The Toyota Train Wreck

It almost seems unfair to pile on criticism of Toyota, but for a company that has done so much that is right for so many years, it’s startling to see how badly they missed handling this crisis.

Toyota has been a shining star of the automobile industry for a very long time. Along with the Civic and Accord from Honda, with the Corolla and Camry, they built a mass market appreciation in the US for a high level of quality and styling that put US carmakers on the defense. As their market share and reputation grew, they took on the big boys–the European luxury cars like Mercedes and BMW through a new marque–the Lexus. More recently they won my particular admiration for the vision, courage, engineering and design prowess that resulted in the Prius. Ford, GMC and Chrysler were dolts in comparison.

Now Toyota is mired in a horrific reputational crisis that appears to worsen by the day. Every pundit on the planet has theories about what Toyota has done wrong and what, if anything, they should do to repair the damage.

Here is what I know about reputation. It’s like the stock market: it takes a long time for the market to rise enough to become a true bull market. Then the “market” or “reputation” becomes a sure thing with endless upside. But the descent into a bear market/sullied reputation happens so fast that one bears the scars of the “bear claws” for a long time.

My guess is that Toyota is a deer in the headlights and totally in the power of their legal department. Thus, no information is forthcoming because any statement could become fodder for lawsuits. I have worked in corporations like this. You know what else? They aren’t telling their employees anything either. It takes an unbelievably brave and self-confident CEO to take control of a situation like this and, if anything, OVERcommunicate, say mea culpas, and create a path forward.

Toyota simply has no experience in being a bad guy. But bad they have been, and they will carry the burden for a long time.

The End of Pontiac: A Cautionary Tale Of Brands That Were Loved Too Much

CNN just reported that Pontiac will end. This is further evidence of the frequently reported fact that that GM has”too many brands”. Which leads me to wonder how and why that could happen.

GM is a classic house of brands:

The GM brand portfolio

Today (prior to the demise of Pontiac), GM offers a total of 101 vehicles across a collection of 8 brands. Toyota, the world’s biggest car company, has 3 brands (Toyota, Lexus, Scion) and 75 vehicles, 59 of which are under the Toyota brand. Lexus is a fairly limited luxury brand, and Scion is a tiny niche brand, so the Toyota name stands out loud and clear. Is that a factor? Was it  sibling rivalry run amok, with no real parental control? 

I recently had the very good fortune to speak to a former GM senior marketing executive, and he provided support for my hypotheses and gave me additional background on how and why GM brands became a problem rather than an advantage.

GM was essentially formed as a holding company, which is the way that a house of brands is built. Historically, the individual car companies had a great deal of autonomy, which was balanced by strong central planning from the finance perspective. This worked quite well while the US was dominant in the auto industry. Over time, as the business became more competitive, GM adopted professional product management practices.

Branding at this point was at the the product line level (e.g., Camaro, LeSabre), not the general car company. With 50 or 60 different product brands clamoring for attention, it was confusing for the consumer and the sales people. Enter Toyota, and its simple message of quality.

Needless to say, the center could not hold, and the fragmented system of product managers ended. Focus then returned to the general car brands. And each car brand, of course, had its own advertising agency, which was fully invested in protecting its client no matter what the brand perceptions or sales data might suggest. Plus, each car company had its own system of brand tracking and success factors that probably obscured looming problems. That’s what I meant about sibling rivalry.

Like any parent, it was virtually impossible for GM to tell one of its offspring that it was loved less than the others, so despite increasing evidence that there were too many brands, senior management held on. Yes, I know that it was much more complex than this–dealership pressure, union issues, manufacturing and R&D commitments, etc. And from what I hear, the shut down of the Oldsmobile brand was painful in the extreme.

Is there a moral to this story? Let me suggest the following:

• Companies with different brands that compete against each other owe it to themselves to establish a single, consistent approach to brand metrics. Diageo, for example, is famed for this.
• Don’t let tradition and emotion and years of promises to sell more product get in the way of business decisions. Just like in certain families, an intervention is sometimes called for.
• An architecture built on a master brand can offer real power and efficiency, despite the protestations of your ad agency or brand identity firm. And you can have a house of brands that breaks into master branded product portfolios.

I’m sad about the end of Pontiac. I was sad about the end of Oldsmobile. As an American of a certain age, I still had a sense of these brands standing for different things. It would be good to see GM move through this painful process as quickly as possible. Let’s get past it, and then find a way to celebrate and share the word about the resurgence of value and quality from GM and all the Detroit automakers.