decade, and the demands we make of each employee must be adjusted accordingly. All employees will continuously reaffirm their commitment to pursue the best practices in their daily work. When there are problems, it's important to keep asking "why?" in pursuit of the root causes.

Overview of a Recent Series of Quality Management Issues

Following the floor mat issue in the U.S. in November 2009, Toyota announced a voluntary safety recall on January 21, 2010 on some Toyota-brand vehicle models sold in the U.S. for the accelerator pedal problem. On February 9, Toyota announced a recall in Japan, the U.S. and Europe on four models, including the new Prius, for a brake problem. Details of the problems and remedies for these markets are as follows:

Problems Incidents Remedies
Floor mat If improperly secured in the vehicle, some floor mats used in the U.S. may move forward and hold the accelerator pedal down in a fully or partially open position. Exchange for the proper floor mat.
Reconfigure the shape of the accelerator pedal.
Change the shape of the driver's side foot-well on some models.
Accelerator pedal In the accelerator-pedal assembly of affected vehicles, condensation resulting from cold-weather use of the heater or other causes may form on the worn surface of what is known as a friction device. If this occurs, there is a possibility that, in the worst case, the accelerator pedal returns slowly, or does not return, to its idle position. Install a precision-cut steel reinforcement bar into the accelerator-pedal assembly that creates a space to reduce the surface tension between the friction device and a component called the pedal arm.
The bar also strengthens the reaction force of the spring that returns the accelerator pedal to its non-pressed position.
Anti-lock Braking System (ABS) Braking performance may be reduced, resulting in increased braking distance (compared to performance before ABS activation) when vehicles switch at low speed to hydraulic braking-only to activate ABS, which is used to stabilize handling on slippery surfaces, such as snowy and icy roads. Correct ABS software program to prevent a reduction in braking performance.

Special Committee for Global Quality Launched
to Achieve a More Safety- and Confidence-based Customer Interface

Any time a problem should occur, it is Toyota's practice to thoroughly determine the root cause, take corrective actions and press ahead with further improvements. This is an article of faith that has been firmly embraced since the foundation of the company. In response to the recent series of problems, the Special Committee for Global Quality, chaired by President Akio Toyoda, was formed on March 30, 2010. The purpose of the Committee is to listen more respectfully than ever to customers from every region, demonstrating the company's concerted commitment to a fundamental review of our operational attitudes and establishing a customer interface across Toyota's entities worldwide, in every business sector. Improvement plans worked out by the Committee will be verified and assessed by four external advisors as well. Assessment results of the latest meeting will be released to the public in good faith and in a timely and appropriate manner.

Establishment of the Special Committee for Global Quality

Objective for Establishment of the Special Committee for Global Quality

Review all the working steps from the customer's perspective, through the new interface, and reinforce the quality control system:

Development, procurement (suppliers), production, engineering, sales and service

Key Objectives Identified by the Special Committee for Global Quality

Genchi Genbutsu Early Detection and Early Resolution (EDER) based on customers' voices
Human resource development that reinforces our Customer First approach
Assessment by outside experts
Product development focused on customer safety and confidence
Independence of quality management activities in each region of the world

Toyota formed the Special Committee for Global Quality chaired by President Akio Toyoda and, thereby implemented a series of approaches to address a deterioration in information gathering and inconsistencies that arose in information sharing practices between headquarters and the regional offices. These problems are seen to be the harmful side effects of the rapid globalization. The committee aims to reconstruct quality management procedures thoroughly, region by region, and this should eventually reinforce the global quality management system substantially. In addition to examination of the procedures and systems by the Quality Function Board, an additional executive-director-level meeting, the Special Committee for Global Quality, will be held.

