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Recalling Toyota

Cynthia Montaudon Tomas

Cynthia Montaudon Tomas During the year 2004 Toyota faced numerous recalls. One of the most publicized was a Hilux
is a Chief Research Officer incident in Japan. Toyota had been in the market for years with no documented problems; a
in the Support to Research 1993 Toyota Hilux Surf crashed after losing its steering power because a rod from the
and Graduates steering unit broke. Three Toyota’s designers who overviewed quality control were accused
Department, Universidad of negligence by the Japanese Police and ended up in court, while Toyota had to issue a
de Guanajuato, recall of 330,000 vehicles in Japan (Neff, 2006). The driver was unharmed but five other
Guanajuato, México. people were injured when the Hilux Surf crashed into their vehicle after crossing the median
in a highway in Kumamoto, Japan. Could the accident be prevented?

Background
This case shows a situation that Toyota’s CEO’s faced regarding an important recall. In 2005,
Toyota accounted for a quarter of the global industry’s entire expansion. The company
always considered quality as an essential aspect in all its manufacturing practices as well as
in post-sales services. Toyota had developed thousands of specific guidelines describing
what had to be done in every step of the process to produce cars ensuring quality. However,
these practices had not avoided quality control problems or recalls. From 2001 to 2005
Toyota faced an increasing number of vehicle recalls. 11.8 million vehicles were recalled in
six and a half years (Toyota Motor Corporation Sustainability Report, 2007). Still, Toyota had
less recalls in the USA than Chrysler, Ford, Honda, Nissan or VW.
Toyota’s recalls covered parts of a vehicle, ranging from paint defects, engine problems, all
the way to floor mats, and accelerator pedals (Kanter et al., 2010). Toyota’s officials suggested
that the number of recalls was high because their concern for quality was deeper than in any
other manufacturers, and have stated that some of the recalls had been voluntary, to provide
high quality service to their clients. A voluntary recall was done when a company decided that
a product, a component or a part did not have the adequate quality, or did not meet specified
standards and there was a suspicion that something could go wrong, even when the
government or other agencies had not declared so (Consumer Union, 2010)

Company profile: Toyota


Quality at Toyota is not always about defects and things gone wrong. Toyota is also concerned
with ‘‘secondary quality’’, the feel of the door handles, the touch of audio controls, the richness of
Disclaimer. This case is written the grain on the instruments panel [. . .] (Liker, 2004).
solely for educational purposes
and is not intended to represent ‘‘By the 1970’s the Japanese transformed a war ravaged country with a devastated economy
successful or unsuccessful
managerial decision making. into an industrial giant that was the envy of most countries’’ (Besser, 1993). Japanese products,
The author/s may have including vehicles, jumped from being considered by the consumers as having the lowest to
disguised names; financial and
other recognizable information
the highest quality. Toyota revolutionized manufacturing practices with the introduction of the
to protect confidentiality. Toyota System. The company had a manufacturing strategy to support the firm’s corporate

DOI 10.1108/EEMCS-10-2013-0198 VOL. 3 NO. 5 2013, pp. 1-17, Q Emerald Group Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
strategy, which was key in developing an advantage over the competition in the market
(Skinner, 1969), but this situation had not been in place for a long time before 2005.
‘‘Toyota first caught the world’s attention in the 1980’s, when Japanese quality and efficiency was
put to the test as Japanese cars were lasting longer than American cars and needed fewer
repairs’’ (Liker, 2004, p. 3). ‘‘In the 1990’s it became apparent that the way in which Toyota
engineered and manufactured its vehicles led to consistency in the process and the product’’
(Womack et al., 1991).

Toyota had the fastest product development process in the world. New cars and trucks took
12 months to be designed, while competitors usually took between two and three years.
According to Liker (2004), ‘‘Toyota used very specific software solutions, and the approach
was called collaborative vehicle development using digital engineering’’. Data from
prototypes, vehicle evaluations, and preproduction tests were fed back to engineering.
Toyota changed the system and later on prototypes were tested digitally up front in the
design process, avoiding downstream rework.

