Toyota Global Operations - Unintended Acceleration and Unintended Consequences

NINE MILEM a n a g e m e n t C o n s u l t i n g

Toyota Global OperationsUnintended Acceleration & Unintended Consequences

Copyright © 2013. All Rights Reserved. The Nine Mile Management Consulting Group

February 2013

www.ninemileco.com

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Nine Mile Management Consulting Group October, 2012 October, 2012 February 2013

Toyota Global Operations – Unintended Acceleration & Unintended Consequences

Table of Contents

1. Introduction (pg. 3)

1.1 Toyota Production System (pg. 3)

2. Global Operations (pg. 4)

3. Strategic Global Operations Issue (pg. 5)

3.1 Issue Statement (pg. 6)

3.1.1 Impact of Unintended Vehicle Acceleration on Toyota’s Global Operations &

Financials (pg. 6)

4. Analysis of Input Factors leading to Strategic Global Operations Issue (pg. 6)

4.1 Comparison of Suppliers (pg. 7)

4.1.1 Design Considerations (pg. 7)

4.1.2 Materials & Cost Considerations (pg. 8)

4.2 Engineering & Toyota-Supplier Relationship (pg. 9)

4.2.1 Manufacturing & Tooling Considerations (pg. 9)

4.2.2 Cost Considerations (pg. 10)

4.2.3 Denso Pedal Assembly Unit Patent Considerations (pg. 10)

4.2.4 Skills & Training Considerations (pg. 11)

4.2.5 Growth Oriented Management Focus (pg. 11)

4.2.6 Perceived Superior Performance Considerations (pg. 12)

4.3 Summary of Input Factors leading to Strategic Global Operations Issue (pg. 12)

5. Strategy & Recommendations for Future Global Operations & Toyota’s Globalization-Localization

Plan (pg. 12)

5.1 Immediate Considerations for Supply Chain Issues (pg. 12)

5.2 Localization of Suppliers (pg. 13)

5.2.1 Toyota-Supplier Relationship for Parts Engineering & Testing (pg. 13)

5.2.2 Toyota-Supplier Relationship & Third-Way Approach (pg. 14)

5.3 Future Considerations for Emerging Markets (pg. 14)

6. Recommendations & Strategies for Crisis Management (pg. 15)

6.1 Convoluted Problem Reporting Processes (pg. 15)

6.2 Public Relations & Transparency (pg. 16)

Appendix I Financial Analysis

Appendix II Component Analysis & Overview

Appendix III Costing of Components for Pedal Assemblies, Manufacturing Processes, &

Materials Used

Appendix IV Chronology of Events Leading to Automotive Recalls

Appendix V Previous Background Research

References

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Introduction

Toyota Motor Corporation is one of largest multinational automobile manufacturers,

headquartered in Toyota City, Japan. It was founded in 1937 and throughout the company’s history,

Toyota has diversified their vehicle range through Lexus, Scion, Daihatsu, Hino Motors, & Fuji

Heavy Industries, with manufacturing and service facilities located all over the globe (Wan, 2011).

Toyota is the fifth largest company in the world and has the greatest world (“World’s Largest

Carmaker”, 2011). Toyota also holds the greatest world market share in terms of production output

at 11% (2012) (Lassa, 2012), and a total output of 7.3 million vehicles produced globally, and 1.3

million vehicles produced in the North American market (2011) (Ohnsman and Naughton, 2012).

Additionally, they are acknowledged for being a progressive organization – recognized for their

innovative approach for mass-market hybrid vehicles and being the first to mass-produce Hybrid

Electric Vehicles (HEVs), i.e. the Toyota Prius (Hino, 2005). Since inception, Toyota has been using

its guiding principles to produce reliable quality vehicles and invest in sustainable development; for

example, Toyota currently tops the North American Corporate Average Fuel Economy (CAFE)

ratings at 26.7 miles per gallon (mpg) (Abeulsamid, 2008).

1.1 Toyota Production System

The “Toyota Way” is a methodology, framework, and mindset that permeates throughout all

aspects of the company, Appendix V (Wiley, 2010). This strategy was formally summarized in 2001

through the adherence to five key principles: (1) Challenge: long-term vision, (2) Kaizen: continuous

improvement, (3) Genchi Genbutsu: mutual ownership of problems, (4) Respect for People: building

mutual trust, and (5) Teamwork: opportunities for development (Hino, 2005).

The Toyota Production System (TPS) arises from this methodological way of thinking and is

established on two key concepts: (1) Jidoka, and (2) Just-in-Time (JIT) manufacturing (Womack,

1991). The principle of Jidoka emphasizes the stoppage of production in case of defects, whereas JIT

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focuses on productivity improvements through an optimum combination of inventory and supply

for continuous flow in production (Cole, 2011). Additionally, the TPS strategy is centered on the

elimination of excess waste (overproduction, transportation, inventory), which is defined as

anything above and beyond the minimum input requirements to achieve a desired output, i.e. raw

materials, energy, labour (Liker and Meier, 2005).

In the end, the focus of this strategy results in organizational change in operations instead of

short-term cost performance – for example, the production time per vehicle has actually increased

to 27.9 hours, up 5.5% from 2003 and through a commitment to standards and quality, Toyota has

achieved an overall average profit of approximately $1,488 USD per vehicle (Lassa, 2012).

2. Global Operations

The global operational reach of Toyota has resulted in vehicles sold in over 170 countries; 51

bases in 26 different countries and a total of 9 R&D locations (“Globalization & Localization”, 2012).

With increased globalization, Toyota has adopted strategies for increasing the local presence of

production facilities, supplier relationships, and distribution networks – summarized by the

Globalization-Localization Strategy (“Globalization & Localization”, 2012). The primary advantage of

adopting a localized manufacturing base allows Toyota to be close-to-market, i.e. vehicle

specifications can be adapted to the demands of the local market, as was in the case of Lexus for the

US market, and the Yaris for the European market (Johri and Petison, 2008). Furthermore, Toyota’s

restructured profit centers in Japan, North America, and Europe has further facilitated the

Globalization-Localization strategy such that each group can focus on catering to the demands of

the region and allowing for increased structural autonomy through the Toyota organization (Johri

and Petison, 2008). In order to increase offshore (outside of Japan) production capacity

(globalization), the following 3 localization efforts were undertaken: (1) establish local sales network,

(2) build production facilities, and (3) establish joint-ventures.

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The proof of Toyota’s Globalization-Localization Strategy can be further be seen in production

and net revenue figures for 2011 (Table 3, Figure 8, Figure 13) which indicate that while 52% of total

vehicle production was conducted in Japan, 48% of vehicles were manufactured oversees (outside of

Japan) and 19% were produced in North America (“Toyota”, 2012). From the perspective of net

revenues (Table 3, Figure 9, Figure 14), over half, i.e. 53% of total revenues come from overseas

markets and 23% come from North America alone (“Toyota”, 2012). While the bulk of Toyota’s

overseas strategies are dependent on North America, they are also targeting emerging markets in

Asia (Figure 7, Figure 11), such as China (growth of 24% between 2010 and 2011), which are steadily

increasing in sales revenues. In regards to their current 5 year plan, Toyota forecasts a 50-50% split

between sales in emerging markets compared to those in industrialized nations (“The Toyota Global

Vision”, 2011).

3. Strategic Global Operations Issue:

Though Toyota’s year-over-year sales figures and net revenues had been steadily increasing up

until 2008, a systemic issue faced all business units – that of unintended vehicle acceleration. The

Los Angeles Times (Figure 23) was the first media source to report of these vehicle problems

claiming that Toyota had ignored approximately 1,200 complaints about unintended acceleration

over a span of 8 years (MacKenzie and Evans, 2010). Negative publicity associated with 5 cases of

deaths of owners also emerged (MacKenzie and Evans, 2010).

