Toyota Ethical Audit

Toyota Motor Corporation, commonly known as Toyota, is a global corporation headquartered in Japan. At its climax, Toyota employed approximately 320,000 people worldwide. It is the world’s largest automobile maker by sales. The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father’s company Toyota Industries to create automobiles. Toyota also owns and operates Lexus and Scion brands and has a majority shareholding stake in Daihatsu and Hino Motors, and minority shareholdings in Fuji Heavy Industries, Isuzu Motors, Yamaha Motors, and Mitsubishi Aircraft Corporation.

The company includes 522 subsidiaries. In 2009-2010, the company was heavily in debt and had to request a loan of more than $3 billion from a bank backed by the Japanese government. Its net income was 153 billion yen ($1. 68bn; £1. 06bn) after a loss of 164 billion yen a year earlier. Toyota confirmed its estimate that it would lose about $2bn (? 1. 23bn) in costs and lost sales from its worldwide recall of potentially faulty vehicles.

The objectives of writing this ethical audit report on Toyota are: I. To identify the ethical dilemmas facing by the company. II. To discuss the evaluation of the relative importance of the dilemmas and how Toyota is currently dealing them. III. Also to explain Toyota ethical best practices and values. IV. And lastly, to give recommendations that will enable Toyota to give appropriate answers to its critics. An ethical dilemma is a situation where in moral precepts or ethical obligations conflict in such a way that any possible resolution to the dilemma is morally intolerable. In other words, an ethical dilemma is any situation in which guiding moral principles cannot determine which course of action is right or wrong.

Below are some of the ethical dilemmas Toyota is facing. According to Plantes (2010), “Toyota is manufacturing unsafely cars that lead to failing brakes and uncontrollable self-accelerating gas pedals. At the same time, Toyota was producing new vehicles with known safety flaws and advertising their vehicles to be the safest and highest quality vehicles on the road. (Ejaz, n. d. ). But Toyota is accused of putting profit ahead of people, not just people but customers and their safety, the ultimate business sin.

It has been described as slow moving, secretive and perceived as trying to cover up problems rather than address them head on. (Refer to Appendix 2 for some pictures of Toyota unsafe cars that lead to accident. ) On February 3, 2010, the National Highway Traffic Safety Administration (NHTSA) announced that it had received reports from 102 drivers of possible problems related to the braking system on the MY 2010 Toyota Prius, including four of crashes. Same complaints of over 200 reports was also received by Toyota from drivers in the US and Japan.

Three of these reports claimed that brake problems had led to the car crashing, with one accident in July 2009 occurring when a Prius crashed head on into another car injuring two people. This is the latest problem Toyota company is facing. (BBC, 2010). Gu (2010) said “Toyota and its stock have been hammered over the past year (2009) by reports that thousands of Toyota and Lexus models had crashed due to a combination of sudden, automatic acceleration and unresponsive brakes. But it turns out, according to preliminary testing by the federal (NHTSA), the crashes were probably due to thousands of cases of human error”.

To demonstrate the problem of relying on power-assisted brakes in the case of sudden and uncontrollable acceleration, the attorney for Guadalupe Gomez explained the details of his client’s case, “He [Gomez] was held hostage for 20 miles on a Bay Area freeway by a 2007 Camry traveling more than 100 mph. Gomez was unable to turn off the engine or shift into neutral and then burned out his brakes before slamming into another car and killing that driver. ” (Ejaz, 2009). Some questions and confusion exist if the Toyota explanation fully accounts for all instances of the unintended acceleration involving Toyota vehicles.

CTS Corporation, the American manufacturer of the electronic accelerator pedals that Toyota claims are at fault, has announced that: “The problem of sudden unintended acceleration has been reported to have existed in some Lexus vehicles and Toyota vehicles going back to 1999, when CTS did not even make this product for any customer, CTS believes that the rare slow return pedal phenomenon, which may occur in extreme environmental conditions, should absolutely not be linked with any sudden unintended acceleration incidents”. (Wikipedia, 2010).

Liker and Hoseus (p. 12) pointed that “people are the most important assets of Toyota and determinant in rise and fall of the company”. Toyota is a unique blend of Japanese culture. Toyota had been struggling in developing the culture at the plant. A big part of the challenge is that Toyota’s culture evolved in Japan where the culture is quite different from U. S. culture. The way of thinking between the Eastern and Western are quite different. To change employee or organization culture is a huge challenge to a company. (Liker & Hoseus, p. 20-28).

Fernando (2010) quoted that “Jeff Kingston of Temple University in Japan thinks the entire Toyota disaster has its roots in Japan’s deferential corporate culture. Essentially, design problems weren’t sufficiently challenged and critical information wasn’t relayed properly to management due to Toyota’s traditional Japanese corporate culture”. The company has been widely criticized for its handling of the failing brakes and uncontrollable self-accelerating gas pedals problem. But a professor at Rollins College says cultural differences may be to blame.

International business professor Donald Rogers says in Japan it’s rare for a company to ever make a public apology about anything, and Toyota has already apologized three times. “To apologize a second time is unusual. To apologize a third time is almost unheard of,” said Rogers. “We’re got Americans who are thinking that Toyota hasn’t done enough, and we’ve got folks from the Japanese cultural and legal system who believe that Toyota has done far more than they ought to. ” (Hinton, 2010). In 2001, the Toyota way was introduce. (The Toyota Way describes the 14 principles that form the foundation of this uniquely successful management style).

When Toyota way was introduced, employees at Toyota found it difficult to adopt with it. According to Fackler, (2007), “Toyota Way does not occupy much space on the office wall, but Latondra Newton (General Manager Toyota North America) calls it the hardest thing for Toyota’s new American employees to accept, those colored bar charts against a white bulletin board, in plain view for all to see”. No manufacturer can claim to be world class if its soft assets aren’t handled just as efficiently as its inventory. Toyota (hopefully) has learned this the hard way. (Fernando, 2010).