The ‘‘Toyota Production System’’


In Japan, the Toyota Production System was developed as the ‘‘ultimate manufacturing system’’
(Warnecke and Huser, 1995). The automobile industry became its testing site as it had emerged
in other practices. The beginnings of Toyota Motor Company can be traced to the origins of the
automatic looms created by Kiichiro Toyoda, the founder of Toyota, which were capable of
detecting a snapped thread and therefore they could prevent defects form occurring.
The company sold patents to a company in England to finance its automobile manufacturing
operation. Toyoda studied the American automotive industry to develop a system for the
production of smaller quantities of vehicles in Japan. Materials were scarce after the Second
World War, therefore consumers demanded variety, but at that time, Toyota could not catch
up with the competition in making thousands of identical parts to gain economies of scale. In
1946, Toyota rearranged the machines at the plant in the order in which parts were used.
Toyota had to think ‘‘smaller’’. It had to build a production line with reduced spaces, while in
the US production equipment was designed for large facilities.
Eventually Toyota was able to produce with the smallest loss, maintain the lowest inventories,
the shortest lead times and the highest profits of all manufacturers in the automobile industry.
Ohno was credited with the development of the Toyota Production System, specifically in the
area of reduction of waste, and with methodologies to reduce production time for
subassemblies and inventories. This Japanese automobile industry, as well as other
industries, was forced to work on limited spaces because of the extension of the country,
which made available space become scarce and therefore more expensive.
Ohno was inspired by the shelf-stocking practices of American supermarkets to replace
individual items as the supply of each item began to run low. Items would be produced only
when they could be used in the next step, not before, and as a result, inventory could be
minimized. Fujimoto and Tidd suggested that there were similarities between just in time
(JIT) and Fordism manufacturing practices, because both pursued synchronisation of
upstream and downstream processes. JIT allowed an enterprise to be highly responsive to
customer demand. Thus, in addition to reducing production inventories, it helped ensure
that a company only manufactured what the market demanded. Fordism synchronized the
workstations by physically linking them by continuous conveyors, JIT created pressures for
synchronisation eliminating buffer stocks between the stations.
Fujimoto and Tidd explained that at Toyota work standardisation and the training of
multi-skilled workers were carried out in parallel, meaning that decomposition of craft jobs into
standardised tasks and re-combination of tasks to multi-skilled jobs occurred at the same
time. Toyota achieved major improvements in productivity and increased in quality by
eliminating the wastes of overproduction, time, transportation, stock, movements,
and defective products. By lowering inventory, it was possible to expose other problems
regarding how the different processes were organized, manufacturing and

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maintenance problems, and even problems with managements. Companies could no longer
hide defective components in inventory. Workers could not discard a defective part and select
another from the safety stock, because there were not any. Workers had to find out what the
problem was, which led to several processes of innovation that occurred spontaneously.
At first, the Toyota System had a negative impact on labour, as did the Ford System when it
first started. Toyota records suggest that the system led to some accidents and suicides of
its workers, and that there was a sense of despair and loneliness on the lines. Since the
1950s, an uncountable number of Western automobile production specialists visited Toyota
to find out the secret behind its success.
Kenney and Florida as well as Bolwijn and Kumpe have shown that industrial paradigms
change over time. Fordism emerged in the early twentieth century, and in the middle of it a
new paradigm was in the making: Toyotism (also known as lean production). Fordism
focused on cost, through local optimisation, and enabled companies to produce reasonable
quality. Toyotism, in contrast, enabled companies to produce at low cost, high quality
products. This achievement can be explained by the existence of two systems of production:
lean, and mass, both of them sometimes co-exist. Mass production technology is
disappearing in the automobile industry because of new technology and the adoption of
lean methods. Automakers have required more flexible production systems to the extent that
the industry has become more integrated.

Quality control tools and techniques


Although numerous tools and techniques have been available to control quality, two
remarkable authors were selected to understand what happened at Toyota: David Garvin
and Kaoru Ishikawa. Garvin was a Professor at the Harvard Business School who developed
the notion of quality dimensions and Ishikawa was one of the leading authors of quality
control in Japan, creator of the cause-effect diagram.
Quality is related to different factors, which are defined by Garvin (1988) as Quality
Dimensions. Garvin’s tools are not related to the Toyota System; his ‘‘quality dimensions’’
present an overview of quality considering all aspects that account for quality in a product or
a service. Problems can occur when performance, features, reliability, conformance,
durability, serviceability, aesthetics, and perceived quality are overlooked (Table I).
The following paragraphs are an adaptation of Garvin’s (1988) eight dimensions to the
automobile industry, specifically to the Toyota Hilux case.
‘‘Reliability’’ meant that a car was trustworthy, that it would not fail during the guarantee
period, and would not cause accidents because it had been tested.
‘‘Conformance’’ in a car was the commitment to all pre-established standards. Safety
standards, traffic standards, industry standards environmental standards and even de facto
standards had to be met, based on national and international rules and regulations.