Toyota's internal functions, including newly appointed Chief Quality Officers (CQO), represent customer voices from North America, Europe, China, Asia, Oceania, the Middle East, Africa and Latin America. As they looked into the factors that had caused the recent recall and other quality issues, attendees carried out retroactive studies on all the work processes, including Design Quality, Manufacturing Quality, Sales Quality and Service Quality. Recovery plans were worked out toward their solutions in light of customer perspectives from each region, stressing the need to reinforce global information sharing procedures while preserving the visibility of activities. The meeting process and the quality analyses were disclosed to the press on the same day at a press conference where President Toyoda said," It has been my belief that, in order to regain their trust, nothing should be more important than sincerely listening to our customers' voices. We are fully committed to executing the plans set out by the Special Committee for Global Quality, including a concerted effort by dealers, suppliers and manufacturers to regain the trust of our customers." Toyota will continue to improve its working procedures in every region of the world, pressing forward with the plans of the Special Committee for Global Quality and other joint activities that closely involve all of our overseas entities and dealers.

Organizational Position of the TMC Special Committee for Global Quality (as of March 30, 2010)

Organizational Position of the TMC Special Committee for Global Quality (as of March 30, 2010)

Chief Quality Officer (CQO) Teams

North America Steve St. Angelo, TMC Managing Officer
Europe Didier Leroy, TMC Managing Officer
China Masahiro Kato, TMC Managing Officer
Tian Congming, Senior Vice President of FAW Toyota Motor Sales Co., Ltd. (FTMS)
Han Xinliang, Senior Vice President of Tianjin FAW Toyota Motor Co., Ltd. (TFTM)
Feng Xingya Senior Vice President of Guangzhou Toyota Motor Co., Ltd. (GTMC)
Godfrey Tsang Vice President of Toyota Motor (China) Investment Co., Ltd. (TMCI)
Asia and Oceania Mitsuhiro Sonoda, TMC Managing Officer
Surapong Tinnangwatana, Senior Vice President of Toyota Motor Asia Pacific-Engineering and Manufacturing Co., Ltd. (TMAP-EM)
Vince S. Socco, Senior Vice President of Toyota Motor Asia Pacific Pte Ltd. (TMAP-MS)
Middle East, Africa,Latin America Hisayuki Inoue, TMC Managing Officer Katsutada Masumoto, TMC Managing Officer
Japan Katsutada Masumoto, TMC Managing Officer

Specific Measures to Improve Safety and Quality

Strengthened Monitoring Function: The Early Detection and Resolution of Problems

We will improve the safety decision-making process and speed of implementation by strengthening quality information gathering systems near customers in each region and rapidly and accurately analyzing collected information. Furthermore, we will take the following measures to prevent safety issues before they occur.

(1) Strengthening the Information Gathering Function

Responding to customer concerns regarding unintended acceleration: In the United States, the Swift Market Analysis Response Team (SMART) strives to respond to customer voices/concerns about unintended acceleration within 24 hours of notification, in principle, by the customer. If requested by the customer or otherwise necessary, an appointment is made to inspect a vehicle for concerns relating to unintended acceleration. These inspections are conducted by trained technical staff and include an analysis of safety-related information gathered from the customer and the dealer as appropriate. In addition to investigating the phenomenon reported by the customer, vehicle control data is gathered and parts are collected as necessary. In May 2010, the Design Quality Innovation Division was established within the technical divisions to reflect customer feedback in vehicle design, improve the quality of design drawings, and develop human resources. Also, we will take thorough preventative measures that include gathering Japanese and overseas market information by SMART members as well as the inclusion of any necessary countermeasures in the development of each design.

(2) Increasing the Number of Technical Offices

Comprised of several experts in the service, R&D and quality control areas, technical offices are established in each region to enhance our gathering and communication of technical information that is used to determine the necessity of recalls and to improve quality. We are increasing the number of technical offices in North America from one to seven, and are establishing new technical offices in other regions, including seven in Europe and six in China.

(3) Using EDRs and Remote Communications Functions to Assist Root Cause Analysis

Onboard event data recorders*(EDRs) record driver operation and vehicle performance data before and after an impact for use, if the customer agrees to such an investigation, in investigating the cause of an accident. Many models in Japan and the United States already have an onboard EDR, and by the end of 2010, they will be included in all Toyota vehicles in the United States. In addition, we will expand deployment of read out tools.