Power Distance: This is the extent to which the less powerful members of the society expect and accept that power is distributed unequally. Neither the United States nor Japan stand out markedly on this dimension compared to the world average. This could make it challenging to spread the standardized work and aggressive targets from the top that are characteristic of Toyota’s system. Individuality: This is the extent to which individuals are integrated into groups. The United States score the highest in this dimension, while Japan is much more collectivist country.

The Toyota Way emphasizes teamwork. The team comes before the individuals. Masculinity: This refers to the degree to which the society is dominated by male values that have particularly assertive and competitive orientations. Both United States and Japan are above average in masculinity. Certainly Toyota grows up with male domination. Uncertainty Avoidance: This addresses the society’s tolerance for uncertainty and ambiguity. Japan is near the top of the world on uncertainty avoidance while the United States is considerably below average. The world beating Toyota is known as conservative.

Long Term Orientation: Countries that have a long term orientation value thrift and perseverance. The foundation of the Toyota Way model is long term thinking. Patience and perseverance are both highly valued within Toyota. (Liker & Hoseus, p. 22) (Refer to appendix1 for Hofstede chart) Slavery and human trafficking According to Ejaz (2009), Toyota has thousands of “karoshi” claims each year. This word means “overworked to death”. Their plants have very high suicide rates as well. At Toyota, when an injury has happened to an employee, on the job they are layer off, and get no compensation.

Toyota is well known for their union busting, which has damaged a lot of small countries all around the world. Reducing the standards of living amongst the countries citizens. There are already 1800 proof positive in the US where employees at the Kentucky plant have been injured, fired, and they disappear from the compensation pay roll. This happens at a rate of 400 Americans per year working at Toyota. Toyota builds their plants in the poorest states to take benefit of the lowest pay in the country. Many workers have been kept on as temporary workers for over 4 years.

Their aim is to lower the average wages in America. Toyota is one of the world’s most profitable corporations, yet the more profits they make, the more they lower worker wages . So basically Toyota uses the cheapest materials, and the poorest workers to manufacture them. Each and every employee has his/her own right. Some of the major types of employee rights are: Right not to be terminated without just cause, Right to due process, Right to privacy, Right to know, Right to workplace health and safety, Right to organize and strike and also Right regarding plants closings (Weiss, p. 361).

But still in Toyota, low workers are not regarding as part of the organization employees. Create dangerous safety issues. After knowing the Create dangerous safety issues, the management of Toyota were so glad for knowing what went wrong with their products (cars). Immediately they heard about it, Akio Toyoda President and CEO of Toyota Motor Corporation, apologizes to the public that “I am deeply sorry about the inconvenience and concern caused to our customers and others, We, the ones supposed to relate to people the attractiveness of automobiles, have instead imparted on them worry.

I regret this more than anything. ” (Los Angeles Times, 2010) and then recall of affected cars was made. Akio Toyoda further testified that Toyota was launching a national campaign allowing any Toyota owner affected by a recall to have their vehicle picked up, repaired and returned to them by their local Toyota dealership ensuring that the consumer would not be required to get behind the wheel of their potentially defective vehicle.

In addition, Toyota agreed to reimburse the consumer for all transportation expenses incurred while the repair was in progress. (24-7 Pressrelease, 2010) According to Contract Theory, under its duty to comply, product must be reasonably safe for its intended use and also consumer can bear risk if all these 4 conditions met: 1). They know the risk exists, 2). They can appraise the risk’s probability & severity, 3). They can cope with the risk and 4). They refuse to pay more to reduce the risk.

In theory, it stated that the responsibility of manufacturers for harm resulting from defective products is that specified in a sales contract The relation between buyer and manufacturer or seller is viewed in this theory as a contractual relation, which is subject to a term of contract (Boatright, p. 296). So, Toyota here follows this theory, in the sense that the harm resulting to their products or customers, the company is the one responsible to handle the issue or to repair the affected car as long as there is term of contract.

But consumers are the ones to bear the risk if the four conditions of the duty to comply met. Recalling of cars is just an example on how Toyota is handling the issue. According to Liker and Hoseus (p. 1), “M Kiichiro Toyoda the founder of Toyota described Toyota culture as when each person fulfilling his or her duties to the utmost can generate great power when gathered together, and a chain of such power can generate a ring of power”. Toyota is a Japanese based company, it has numerous bases throughout the world, localizing the company.

This enables the organization to adapt and better culturally understand the countries it is operating in. By setting up subsidiaries within the target countries, the consumers and the organization have a shared cultural understanding, thereby minimizing cultural conflicts. For example, company subsidiaries such as Toyota Motor Sales, U. S. A. , Inc. allow for a much easier cultural understanding since Americans are marketing and selling to other Americans, not Japanese to Americans. (Bruner et el, 2008).

Toyota’s success stems from vision and dedication to a set of common principles the Toyota Way. Its five core values express the beliefs and values shared by Toyota. All Toyota team members, at every level, are expected to apply these values in their daily work and relations with others. By going to the source of information to make correct decisions, by continuous improvement, by embracing challenges and by respecting customers and each other more than 700,000 people worldwide contribute every day to the success of the Toyota team.

Toyota Material Handling Europe, 2006) According to Deontology theory, the morality of an action is judge best on its rules (Wikipedia, 2010). Toyota here can rely on this theory, since the company is Japanese based company. So they have the right to make it must for any employee to follow its culture rules. Another theory is the Absolutism versus Relativism; in which the absolutist agreed that business ought to be conducted in the same way the world over with no double standards. This view might be expressed as “when in Rome or anywhere else, do as you would at home”.