Table I Garvin’s eight dimensions of quality


Dimension Explanation

Performance Primary operating characteristics of a product


Features The bell and whistles of products
Reliability The probability of a product failing within a specific period
Conformance The degree in which a product’s design and operating
characteristics met pre-established standards
Durability A measure of product life with (economical and technical)
Serviceability Speed, competence, courtesy and ease of repair
Aesthetics Related to the notion of beauty
Perceived quality An overall perception (used based)

Source: Garvin (1988, pp. 49-50)

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‘‘Durability’’ was another dimension of quality related to product life. Even when the life of a
car depended greatly on driving habits and lifestyles, or environmental factors that
decreased the life of a car, there were still durability parameters both in the private and
public contexts. In the case of the private sector, standards had been developed by
individual firms that concerned the company and their suppliers (for example, Ford
standards), and there were also industry standards. In the case of the public sector, safety
had been regulated by different governmental agencies in countries around the world. Every
single part of a car had a determined durability or ‘‘active life’’.
In order to fulfill the ‘‘serviceability’’ dimension, a car should be able to be repaired at minimum
cost and in timely fashion. In this light, there was a related industry, called the auto parts sector,
which basically supplied the market with replacement parts. The dealerships and auto shops
were the actual frontline for the access of the consumer to the serviceability aspect. Post sale
services were also included in the ‘‘serviceability’’ dimension. In this respect, speed of repair
was essential, as well as the courtesy, competence and cost of the service on offer.
Continuing with Garvin’s (1988) eight dimensions of quality, ‘‘Aesthetics’’ was one of the
subjective dimensions because it was related to the design and style, for example, colours,
trims, accessories, among others. There was a wide variety of options to suit almost any style
that would be attractive to the consumer; every consumer had tastes or preferences that
could not be generalized.
Finally, ‘‘perceived quality’’, as the last of the eight dimensions suggested by Garvin, was the
general perception or opinion about the overall quality rating that a client or group of clients
had about a certain car, based on their own experience. This aspect included ‘‘brand
identity’’ and ‘‘brand positioning’’. In this dimension, quality could then be translated into
satisfactory or unsatisfactory contacts with the car as a product, with the automaker, the
dealer and the after sales service (Table II).
Ishikawa (1985) considered three additional dimensions:
1. Cost, which included yield, unit cost, losses, productivity, raw
Related to
materials cost, production costs, fraction defective, defects, overfill,
Garvin’s
reliability
cost price, selling price and profit.

2. Delivery including production volume, sales volume, changeover


losses, inventory, consumption, lead time, changes in production
Related to plans, considering that quality control is impossible without
Garvin’s numerical data.
serviceability,
reliability and 3. Service, including safety and environmental characteristics, product
conformance liability, product liability prevention, compensation period, warranty
period, before sales and after sales service, parts interchangeability,
spare parts, ease of repair, instruction manuals, inspection and
maintenance, among others.

Ishikawa (1985) also proposed a cause-effect diagram, which he developed in 1950 in


which different causes of a same problem are divided into different elements: men,

Table II Equivalences between Garvin’s eight dimensions in quality and Ishikawa’s quality
aspects and characteristics
Garvin’s eight dimensions of quality Ishikawa’s quality characteristics

Performance Performance
Reliability Reliability/strength
Conformance Tolerances/dimensions
Durability Lifetime
Aesthetics Appearance
Features
Serviceability
Perceived quality

Source: Garvin (1988, p. 49)

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machines, method, materials and the environment. These causes can be modified
according to a specific quality control problem in order to find which causes ha a higher
impact in the quality problem.
The causes are arranged as a fish bone, all being connected by the centre or spine.

Toyota’s recalls
We would like to deeply apologize for troubling many people concerning the quality and safety of
our products (Masatami Takimoto, Toyota Vice President) (The Japan Times, 2006).