*Event data recorder (EDR): A device that records acceleration, braking and other vehicle performance conditions for analysis when an impact occurs.

(4) Strengthening Information Analysis and Improving the Safety Decision-Making Process

We created an Integrated Quality Information System for the uniform management of customer complaint information from dealers and distributors, as well as warranty repair and market-specific technical information from a variety of sources. This was done to strengthen our ability to target the early detection and resolution of problem areas. In the safety decision-making process, customer representatives from each region participate in recall review meetings to improve the mechanism for accurately reflecting customer feedback and regional concerns.

Early Detection and Early Resolution Based on Reinforced, Information Gathering and Genchi Genbutsu

Early Detection and Early Resolution Based on Reinforced, Information Gathering and Genchi Genbutsu

Strengthening Information Disclosure: Regaining Trust through Comprehensive Communication

Toyota is enhancing the effectiveness of our quality improvement activities. To this end, Toyota will release the results of third-party expert reviews and assessments of the improvement measures adopted by the Special Committee for Global Quality. Also, Toyota will work closely with dealers to promote safer driving by providing customers with comprehensive information regarding safety technology, safe driving methods and other awareness tools that contribute to the safe use of vehicles.

Human Resource Development

In July 2010, we established five Customer First Training Centers (CFTCs) to maintain quality, Toyota's lifeline, and further develop our human resources, in Japan, North America, Europe, Asia and Oceania, and China. The training program specializes in the cultivation of quality control experts and location-specific problems, employing people who have been trained for specific regional programs. The programs include Basic Training, which focuses on the essence of the customer first philosophy, the importance of quality and the Toyota way, and Expert Training, which cultivates expertise based on quality case studies. The first training center, set up in Japan in May 2009, is already developing additional programs to be conducted at new centers as they are established.

Five Quality Professional Training Centers (CFTCs) Are Established Around the World

Actions by Segment

Segment Action
Governance Committee for Global Quality was formed in a concerted effort to fundamentally review the corporate approach toward reinforcement of the customer's s perspective.
Safety-related Briefing Tools, etc. The Safety Guide Book, a manual for safety education, was revised.
Toyota ASCA*Society An internal discussion session was carried out to discuss the Quality /Recall Issue.
Development /Design 13 issues were extracted and counteractions were developed. New organizations, the Design Quality Innovation Div. and the Product Audit Dept., were formed.
Procurement Joint activities with suppliers were pushed forward to achieve a comprehensive high-quality standard.
Production More complete "customer's perspective" shop floor (monozukuri) work practices are under way to strengthen the design-based production activities aimed at eliminating defects.
After-sales service A variety of safety/security-related briefing tools were created and distributed, reflecting the recent issue. In overseas markets, the group's technical offices were reinforced with new work practices to ensure a prompt response to quality issue information and the development of effective solutions.
Example of dealers' initiatives An initiative of Tokyo Toyopet Motor Sales Co., Ltd. to New Prius recall with the top priority on confidence of customers.
Example of overseas initiatives (N. America) An initiative on accelerator-pedal related recall for prompt response.
Customer Satisfaction Improvement A directors' meeting was held to discuss what we can learn from the quality issue and how to utilize that knowledge, the subject brought up by the TQM Promotion Division.
Dealer Support Briefing sessions were carried out for local dealers in China, where engineers reinforced Toyota's commitment to quality, safety and security.
Communication Tools were created to explain the safety of Prius and SAI.

*Advisory Specialist for Consumer's Affairs

The Third-Party Evaluation Report

Toyota received an assessment — of our quality-assurance review-and-improvement measures — prepared by the Union of Japanese Scientists and Engineers (JUSE), which is a non-TMC-affiliated organization specializing in quality control, and four JUSE recommended experts.

The assessment focused on the measures adopted at the first meeting of our Special Committee for Global Quality, held on March 30, 2010 and chaired by President Akio Toyoda.

At the second meeting of the Special Committee for Global Quality, which is scheduled for October, Toyota plans to review the status of the quality-assurance-improvement measures it has undertaken, including those based on the assessment.

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