The problem of unintended acceleration results in the gas pedal not returning from the

‘accelerate’ to the ‘neutral un-throttled’ position leading to sudden acceleration, uncontrolled

acceleration, or lack of responsive acceleration of the vehicle under the force of the users foot

(Motovalli, 2010). Defective North American pedal assemblies were later recalled on January 21, 2010

affecting 2.3 million vehicles including the Toyota Avalon, Camry, Corolla, Highlander, Matrix, Rav4,

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Sequoia, and Tundra – representing approximately 50% of Toyota’s 2011 vehicle sales (MacKenzie,

2010).

3.1 Issue Statement

The remainder of this report will categorically analyze what went wrong in regards to

the issue of faulty pedal assemblies, who are the responsible parties, and how should Toyota

proceed to maintain adherence to quality standards in the face of its Globalization-

Localization strategy through engagement of its key stakeholders and suppliers.

3.1.1 Impact of Unintended Vehicle Acceleration on Toyota’s Global Operations & Financials

The vehicle recall led to a 6% decrease in vehicle sales in 2009-10 (Table 3, Figure 7).

Furthermore Toyota’s stock price fell approximately 10% overall and about 30% relative to the S&P

500 over the period from early September 2009 through April 2010 (Welch, 2010). The Wall Street

Journal and JP Morgan also estimated a loss of approximately $5 billion USD over the next fiscal year

2010-11, considering litigation costs, warranty costs, increased marketing and incentive campaigns to

countervail the negative publicity surrounding the claims of unintended acceleration (Neff, 2010).

Despite having $29 billion USD in cash and little debt (“Financial Results: FY2012”, 2012), the credit

rating agency Fitch placed the company’s ‘A+’ rating on the negative side because of recall issues and

subsequent decline in sales and brand reputation of its vehicles (Neff, 2010).

Furthermore, from an operational point-of-view, Toyota suspended sales of affected recalled

vehicles after the recall as well as shutdown assembly lines in 5 North American production plants

for 5 days to recalibrate.

4. Analysis of Input Factors leading to Strategic Global Operations Issue

The lead-up to the massive Toyota (Table 9, Table 10) recall stems from a variety of different

input factors and perspectives, all of which combined created an unfavourable situation for Toyota.

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4.1 Comparison of Suppliers

The issue of unintended vehicle acceleration was determined to be rooted in the pedal

assemblies manufactured by a Toyota supplier. In the case of pedal assemblies, Toyota sources its

parts through either Denso Corporation (Kariya, Japan) or CTS Corporation (Elkhart, Indiana)

(Niedermeyer, 2010). The proximity of pedal assembly manufacturing facilities to Toyota’s vehicle

assembly plants results in an advantageous relationship in terms of JIT manufacturing. While

Toyota has a 33.35% stake in Denso (6902.T, Tokyo SE) and has been in a part-supply relationship

with Toyota since 1949, since the 2005 appointment of CTS Corporation (CTS, NYSE) to supply pedal

assemblies to the North American market, Denso has been predominantly supplying Toyota’s

Japanese assembly plants for both Toyota as well as Honda to a lesser extent (Hiles, 2011) (Table 1,

Table 2).

4.1.1 Design Considerations

Through an analysis of the actual pedal assemblies of both suppliers, it is clear that the Denso

and CTS designs are fundamentally different in their modes of operation, Appendix II. In order for

a vehicle’s pedal assembly to return the accelerator pedal to its original un-throttled state, a spring-

loaded mechanism is used to achieve the necessary unobstructed spring back. In the case of the

Denso unit (Figure 17, Figure 18), the pedal assembly achieves spring back via friction between a

curved-loaded spring sandwiched between two injection molded plastic casings which also house

the pivot for the gas pedal such that rotational motion and depressing of the pedal via the users foot

can be achieved. However, the CTS unit (Figure 19, Figure 20) requires the use of an injection

molded friction lever with curved gear grooves to achieve the spring back as it pivots around a steel

pin inserted in a brass sleeve. The fundamental complexity and added number of parts of the CTS

unit, especially the presence of the friction lever design, is one contributing factor to the vehicle

recalls surrounding unintended acceleration (Niedermeyer 2010). Furthermore, Toyota definitively

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outlined the CTS manufactured pedal assemblies as being defective in regards to operation in high

temperature and humidity environments (i.e. the result of turning on the vehicles on-board heating

system which in turn may blow downwards on the gas pedal), resulting in catastrophic malfunction

(Green and Ramsey, 2010).

4.1.2 Material & Cost Considerations

In the case of materials, the cost of engineering plastics constitutes over 70% of the overall cost

of injection molded part (Table 7); furthermore the cost of the injection molded parts in the pedal

assembly represent 74% of the total final part cost (Benhabib, 2003). In the case of the Denso unit

(Table 4) manufactured via polyphenylene sulfide (PPS), the overall part cost is estimated to be

$28.87 USD including material ($10 USD/lb), manufacturing, assembly, quality control, shipping,

duties and taxes. However, in the case of the CTS pedal assembly (Table 5), the initial choice of

polyamide PA46 (Nylon) at a material cost of $2.10 USD/lb (Table 7) means that overall injection

molded part costs are significantly reduced in comparison to the Denso unit and the total cost of the

part is approximately $10.19 USD cheaper; overall part cost is estimated to be $18.68 USD. Through

investigations by the US National Highway Traffic and Safety Association, it was also determined

that the material of the friction (Table 8) lever used in the CTS design, i.e. PA46, was also a key

contributor to the malfunction of the pedal assembly (“Internal Memo”, 2010). In the case of PA46,

while it has a long history of use in automotive applications and is used to replace metal in high

temperature applications, its major drawback comes due to its high moisture uptake (Fakirov, 1999).

These material properties in combination with the formation of condensate due to duct heating in

the car resulted in increased friction between the friction teeth and the internal grooves in the pedal

assembly leaving the pedal in the accelerate position (Niedermeyer, 2010).

Furthermore, well before the recall of 2.3 million Toyota vehicles, between February and June

2009 (Table 9, Table 10), Customer Quality Engineering Japan (business unit within Toyota) had

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made a material change from PA46 to PPS and then later on to POM (Delrin acetal resin), as well as

increasing the actual physical dimensions of the CTS friction lever design itself in order to avoid

pedal sticking (“Internal Memo”, 2010).

4.2 Engineering & Toyota-Supplier Relationship

It is clear through the previous discussion that there were significant differences in terms of

overall design, material specifications, and costs between the Denso and CTS pedal assembly units.

The current relationship between Toyota and its suppliers means that most parts are outsourced; in

reality, Toyota as a company has moved more and more towards being the destination of final

assembly, rather the manufacturer of car parts (Canis, 2011). In most cases, Toyota outlines its

specifications for a part, allows several suppliers to bid for the manufacture of that part, and works

with Toyota engineers in order to achieve the final part performance specifications that are required

– therefore a clear interplay exists between the initial requirements presented by Toyota and the

final design as manufactured by the supplier (“Case Study”, 2010). At the end of the day, even

though parts are manufactured outside of the company, they are directly responsible for the

performance of each part, and guarantee its safe operation, dimensional tolerances, and reliability.

In this case, Toyota assumed full responsibility for the malfunctioning CTS manufactured unit;

however, several possible scenarios are elaborated upon to understand why Toyota would accept

such a drastically different designed part by CTS.