The Toyota Hilux first appeared on the market as a 1.5 ton commercial truck with a
stake-bed. The model did not suffer modifications until the Second World War, when a
compact pickup was designed based on the original truck. In 1963, Toyota entered the
American market with the Stout pickup. The vehicle was named Hilux in 1969 when it was
redesigned to replace three existing models of pickups. The new Hilux used the same old
1.9 liter engine and a four-speed transmission. Between 1979 and 1989, the Hilux underwent
numerous modifications to provide a larger and more luxurious vehicle. In the USA, it was
called the Toyota Truck, dropping the name Hilux completely, even in the owner’s manuals.
The modern version of the Toyota Hilux, commonly known as the Tacoma, appeared in 1995.
Toyota faced a wide variety of recalls in the 2000s, being the Hilux recall one of the most
important. In 2004, a sudden steering problem caused a Hilux Surf to swerve into oncoming
traffic and strike another vehicle head on. ‘‘The vehicle strolled onto the opposite lane and
collided head-on with a passenger car, injuring five people after its relay rod fractured and
put the steering out of action’’ (Japan Transportation Scan, 2006).
Two months after the accident, Toyota recalled the Hilux Surf and two pickup truck models
that used a similar steering assembly, the T100 and the Hilux, as the Tacoma pickup truck in
the USA. The recall included the 4Runner in the USA in September 2005.
The Ministry of Land, Infrastructure and Transport in Japan issued a written instruction on
July 21, 2006, urging Toyota to improve its recall-related operations. The automaker had
problems handling and reporting defects, and sharing information with the departments
which were involved in the recall (The Japan Times, 2006).
Japan’s Ministry of Transportation revealed alarming statistics on the number of recalls by
Toyota in 2005 when compared to 2001 (Table III).
According to Goldman Sachs specialists, 68 percent of Toyota’s recalls until 2005 could be
blamed on design flaws (Maynard and Flacker, 2006): rubber parts that were not made thick
enough to withstand engine heat and joints that were too weak to hold together. Design
problems were related to Toyota’s high project workloads, and lack of adequate personnel,
among others. The ‘‘commonization’’ of parts[1] led to the quantity of each recall being
larger, because a same part could be used for millions of cars, and if that particular part was
recalled, millions of vehicles could be affected.
Toyota’s rapid growth was also an element that caused failures because the design centers
were understaffed, and because of shortages of in-house talent, the company was forced to
outsource relying on its parts suppliers for the design of key components.

Table III Recalls by Toyota


Year Market share (%) Percentage of recallsa

2001 42.1 1.4


2005 44.9 34

Notes: aA recall was a return of a product to its manufacturer for repair or replacement, normally due
to failure or malfunction; recalls and market share by year
Source: The Japan Times (2006)

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As the results of the investigations concerning the Hilux accident, on July 2007, three Toyota
officials faced charges for negligence in quality control problems. The executives from
Toyota’s quality department were accused of professional negligence because they did not
issue a proper recall regarding the 2004 Hilux accident. ‘‘A Japanese police investigation
concluded that three Toyota executives including the head of the quality division, knew of the
faulty steering rods for years, but did nothing about them’’ (Jackson, 2009).
Investigations on the case determined that the relay rod fractured caused a loss of steering
control. The police suspected Toyota knew about the vehicles defective rod, which could
crack due to poor structural strength in 1996, if not earlier. Toyota said it first discovered the
problem in 1996 (Japan Transportation Scan, 2006) but they occurred only in ‘‘unusual and
extreme’’ conditions and did not warrant a recall at that time. According to the Japan
Transportation Scan (2006):
[. . .] the vice president and managing director in charge at Toyota, learned that the relay rod of
the Hilux Surf was vulnerable to cracks due to poor strength at an in-house meeting on vehicle
defects in April and June 1996.

The relay had not been changed from the old model even with a 95 kilograms increase in the
load of the new model.
Toyota found in 1996, that after the 1988 redesign of the Hilux Surf models, its relay rod was
not strong enough, because despite a 95 kilogram increase in the load on the front wheels of
the new model, the rod had not been changed from that of the earlier model. Toyota modified
vehicles to avoid problems from reoccurring but did not recall the Hilux immediately
because no serious accidents had occurred.
The relay rod of the steering unit could crack due to the lack of strength if actions
requiring high steering power, were taken for a long period. If the crack was ignored, it
could grow, and the relay rod could break causing the vehicle to stall. In all the 82
registered cases relating to the defective rod, 46 were from Japan and 36 abroad. Toyota
filed a recall report with Japan’s Transport Ministry in October 2004, which covered a
combined 330,496 units of Hilux Surf vehicles manufactured between December 1988
and May 1996.
In September 2005 the company announced a global recall affecting 1.2 million Hilux
vehicles and some T100 trucks in 180 countries and regions. Toyota’s officials argued that
the delay in the global recall was caused by the need to carry out different safety checks,
and not negligence. By further analyzing the steering problem recall, other recalls affecting
additional parts or component of the same vehicle appeared (Table IV).

