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Toyota lessons lost on Takata as it resists US recall order

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Takata Corp's resistance to a US order to expand a recall of its air bag inflators is likely driven by a need to protect itself from legal liability, but risks longer-term business damage by alienating the public, experts say.

[TOKYO] Takata Corp's resistance to a US order to expand a recall of its air bag inflators is likely driven by a need to protect itself from legal liability, but risks longer-term business damage by alienating the public, experts say.

Takata this week rejected a National Highway Traffic Safety Administration (NHTSA) demand to declare its inflators defective and call in vehicles US-wide for replacement. An existing recall is limited to a few hot and humid states. In a letter, Takata queried NHTSA's justification for the order while a cause for why its inflators can erupt with excessive force is still unclear. The Japanese firm left it up to automakers to decide whether to expand the recall.

"Takata's approach reflects ignorance or denial of the reality that the court of public opinion can put you out of business long before a court of law decides about liability," said Jonathan Bernstein, president of California-based Bernstein Crisis Management.

Takata's response drew criticism from US regulators and lawmakers. In Tokyo, government officials privately expressed shock and concern, with one bureaucrat saying it would be "disastrous" for Takata to fight NHTSA's demand as Japan frets about the broader reputational impact on its auto industry.

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Defective Takata air bag inflators, which can explode and shoot shrapnel into the car, have been linked to five deaths. More than 16 million cars have been recalled globally since 2008, the bulk by Takata's top customer Honda Motor Co.

Takata's approach is in contrast to Toyota Motor Corp's handling of a massive recall in early 2010. Toyota was slammed for its initial response to cases of unintended acceleration in its cars, but got back on track, providing something of a blueprint for how to steer through such crises.

Toyota insiders said CEO Akio Toyoda was a driving force for transparency and accountability. "Mr Akio gave me three requirements," Steve St Angelo, then Toyota's quality chief in North America, told reporters in Japan recently.

"First, never lie, even if it hurts Toyota; second, don't blame anyone for our problems - not the government, the media, and certainly not the customer. And third, don't ever, ever put the safety of our customers in jeopardy. If it's black and white, you take fast action. If you're not sure ... you (err) on the side of customers' safety," he recalled.

Crisis management experts say Takata's top executives are wrong to not openly go public with what they are doing about the air bag inflator problems.

Shigehisa Takada, Takata's CEO and the third-generation head of the founding family, last appeared publicly at a closed-door shareholders' meeting almost six months ago. His deputy, Stefan Stocker, has also kept a low profile, and Takata is represented at US congressional hearings by Hiroshi Shimizu, a senior vice president with no executive title.

People who have met Mr Takada recently say he appeared to have little sense of crisis, believing the problem will blow over in time.

"Even though it's a business-to-business company, there are consumers at the end of its products," said Hiroshi Osada, professor at Bunkyo University and member of an external panel that audited Toyota's quality management during its 2010 crisis.

"It's unacceptable that top executives haven't come forward yet. It speaks to the attitude they have towards this crisis."

Takata says senior executives have no immediate plans to hold a news conference, while lawyers have instructed its public relations staff to avoid meeting with journalists.

REUTERS

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