4.2.1 Manufacturing & Tooling Considerations

As outlined in Section 4.1.2, the cost of the injection molded plastic components that make up

the pedal assembly actually account for greater than 70% of the part costs (Table 7). The process of

injection molding requires an injection molding machine capable of producing enough clamping

force (in this case, approximately 150 tons) (Table 6). Plastic is quickly injected and cooled in a

mold under clamping pressure which results in the final design shape (Benhabib, 2003). For the

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manufacturing of pedal assemblies, this would result in capital investment of approximately $40,000

to $200,000 in terms of the cost of tooling and molds, per machine – with the cost of the injection

molding machine with the right clamping force adding an additional $500,000 to $1 million dollars

(Benhabib, 2003).

One highly plausible scenario in regards to the initial acceptance of the CTS designed part

could reside in the fact that CTS is also a pedal assembly parts-supplier to Honda, Nissan, Ford,

Chrysler, and Mitsubishi – and CTS has also publicly stated that Toyota accounts for only 3% of their

overall parts sales (Green and Ramsey, 2010). Therefore, the CTS unit could be the result of another

auto manufacturer’s design which has been incorporated and modified to result in the final CTS

design while maintaining the tooling and molds from existing processes to reduce capital

investments on the part of CTS (Merx & Ramsey, 2010).

4.2.2 Cost Considerations

Cost considerations always are a key factor in final design considerations, and in this case, the

reduced cost of PA46 in CTS’ initial design (Table 5, Table 7) could be reflective of their previous

experiences manufacturing with this engineering plastic in order to meet similar performance

requirements as demanded by Toyota. Additionally, the initial decision to go for a supply-partner in

the US was an extension of their Globalization-Localization strategy as well as to reduce associated

costs due to shipping, freight, duties, and taxes to transfer parts from Japan to North America.

4.2.3 Denso Pedal Assembly Unit Patent Considerations

While the replication of the Denso design could not be possible due to the nature of the design

patent that the Denso Corporation holds on its pedal assembly, the drastic variation of the design

could also be due to patent considerations (Merx & Ramsey, 2010).

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4.2.4 Skills & Training Considerations

Toyota’s senior engineers are referred to as their Sensei (‘master’ or ‘teacher’). Their ultimate

function is to coach teams from supplier factories, for example, to maintain an understanding of the

principles of lean production (“Case Study”, 2010). With the increased globalization focus, this

ultimately put strains on their human resources base, “having too few Sensei to support expansion”

(Meigs, 2010). In the case of the Toyota relationship with CTS, this could have also been a

contributing factor leading to the acceptance of the CTS design and also the lack of responsive

feedback to the recall crisis itself, Section 6.1, Section 6.2.

4.2.5 Growth Oriented Management Focus

As echoed by a MIT Sloan Management Review article by Professor Robert E. Cole, the reason

for the lack of rigorous design inspection and review of Toyota parts is also a result of the focus of

Toyota management on growth, weakening its traditional emphasis on quality (Cole, 2011). This

growth phase can be attributed in large part to the presidency of Hiroshi Okuda for Toyota and his

ambition of achieving 15% global market share by 2010 (Cole, 2011). Furthermore, between 2008 and

2008, the by-product of this global growth strategy resulted in an overall year-over-year sales

increase of 9% and overseas manufacturing rise from 37 to 53% (Cole, 2011).

This focus on growth can also be seen through the company’s ignorance of approximately 1,200

customer complaints about unintended acceleration as well as the convoluted and hierarchical

approach to dealing with Field Technical Reports (FTRs) outlining vehicle issues within the field. In

effect, car dealers often act as the first line of defense and reporting in relation to vehicle problems.

The management focus on growth was in large part counter intuitive to the principles of TPS

and in the end, “totally irrelevant to any customer” (Womack, 1991). This ultimately led Toyota to

“[work] with a number of suppliers with whom they were unfamiliar and who did not truly

understand how Lean [production] should work” (“Case Study”, 2010).

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4.2.6 Perceived Superior Performance Considerations

The last speculative consideration results from the comparison of the CTS design to that of the

Denso unit. Internally, Toyota may have tried to move to another engineering design to alleviate

intrinsic flaws of the Denso unit – even though the Denso units had never been implicated in a pedal

acceleration issue in the past.

4.3 Summary of Input Factors leading to Strategic Global Operations Issue

The acceptance of the CTS design likely involved a mutual collaboration between Toyota and

CTS engineers in order to optimize the part for performance and cost. While the responsibility of

defects lies with Toyota, the initial acceptance of such an un-vetted, unproven, and drastically

different design goes against the TPS principles. From the point-of-view of CTS, the likely

combination of existing tooling, reduced capital investment, and ease of manufacturing may have

initiated the pedal design. But from the point-of-view of Toyota, this unfamiliar design and related

unknown performance under extreme conditions had not been conclusively tested.

5. Strategy & Recommendations for Future Global Operations & Toyota’s Globalization-

Localization Plan

The future of Toyota’s extended global operations vision is directly proportional to the way

Toyota addresses its key relationships with stakeholders and suppliers in the future. Moreover,

however unfortunate this unintended acceleration issue was, it also presents key insights for how

Toyota should proceed in the future to maintain productive relationships and to uphold its

adherence to quality standards such that another mass vehicle recall does not occur.

5.1 Immediate Considerations for Supply Chain Issues

The current Toyota recall affects cars between the 2005 and 2010 model years and the current

fix is either through a replacement of the faulty pedal assembly unit with an improved CTS unit

(MacKenzie, 2010). However, Toyota faces certain immediate supply chain issues due to the lack of

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parts inventories to maintain both a supply for auto manufacture assembly lines as well as

dealerships for recalled cars since the current annual output capacity for CTS is 2 million pedal

assembly units per year (Green and Ramsey, 2010). The current demand is approximately 3.6 million

units for North America. Therefore, in order to maintain a continuous supply for their assembly

facilities, Toyota should prioritize and maintain supply for the automobile assembly plants as well as

source additional Denso units to repair recalled vehicles. In the near time frame, they may also

consider investing some of the $5.6 billion that Toyota publically set aside to deal with these recall

issues (MacKenzie, 2010).

5.2 Localization of Suppliers

Creating a local supply network to meet the needs of JIT assembly means vehicle manufacturers

must also adhere to stringent production demands. However, Toyota should look back into their

past – when the first greenfield Toyota production facility opened in 1985 in Georgetown, Kentucky;

Toyota had believed that “[d]eveloping human infrastructure was TMC’s foremost priority in

transplanting TPS to Georgetown” (“Toyota Motor Manufacturing”, 1995). At the time, Toyota

provided training for suppliers including top management to assembly workers and allowed for site

visits to other Toyota plants to get a feel for the Toyota principles (“Toyota Motor Manufacturing”,

1995). With their current rapid growth, Toyota must fall back on the principles of localization and

establish joint-ventures in knowledge transfer, training, and best practices.

5.2.1 Toyota-Supplier Relationship for Parts Engineering & Testing

Related to their localization framework, Toyota must also develop relationships between

engineering departments at both Toyota and the supplier. In this way, part designs can be looked at

more rigorously for non-obvious defects. Additionally, the defect relating to unintended

acceleration could have earlier observed if a conjoined test program had been initiated between

Toyota and CTS since all vehicle parts undergo limitations and failure-point testing to determine the

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extreme operating window for safe operation. It is then recommended that Toyota integrate design

and testing programs for its parts through the transplanting of Toyota engineers that act as

‘consultants’ to the parts supplier.

