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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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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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Nine Mile Management Consulting Group October, 2012 October, 2012 February 2013
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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Nine Mile Management Consulting Group October, 2012 October, 2012 February 2013
Figure 25: Toyota Globalization-Localization Strategy
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Nine Mile Management Consulting Group October, 2012 October, 2012 February 2013
Figure 26: Comparison of CTS Pedal Assembly with the Reinforcement Bar Solution
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Nine Mile Management Consulting Group October, 2012 October, 2012 February 2013
Figure 27: Overview of Denso and CTS Suppliers
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Nine Mile Management Consulting Group October, 2012 October, 2012 February 2013
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