5.2.2 Toyota-Supplier Relationship & Third-Way Approach

A third-way approach is not deemed a realistic feasibility for Toyota. While Toyota has built a

responsive supply chain network, the switching costs to move from one parts-supplier to another

remains very high in terms of both cost, engineering, and knowledge transfer. The strength of the

Toyota supply chain is a result of the network of suppliers and the ultimate continuity of the “Toyota

Way” in each of their operations.

5.3 Future Considerations for Emerging Markets

As outlined in Toyota’s global plan, they are in plans to evenly distribute their sales base such

that 50% of revenues come through pre-existing industrialized nations, and 50% of the remaining

revenues come through sales from emerging markets such as the BRIC nations of Brazil and China

(“The Toyota Global Vision”, 2011). In the words of current Toyota president Akio Toyoda, “China

and other emerging markets are the subjects of great expectations in our industry. At Toyota we

hold especially high hopes for the Chinese market. We have set a target of securing 15% of our

global unit sales in China” (“The Toyota Global Vision”, 2011).

Such a strategy will demand increased localization and in this case, Toyota should take an

increasingly proactive approach in sourcing these supplier relationships and overseeing quality

through: (1) more emphasis on skills infrastructure and training, (2) ensuring senior Sensei/Master

engineers are able to work with suppliers to develop their parts and ensure adherence to Six Sigma

Process Control, and (3) developing an efficient logistics network in these emerging nations to

facilitate JIT manufacturing.

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6. Recommendations & Strategies for Crisis Management

The Toyota recalls and issues with unintended acceleration also clearly outlined a lack of crisis

management and public relations strategies on the part of Toyota.

6.1 Convoluted Problem Reporting Processes

Via an analysis of the chronology of events (Table 9, Table 10) leading up to the announcement

of the recalls, many unintended acceleration incidents were reported. Car dealerships often act as

the first service and contact point between an owner and Toyota (Figure 24). In the current

structure of the company, Toyota dealers take complaints and issues from the market and bring

them to the attention of regional Customer Quality Engineering Groups through Field Technical

Reports. However, it is unclear of the processes that take place between Toyota Engineering, Toyota

Distributors, Customer Quality Engineering Groups, Toyota Engineering, and lastly the parts-

supplier itself, CTS. The increased hierarchy seen in the reporting process means that issues must

travel through a long and complex inter-departmental chain of information flow before reaching key

decision makers that have the ability to oversee the entire issue. For example, in Toyota’s own

account of the unintended acceleration issue, they had received 4 FTRs in January of 2008 regarding

acceleration problems yet Quality Engineering Japan oversaw the failure analysis instead of

European group – the overall result is clear, while Toyota first learned about this problem as early as

July 2006, they did not act to make design changes until June 2009, and furthermore did not issue

vehicle recalls until January 2010 (“National Highway”, 2010).

The lack of an efficient problem reporting process goes against the principle of Jidoka according

to the “Toyota Way.” While streamlining processes for larger organizations can present challenges,

it is recommended that regional Customer Quality Engineering Groups take a front-line approach

via partnership with dealer networks to conduct failure investigations and collect and recover parts

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from faulty vehicles. Furthermore, Customer Quality Engineering Groups should then work hand-

in-hand with Toyota Engineering in order to address defects and design modifications.

6.2 Public Relations & Transparency

The other key ingredient that Toyota lacked was an attention to media, marketing, public

relations, and transparency when this initial unintended acceleration issue was outlined by the

press. For example, even though issues with unintended acceleration had dated back from 1999 to

2006, they actively decided to monitor the situation instead of taking action (“Internal Memo”,

2010). Furthermore, it was only until the Los Angeles Times started to investigate this issue, did the

company begin to respond; in the beginning Toyota had sent a letter to owners indicating that “no

defect exists” (MacKenzie, 2010). After subsequent investigations by the LA Times and notification

of the US National Highway Traffic & Safety Administration, Toyota began to respond and take light

of this issue. Toyota’s lack of initial response and lack of clarity also resulted in the declaration by

the US Department of Transportation and the US NHTSA that Toyota would be liable for civil

penalties after providing a Defect Information Report to the NHTSA a full four months after Toyota

began to rectify and take action regarding the situation in the European market (“National Highway,

2010).

Therefore, in terms of crisis management, Toyota should adopt more transparent external

reporting policies such that defects that relate to human safety are made clear to the public and the

authorities. Furthermore, an internal company watchdog department should also be put in place,

not to increase the level of bureaucracy, but to ensure that the company adheres to transparent

public communication on issues of safety.

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I. Appendix: Financial Analysis

Table 1: Presentation of Denso Corporation Financial Summary in Millions of USD or

Japanese Yen (2002 – 2011); Sales, Operating Income, Net Income, R&D, and Profitability Ratios

2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Net Sales in Japan (¥) 1,506,681.00¥ 1,518,105.00¥ 1,615,771.00¥ 1,976,877.00¥ 1,859,046.00¥ 1,609,215.00¥ 1,554,795.00¥ 1,442,645.00¥ 1,325,637.00¥ 1,277,865.00¥

Net Sales Outside Japan (¥) 1,624,779.00¥ 1,458,604.00¥ 1,526,894.00¥ 2,048,199.00¥ 1,750,654.00¥ 1,498,115.00¥ 1,245,154.00¥ 1,119,766.00¥ 1,007,123.00¥ 1,123,233.00¥

Total Sales (¥) 3,131,460.00¥ 2,976,709.00¥ 3,142,665.00¥ 4,025,076.00¥ 3,609,700.00¥ 3,107,330.00¥ 2,799,949.00¥ 2,562,411.00¥ 2,332,760.00¥ 2,401,098.00¥

Operating Income (Loss) (¥) 188,331.00¥ 136,640.00¥ -37,309.00¥ 348,652.00¥ 303,068.00¥ 266,559.00¥ 213,895.00¥ 188,659.00¥ 159,893.00¥ 133,340.00¥

Net Income (Loss) (¥) 143,033.00¥ 73,247.00¥ -84,085.00¥ 244,417.00¥ 205,170.00¥ 169,648.00¥ 132,620.00¥ 110,027.00¥ 111,018.00¥ 72,313.00¥

Year-Over-Year Change (%) 95% 187% -134% 19% 21% 28% 21% -1% 54% -

R&D Expenses (¥) 290,069.00¥ 270,077.00¥ 297,148.00¥ 311,474.00¥ 279,890.00¥ 256,339.00¥ 238,241.00¥ 214,917.00¥ 182,886.00¥ 185,627.00¥

R&D as % of Sales (¥) 9% 9% 9% 8% 8% 8% 9% 8% 8% 8%

Return on Sales (%) 4.6 2.5 -2.7 6.1 5.7 5.3 4.7 4.3 4.8 3

Current Ratio (-) 235.3 230.4 206.3 162.6 151 160.6 161.4 163 161.2 174

Return on Equity (%) 7.4 4 -4.3 11.3 9.9 9.4 8.4 7.6 7.9 5

Japanese Yen/USD Dollar (¥) 84.68¥ 91.31¥ 100.90¥ 113.24¥ 116.10¥ 118.86¥ 116.92¥ 103.92¥ 107.42¥ 120.14¥

Net Sales in Japan ($) 17,792.64$ 16,625.84$ 16,013.59$ 17,457.41$ 16,012.45$ 13,538.74$ 13,297.94$ 13,882.27$ 12,340.69$ 10,636.47$

Net Sales Outside Japan ($) 19,187.28$ 15,974.20$ 15,132.75$ 18,087.24$ 15,078.85$ 12,604.03$ 10,649.62$ 10,775.27$ 9,375.56$ 9,349.37$

Total Sales ($) 36,979.92$ 32,600.03$ 31,146.33$ 35,544.65$ 31,091.30$ 26,142.77$ 23,947.56$ 24,657.53$ 21,716.25$ 19,985.83$

Operating Income (Loss) ($) 2,224.03$ 1,496.44$ 369.76-$ 3,078.88$ 2,610.40$ 2,242.63$ 1,829.41$ 1,815.43$ 1,488.48$ 1,109.87$

Net Income (Loss) ($) 1,689.10$ 802.18$ 833.35-$ 2,158.40$ 1,767.18$ 1,427.29$ 1,134.28$ 1,058.77$ 1,033.49$ 601.91$

Year-Over-Year Change (%) 95% 187% -134% 19% 21% 28% 21% -1% 54% -

R&D Expenses ($) 3,425.47$ 2,957.80$ 2,944.98$ 2,750.57$ 2,410.77$ 2,156.65$ 2,037.64$ 2,068.10$ 1,702.53$ 1,545.09$

R&D as % of Sales (%) 9% 9% 9% 8% 8% 8% 9% 8% 8% 8%

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Figure 1: Denso Corporation – Sales Trends within Japan & Outside of Japan in Comparison to Total Sales (2002 – 2011)

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Figure 2: Denso Corporation – Operating Income & Net Income Historical Trends (2002 – 2011)

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Figure 3: Denso Corporation – Profitability Ratios: Return on Sales & Return on Equity (2002 – 2011)

Table 2: Presentation of CTS Corporation Financial Summary in Thousands of USD

(2004 – 2011); Sales, Operating Income, Net Income, R&D, and Profitability Ratios

2011 2010 2009 2008 2007 2006 2005 2004

Net Sales ($) 588,506.00$ 552,641.00$ 498,982.00$ 691,707.00$ 685,945.00$ 655,614.00$ 617,484.00$ 531,316.00$

Operating Income (Loss) ($) 25,240.00$ 27,843.00$ 17,829.00-$ 30,830.00$ 32,275.00$ 32,818.00$ 37,932.00$ 31,128.00$

Net Income (Loss) ($) 20,967.00$ 22,038.00$ 34,050.00-$ 28,062.00$ 23,947.00$ 22,834.00$ 20,756.00$ 19,956.00$

Year-Over-Year Change (%) -5% 165% -221% 17% 5% 10% 4% -

R&D Expenses ($) 19,990.00$ 18,313.00$ 14,154.00$ 18,306.00$ 15,896.00$ 15,873.00$ 17,092.00$ 19,063.00$

R&D as % of Sales (%) 3% 3% 3% 2% 2% 3% 4%

Return on Sales (%) 4% 4% -7% 4% 3% 3% 3% 4%

Current Ratio (-) 2.3 2.1 2.1 2 1.9 1.8 1.5 2

Return on Equity (%) 8% 8% -14% 10% 7% 7% 6% 6%

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Figure 4: CTS Corporation – Total Sales (2004 -2011)

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Figure 5: CTS Corporation – Operating Income & Net Income Historical Trends (2004-2011)

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Figure 6: CTS Corporation – Operating Income & Net Income Historical Trends (2004-2011)

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Table 3: Presentation of Toyota Motor Company Financial Summary in Millions of Yen (2007 – 2011); Profitability Ratios, Auto Sales, Production, Net Revenues, Operating Expenses, Operating Income – Geographical Breakdown by Region

2011 2010 2009 2008 2007

Operating Income Return on Revenues (%)

Return on Assets (%)

Return on Equity (%)

Japanese Auto Sales (units) 1,913,117 26% 2,162,418 30% 1,944,823 26% 2,188,389 25% 2,273,152 27%

North America Auto Sales (units) 2,031,249 28% 2,097,374 29% 2,212,254 29% 2,958,314 33% 2,942,661 35%

Europe Auto Sales (units) 795,534 11% 858,390 12% 1,061,954 14% 1,283,793 14% 1,223,628 14%

Asia Auto Sales (units) 1,255,016 17% 979,651 14% 904,892 12% 956,509 11% 789,637 9%

Other Auto Sales (units) 1,313,123 18% 1,139,329 16% 1,443,433 19% 1,526,934 17% 1,295,581 15%

Total Auto Sales (units) 7,308,039 100% 7,237,162 100% 7,567,356 100% 8,913,939 100% 8,524,659 100%

Japanese Auto Production (units) 3,721,351 52% 3,956,996 58% 4,254,984 60% 5,160,293 60% 5,100,823 62%

North America Auto Production (units) 1,338,294 19% 1,041,833 15% 919,125 13% 1,267,639 15% 1,204,676 15%

Europe Auto Production (units) 371,528 5% 432,626 6% 481,512 7% 710,895 8% 709,263 9%

Asia Auto Production (units) 1,343,719 19% 1,021,019 15% 946,806 13% 961,207 11% 754,960 9%

Other Auto Production (units) 394,829 6% 356,966 5% 448,605 6% 447,166 5% 411,229 5%

Total Auto Production (units) 7,169,721 100% 6,809,440 100% 7,051,032 100% 8,547,200 100% 8,180,951 100%

Net Revenues Japan (¥) 10,986,246.00¥ 47% 11,220,303.00¥ 48% 12,186,737.00¥ 47% 15,315,812.00¥ 45% 14,815,282.00¥ 47%

Net Revenues North America (¥) 5,429,136.00¥ 23% 5,670,526.00¥ 24% 6,222,914.00¥ 24% 9,423,258.00¥ 28% 9,029,773.00¥ 29%

Net Revenues Europe (¥) 1,981,497.00¥ 8% 2,147,049.00¥ 9% 3,013,128.00¥ 12% 3,993,434.00¥ 12% 3,542,193.00¥ 11%

Net Revenues Asia (¥) 3,374,534.00¥ 14% 2,655,327.00¥ 11% 2,719,329.00¥ 10% 3,120,826.00¥ 9% 2,225,582.00¥ 7%

Net Revenues Other (¥) 1,809,116.00¥ 8% 1,673,861.00¥ 7% 1,882,900.00¥ 7% 2,294,137.00¥ 7% 1,922,742.00¥ 6%

Total Net Revenues (¥) 23,580,529.00¥ 100% 23,367,066.00¥ 100% 26,025,008.00¥ 100% 34,147,467.00¥ 100% 31,535,572.00¥ 100%

Operating Expenses Japan (¥) 11,348,642.00¥ 49% 11,445,545.00¥ 49% 12,424,268.00¥ 47% 13,875,526.00¥ 44% 13,358,036.00¥ 46%

Operating Expenses North America (¥) 5,089,633.00¥ 22% 5,585,036.00¥ 24% 6,613,106.00¥ 25% 9,117,906.00¥ 29% 8,580,140.00¥ 29%

Operating Expenses Europe (¥) 1,968,349.00¥ 9% 2,180,004.00¥ 9% 3,156,361.00¥ 12% 3,851,863.00¥ 12% 3,404,810.00¥ 12%

Operating Expenses Asia (¥) 3,061,557.00¥ 13% 2,451,800.00¥ 11% 2,543,269.00¥ 10% 2,864,470.00¥ 9% 2,107,933.00¥ 7%

Operating Expenses Other (¥) 1,648,987.00¥ 7% 1,558,287.00¥ 7% 1,795,252.00¥ 7% 2,150,159.00¥ 7% 1,839,245.00¥ 6%

Total Operating Expenses (¥) 23,117,168.00¥ 100% 23,220,672.00¥ 100% 26,532,256.00¥ 100% 31,859,924.00¥ 100% 29,290,164.00¥ 100%

Operating Income Japan (¥) -362,396.00¥ -78% -225,242.00¥ -154% -237,531.00¥ 47% 1,440,286.00¥ 63% 1,457,246.00¥ 65%

Operating Income North America (¥) 339,503.00¥ 73% 85,490.00¥ 58% -390,192.00¥ 77% 305,352.00¥ 13% 449,633.00¥ 20%

Operating Income Europe (¥) 13,148.00¥ 3% -32,955.00¥ -23% -143,233.00¥ 28% 141,571.00¥ 6% 137,383.00¥ 6%

Operating Income Asia (¥) 312,977.00¥ 68% 203,527.00¥ 139% 176,060.00¥ -35% 256,356.00¥ 11% 117,595.00¥ 5%

Operating Income Other (¥) 160,129.00¥ 35% 115,574.00¥ 79% 87,648.00¥ -17% 143,978.00¥ 6% 83,497.00¥ 4%

Total Operating Income (¥) 463,361.00¥ 100% 146,394.00¥ 100% -507,248.00¥ 100% 2,287,543.00¥ 100% 2,245,354.00¥ 100%

9.3%

5.4%

14.7%

2.2%

1.4%

4.0%

8.6%

5.3%

14.5%

2.5%

1.4%

3.9%

0.8%

0.7%

2.1%

Operating Income Return on Revenues (%)

Return on Assets (%)

Return on Equity (%)

2006 2005 2004 2003 2002

8.9% 9.0% 9.6% 8.2% 7.7%

5.2% 5.1% 5.5% 3.8% 3.1%

14.0% 13.6% 15.2% 10.4% 7.8%

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Figure 7: Toyota Motor Company Global Operations Sales per Geographical Region (2007-2011)

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Figure 8: Toyota Motor Company Global Operations Production per Geographical Region (2007-2011)

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Figure 9: Toyota Motor Company Global Operations Net Revenue per Geographical Region (2007-2011)

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Figure 10: Toyota Motor Company Global Operations Operating Expenses per Geographical Region (2007-2011)

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Figure 11: Toyota Motor Company Global Operations Operating Income per Geographical Region (2007-2011)

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Figure 12: Toyota 2011 – Breakdown of Automotive Sales per Geographical Region

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Figure 13: Toyota 2011 – Breakdown of Automotive Production per Geographical Region

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Figure 14: Toyota 2011 – Breakdown of Automotive Net Revenue per Geographical Region

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Figure 15: Toyota 2011 – Breakdown of Automotive Operating Expenses per Geographical Region

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Figure 16: Toyota 2011 – Breakdown of Automotive Operating Income per Geographical Region

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II. Appendix: Component Analysis & Overview Figure 17: Overview of Denso and CTS Pedal Assembly - Side by Side Comparison

Figure 18: Internal Mechanisms of Denso Pedal Assembly

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Figure 19: Internal Mechanism of CTS Pedal Assembly

Figure 20: Friction Gear Mechanism of CTS Pedal Assembly

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III. Appendix: Costing of Components for Pedal Assemblies, Manufacturing Processes,

& Materials Used Table 4 : Component & Material Cost Breakdown of Denso Pedal Assembly

Number Component Quantity Material Dimension Cost Approximate Manufacturing Process Inhouse/Outsource

1 Screws 5 Steel 5.0 mm 0.05$ Forming 1 Outsource

2 Compression Spring 1 Steel 40 mm 0.20$ Extrusion and Winding 2 Outsource

3 Rubber Sealing Ring 1 Rubber 20 mm 0.02$ Forming 3 Outsource

4 Injection Molded Casing Half 1 PPS - 30% Glass Fibers 80 mm x 60 mm 7.32$ Injection Molding 4 Inhouse

5 Injection Molded Casing Half - Pedal Side 1 PPS - 30% Glass Fibers 80 mm x 60 mm 7.46$ Injection Molding 5 Inhouse

6 Pedal Arm 1 PPS - 30% Glass Fibers 300 mm x 40 mm 6.69$ Injection Molding 6 Inhouse

7 Plastic Foot Grip 1 Rubber 70 mm x 50 mm 1.10$ Heat Press Stamping 7 Outsource

8 Metal Spacer for Spring 1 Steel 10 mm 0.10$ Stamping and Forming Outsource

Assembly Costs 2.00$ Equivalent $40 USD/hour x 0.05 h

Quality Control Costs 1.50$ Equivalent $50 USD/hour x 0.03 h

Initial Shipping Costs to Plant 0.25$

Final Cost to Manufacturer 26.69$

Duties & Taxes 0.93$ Duty Percentage of 2.5%, Tax Rate 1% 7

Shipping Costs to North America 1.25$ Typical Freight Japan to US 8

Total Costs after Shipping, Duties, & Taxes 28.87$

1 http://order.optimumfixations.ca/?id=1&content=lppageEN&source=ppc2 Quote from Dezhou Runde Metal Products Co., Ltd., Shandong, China3 Quote from Yongsheng, YS-Rubber Ring, Zhejiang, China 4 Injection Molding Estimate from http://www.custompartnet.com/estimate/injection-molding/5 Injection Molding Estimate from http://www.custompartnet.com/estimate/injection-molding/6 Injection Molding Estimate from http://www.custompartnet.com/estimate/injection-molding/7 Quote from Ninghai Plastic & Mold Factory, Zhejiang, China 8 http://www.carsdirect.com/car-buying/what-is-the-import-duty-to-import-cars-from-japan9 http://www.shipping-worldwide.com/japan.htm

Polyamide 46 (PA46) - High temperature polyamide, unmatched performance in automotive applications, highest temperature resistance, 30% filled

with glass fibers. Is often used to replace metal in demanding, high temperature applications. Excellent mar and wear resistance. Mechanical and

constant performance at high temperatures. High fatigue resitance. Good solution for complex shapes and parts with thin walls. "Polyamides Center".

(2012). Omnexus.com. Retrieved from http://www.omnexus.com/tc/polyamides-center/index.aspx?id=pa46

Polyphenylene Sulfide (PPS) - Organic polymer, resists chemical and thermal attacks, engineering plastic, high performance thermoplastic. Molded,

extruded, or machined to high tolerances and resistance to abrasion. In the presence of water, PPS can produce trace amount of sulphonic acid which

can corrode metal surfaces at a very slow rate. "Polyphenylene Sulfide (PPS) Plastics". (2012). GoPolymers.com. Retrieved from

http://www.gopolymers.com/plastic-types/polyphenylene-sulfide-pps-plastics.html

POM (Delrin) Acetal Resin - Bridges gap between metals and ordinary plastics with unique creep resistance, strength, stiffness, hardness, dimensional

stability, abrasion resistance, low wear, and low friction. "DuPont Delrin Acetal Resin". (2012). DuPont.com. Retrieved from

http://www2.dupont.com/Plastics/en_US/Products/Delrin/Delrin.html

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Table 5 : Component & Material Cost Breakdown of CTS Pedal Assembly

Table 6: Injection Molding Machine Approximate Specifications Required for Part

Manufacture (both CTS & Denso Pedal Assemblies)

Number Component Quantity Material Dimension Cost Approximate Manufacturing Process Inhouse/Outsource

1 Screws 3 Steel 5.0 mm 0.03$ Forming 1 Outsource

2 Compression Springs 2 Steel 40 mm 0.40$ Extrusion and Winding 2 Outsource

3 Injection Molded Friction Lever 1 PA46 - 30% Glass Fibers 40 mm x 2 mm 0.41$ Injection Molding 3 Inhouse

4 Injection Molded Casing Half 1 PA46 - 30% Glass Fibers 80 mm x 60 mm 3.10$ Injection Molding 4 Inhouse

5 Injection Molded Casing Half - Pedal Side 1 PA46 - 30% Glass Fibers 80 mm x 60 mm 3.56$ Injection Molding 5 Inhouse

6 Pedal Arm 1 PA46 - 30% Glass Fibers 300 mm x 40 mm 4.78$ Injection Molding 6 Inhouse

7 Plastic Foot Grip 1 Rubber 70 mm x 50 mm 1.10$ Heat Press Stamping Outsource

8 Steel Axle 1 Steel 10 mm 0.10$ Extrusion Outsource

9 Bearing Sleeve 1 Brass 10 mm 0.10$ Extrusion Outsource

10 Metal Spacer for Spring 1 Steel 10 mm 0.10$ Stamping and Forming Outsource

Assembly Costs 2.50$ $50 USD/hour x 0.05 h

Quality Control Costs 1.65$ $55 USD/hour x 0.03 h

Initial Shipping Costs to Plant 0.35$

Final Cost to Manufacturer 18.18$

Shipping Costs within North America 0.50$ Typical Freight US

Total Costs after Shipping 18.68$

1 http://order.optimumfixations.ca/?id=1&content=lppageEN&source=ppc2 Quote from Dezhou Runde Metal Products Co., Ltd., Shandong, China3 Quote from http://www.custompartnet.com/estimate/injection-molding/4 Quote from http://www.custompartnet.com/estimate/injection-molding/5 Quote from http://www.custompartnet.com/estimate/injection-molding/6 Quote from http://www.custompartnet.com/estimate/injection-molding/

Specifications

Defect Rate (%) 5

Run Quantity (units) 100000

Material Price (USD$) 10

Part Weight (oz) 8.01

Regrind Ratio (%) 0

Additives Ratio (%) 0

Material Markup (%) 25

Machine Clamp Force (tons) 150

Hourly Rate (USD$/hr) 35

Machine Setup Time (hrs) 8

Machine Uptime (%) 95

Production Rate (parts/hr) 197

Post-Processing Time (hrs) 0

Production Markup (%) 10

Number of Cavities (no.) 2

Mold Making Rate (USD$/hr) 65

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Table 7: Sensitivity Analysis of Material Costs due to Change of Materials in the

Injection Molding Production Process (Typical part – Representative of both CTS & Denso Pedal Assemblies)

Table 8: Advantages & Disadvantages of Various Engineering Plastics used in Injection

Molding Production Process (Typical part – Representative of both CTS & Denso Pedal Assemblies)

Material: PA46 -

30% Glass Filled

Material: PPS -

30% Glass Filled

Material: POM +

PPA

Run Quantity (units) 100000 100000 100000

Part Dimensions L (in) 3.15 3.15 3.15

Part Dimensions W (in) 2.36 2.36 2.36

Part Dimensions H (in) 2.36 2.36 2.36

Wall Thickness (in) 0.2 0.2 0.2

Projected Area (in2) 7.43 7.43 7.43

Number of Holes (no.) 1 1 1

Volume (in3) 10.52 10.52 10.52

Tolerance 0.005 0.005 0.005

Roughness RA < 16 RA < 16 RA < 16

Material Price ($/lb) 2.10$ 10.00$ 3.50$

Material Costs ($) 150,719.00$ 839,781.00$ 215,199.00$

Production ($) 17,237.00$ 20,352.00$ 20,035.00$

Tooling ($) 41,641.00$ 41,641.00$ 41,641.00$

Total ($) 209,597.00$ 901,774.00$ 312,874.00$

Total per Part ($) 2.10$ 9.02$ 3.13$

Material: PA46 - 30% Glass Filled Material: PPS - 30% Glass Filled Material: POM + PPA

Advantages

- High temperature polyamide, unmatched

performance in automotive applications, highest

temperature resistance, 30% filled with glass

fibers. Is often used to replace metal in

demanding, high temperature applications.

Excellent mar and wear resistance. Mechanical

and constant performance at high temperatures.

High fatigue resitance. Good solution for complex

shapes and parts with thin walls. 2

- High material costs, organic polymer, resists

chemical and thermal attacks, engineering plastic,

high performance thermoplastic. Molded,

extruded, or machined to high tolerances and

resistance to abrasion. 3

- Bridges gap between metals and ordinary plastics

with unique creep resistance, strength, stiffness,

hardness, dimensional stability, abrasion

resistance, low wear, and low friction. 5

Disadvantages

- Major disadvantage is high moisture uptake.

However it is well suited for automotive industry,

"under the hood" applications. 1

- In presence of water, PPS produces trace

amounts of sulphonic acid which can corrode metal

surfaces at very slow rate. Minimal moisture

absorption, very low coefficient of thermal

expansion. 4

- High density when compared to other plastics.

Used in auto industry. 5

1 Transreactions in Condensation Polymers, Stoyko Fakirov2 Polyamides Center. (2012). Omnexus.com. Retrieved from http://www.omnexus.com/tc/polyamides-center/index.aspx?id=pa463 Polyphenylene Sulfide (PPS) Plastics. (2012). GoPolymers.com. Retrieved from http://www.gopolymers.com/plastic-types/polyphenylene-sulfide-pps-plastics.html4 Niedermeyer, P. (2010). "Toyota". Retrieved from www.thetruthaboutcars.com/2010/02/why-toyota-must-replace-flawed-cts-gas-pedal5 DuPont Delrin Acetal Resin. (2012). DuPont.com. Retrieved from http://www2.dupont.com/Plastics/en_US/Products/Delrin/Delrin.html

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Figure 21: Overview of Shipping Pathway of Denso Pedal Assembly

Figure 22: Overview of Shipping Pathway of CTS Pedal Assembly

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IV. Appendix: Chronology of Events Leading to Automotive Recalls

Table 9: Brief Chronology of Events at Toyota

Approximate Date Description of Event

March - December 2007Toyota receives 4 Field Technical Reports, accelerator pedals in Toyota

Tundra were slow to return to unengaged position

December 14, 2007After initial investigation, Toyota confirmed that pedals operated correctly

via the recovered parts from the FTRs under normal environmental

January 7, 2008

Under high temperature and humidity testing, the acceleration pedals were

slow to return to the unengaged position as confirmed by Toyota. These

parts contained a friction lever that was made out of PA46.

January 18, 2008

CTS Supplier has also confirmed that the accelerator pedals for the Toyota

Tundra vehicle were slow to return in conditions of high humidity and

temperature.

January 25, 2008Toyota makes material composition change from PA46 to PPS for the

material of the friction lever in the accelerator pedal design.

February 14, 2008Toyota and CTS implements this design change issued on January 25 in mass

production on all vehicles.

March 21, 2008

Toyota confirmed that even if the Toyota Tundra vehicle accelerator pedal

was slow to return to the unengaged position, the vehicle could still be

stopped via braking.

August - September 2009Dealer Product Report came in concerning a Toyota Camry with a sticky

accelerator pedal complaint.

January 19, 2010Toyota makes presentation to NHTSA (US) about the issue of pedal

acceleration.

January 21, 2010Toyota files Defect Information Report regarding pedals containing PA46

friction levers and changeover to PPS friction levers.

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Table 10: Detailed Chronology of Events at Toyota

Approximate Date Description of Event

July 2006Toyota Motor Company receives FTR from US market regarding sticking of

accelerator pedal on Avalon. Toyota decides to monitor the situation and

not to take action.

January 2008 - December 2008Toyota receives 4 FTRs from European market regarding sticking of

accelerator pedal. Toyota conducts parts recovery in EU market.

December 2008 - March 2009Toyota conducts investigation from recovered EU accelerator pedals and

confirms correct operation in normal environmental conditions.

February 2009 - June 2009

Customer Quality Engineering Japan (business unit within Toyota) analyses

likely cause of pedal malfunction. Condensation along the wear of the

friction lever assembly likely caused accelerator pedal sticking and heater

ducts blowing hot air in that location causing condensation. Material

change from PPS to POM and then extension of the length of friction lever.

April 27, 2009

Personnel at Customer Quality Engineering Europe inform Customer

Quality Engineering Los Angeles about the sticky accelerator pedal problem

complaint received in Ireland.

May 2009

Engineering change request made in regards of extension of the friction

lever arm and changing material from PPS to a combination of PPA and

POM.

June 15, 2009

Toyota issues a Technical Information to Toyota Distributors in the UK and

Ireland identifying field fix by replacing CTS pedal assemblies with Denso

pedal assemblies.

July 2009

Toyota makes the design change for pedal assemblies made by CTS for the

European market on a rolling basis and then plans to implement in the US

market.

August - September 2009 Toyota Matrix was subject of an accelerator pedal complaint.

September 2009Vehicle with a sticky pedal will stop in same distance and without any

problems.

September 29, 2009 Toyota issues a Technical Information to Toyota Distributors in all of Europe

identifying a production improvement and repair procedure to address

October 13, 2009

Toyota Intra Company Communication was issued and copied to Customer

Quality Engineering Japan about Toyota Corolla and sticky accelerator pedal

complaint. Pedal was taken to Customer Quality Engineering Los Angeles

for further testing.

October 22-28, 2009

Three Field Technical Reviews were issues concerning sticky accelerator

pedals in Toyota Corollas sold in the US and parts recovery was conducted.

October 2009 - January 2010 Toyota receives additional FTRs about problem.

November 2009 Toyota notifies NHTSA (US) about 3 FTRs.

November - December 2009

Toyota engineers at the Reliability Testing group confirm that the problem

in the US is a replication of the earlier problems that were identified in the

European market.

January 15-18, 2010Various internal meetings to discuss status of production and changes and

to prepare meetings with NHTSA.

January 19, 2010Toyota makes presentation to NHTSA officials in Washington about the

sticky accelerator pedal phenomenon in Europe and the United States.

January 21, 2010Toyota announced that it would recall 2.3 million vehicles in the United

States regarding this issue.

January 26, 2010Toyota issues stop sale order for vehicles at dealerships containing CTS

pedals.

February 1, 2010

Toyota annouces recall to address the sticky accelerator pedal issue and

that fix would consist of inserting a metal plate in the accelerator assembly

to prevent the pedal from sticking.

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Figure 23: Graphical Overview of Toyota Recalls

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Figure 24: Inter-Relationships between Stakeholders & Information Flow in regards to Recalls

V. Appendix: Previous Background Research Toyota Background Research:

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Denso Background Research:

The differences in design could also be due to the fact that Denso holds a patent on the design

of the part instead of Toyota.

[http://answers.yahoo.com/question/index?qid=20100315175340AAU9ep7]

Denso’s parent company is Toyota therefore there is a closer relationship in regards to the

engineering of the parts. It is a member of the Toyota Group of Companies.

[http://en.wikipedia.org/wiki/Denso]

Denso currently supplies to both Toyota and Honda in regards to their pedal assemblies.

Drive by wire systems allow for greater fuel efficiency and engine performance.

[http://www.thetruthaboutcars.com/2010/01/whats-wrong-with-this-picture-cts-versus-denso-

toyota-pedal-assembly-edition/]

Toyota has a 24.74% + 8.61% stake of Denso in 2009. Daihatsu in which Toyota has a 51%

stake also recalled 275,000 cars due to concerns about sticking accelerator pedals.

[http://books.google.ca/books?id=iDyoSoeoDusC&pg=PT450&lpg=PT450&dq=denso+pedal+as

semblies+toyota+honda&source=bl&ots=VZSTUn7rm2&sig=G0tZSeydMKkSwWAc5sVifJGhUB

g&hl=en&sa=X&ei=p_WBT53UOqXo0QHe7Kn2Bw&ved=0CHwQ6AEwCQ#v=onepage&q=den

so%20pedal%20assemblies%20toyota%20honda&f=false]

CTS Background Research:

Chrysler sends out recall notices for 25,000 Dodge Calibers and Jeeps in regards to “accelerator

pedals could become stuck and cause unintended acceleration”. Pedals were manufactured by

CTS. [http://www.reuters.com/article/2010/01/28/chrysler-cts-idUSN2824976120100128]

Honda confirms that it also uses CTS as a parts supplier for pedal assemblies, but confirmed

that its assemblies were different from the recalled Toyota ones.

[http://wheels.blogs.nytimes.com/2010/01/28/accelerator-pedal-supplier-in-toyotas-recall-has-

many-customers/]

Toyota represents only 3% of CTS’s annual sales therefore other North American automobile

manufacturers are also greatly using CTS parts as well.

[http://wheels.blogs.nytimes.com/2010/01/28/accelerator-pedal-supplier-in-toyotas-recall-has-

many-customers/]

Ford halts production of full-size commercial vans in China while investigating the CTS pedal

acceleration issue.

[http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a59tuhYYoCqk]

CTS supplies to Toyota, Honda, Nissan, and Ford.

[http://www.ft86club.com/forums/showthread.php?t=360]

Overall CTS has the capacity in order to produce approximately 2 million pedal assemblies per

year – the Toyota recall affects 2.3 million vehicles [http://www.autoblog.com/2010/01/27/the-

fix-is-in-toyota-reportedly-has-replacement-pedals-ready-to/]

First awarded Toyota contract around approximately 2005

[http://www.toyotanation.com/forum/149-10th-gen-general-discussion-forum/311831-10th-gen-

corolla-recall-thread-34.html]

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January 21, 2010 Toyota announces voluntary recall to address the issue of unintended

acceleration on 2.3 million North American vehicles. This is in addition to the 4.2 million

Toyota and Lexus vehicles that are being recalled in order to fix issues in regards to the floor

mats interfering with the function of the accelerator pedal.

[http://www.businessweek.com/autos/autobeat/archives/2010/01/toyota_to_recal.html]

“CTS Chief Executive Officer Vinod M. Khilnani said the flaw in the pedals was a slow release

after being depressed, and that there have been fewer than a dozen such occurrences in the

U.S.

The trouble probably was caused by condensation resulting from “extreme environmental

conditions that go beyond CTS’s original specifications” from Toyota, Khilnani said on a Jan.

28 conference call. Toyota came back to CTS with a “more stronger, robust specification,”

Khilnani said. CTS said it has liability insurance with a $1 million deductible.

“Once Toyota approved the specification CTS delivered and used on its products, they can’t

blame CTS,” said Koji Endo, managing director of Advanced Research Japan.

[http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1ey94qdkcuc]

CTS supplies to Honda Motor Company, Nissan Motor Company, Chrysler Group LLC,

Mitsubishi Motor Company, and Ford Motor Company.

[http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1ey94qdkcuc]

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Figure 25: Toyota Globalization-Localization Strategy

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Figure 26: Comparison of CTS Pedal Assembly with the Reinforcement Bar Solution

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Figure 27: Overview of Denso and CTS Suppliers

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Documents

Toyota Global Operations - Unintended Acceleration and Unintended Consequences