Problems at Toyota
By reducing the ‘‘time to market’’ (which can be explained as the time a company spends
from the design of a new vehicle to its introduction in the market throughout the complete
production process) on new products, the design process had been reduced. According to
Jones (2011) Toyota was once proud to be the fastest developer of vehicles in the world,

Table IV Hilux recalls


Model type Affected models Quality problem

Hilux Surf Wagon 23 December 1994 to 24 February 1997 Cooling system


Hilux Surf 23 December 1994 to 24 February 1997 Cooling system
Hilux Surf Wagon 1 June 1994 to 9 August 1995 Fuel pump
Hilux Surf 20 November 1995 to 30 September 1996 Engine
Hilux Surf Wagon 14 December 1988 to 31 May 1996 Steering unit
Hilux Surf 14 December 1988 to 31 May 1996 Steering unit
Hilux Surf 22 May 2001 to 1 October 2002 Shock absorbers ball joint

Source: Consumer Reports (2005)

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specifically, the fastest time to market for new vehicles. Later on, they considered that being
the fastest did not always meant being the best.

According to Kretschmer et al. (2008), the competitive environment in the automobile


industry was characterized by continuous shortening of innovation time. Customer
expectations kept increasing regarding functionality and quality of products and costs.
Because of ‘‘time to market’’ conditions, vehicles were not fully redesigned, and required
revisions were not made.

Analysts say Toyota’s problems started from the mid-1990s, when Toyota began expanding
its global production. Toyota did not hire enough engineers to keep up with production
increases because the company was trying to meet cost-cutting targets.

According to Liker (2004), an Engineering Professor at the University of Michigan, who


studied Toyota for over 20 years, Toyota relied on its suppliers to help the company to
maintain quality, but in 2001-2002, Toyota’s quality was slipping and the company sought to
find and eliminate these problems. 2005 was perhaps Toyota’s worst year in terms of recalls.

The design process at Toyota was prone to failures, even when the traditional method for
developing products and services was a ‘‘serial approach’’ as presented by Jackson and
Frigon (1996, p. 329) (Figure 1).

The Toyota Hilux was modified into a heavier vehicle, but specifications on the parts were not
revised. Therefore, there was added stress on the steering components, specifically on
the rod.

Toyota had been implementing strict cost reduction policies. Costs were maintained
competitive, but it did not reflect in wages for the Japanese workers (Liker, 2004), nor in
investments in trained personnel.

According to Toyota personnel, the workload at Toyota increased as well as the new projects,
but the number of personnel involved remained the same. Under manning was one of
Toyota’s major concerns.

Because Toyota wanted to have the vehicle in the market as soon as possible and because
the company was proud of being the fastest design team in the world, time was reduced in
other critical activities, such as vehicle testing. Toyota also relied on its computer-aided
design more than in actual testing of vehicles. Vehicles were indeed inspected, but
‘‘inspectors tended to see only what they have been trained to see’’ (Garvin, 1988, p. 123).
It was difficult for inspectors to identify design problems since it was not in their area of
expertise.

Figure 1 Ideal design process

Design engineering Manufacturing test quality


services

Design Verify Prototype Review

Redesign Reverify Produce Test

For manufacturing Sometimes!


For test
For quality
For service
Source: Jackson and Frigon (1996, p. 329)

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VOL. 3 NO. 5 2013 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7
One of the problems that could have prevented the accident was the delay Toyota fell into,
before issuing the recall. An issue that can be discussed on the subject, was that defects
‘‘existed’’ only when they were recognized (Garvin, 1988, p. 123) and accounted for:
More than 20 cases of cracks in the relay rod were reported to Toyota between 1992 and 1995 in
Japan and abroad [. . .] Toyota found no need to recall the model in 1996, judging from the
frequency the defect was found and it saw no fault in the way the executives at the time dealt with
the matter (Japan Transportation Scan, 2006).

The problem of not detecting problems in a timely manner, made costs of detecting and
repairing defects at various stages; it increased as a product moved from the design
process to the manufacturing stages, and increased even more, when the product reached
the consumer and a recall had to be issued:
The product development process had to be an integrated approach that addressed all of the
factors early in the process and impacted productivity, quality and customer satisfaction
(Jackson and Frigon, 1996, p. 330).

When something went wrong in the design process, it was almost impossible to detect the
problem and to stop in the manufacturing process; part of it was because recognition
systems at different stages varied and required experienced personnel.
According to Cusumano (1992), until the recession Japan had a severe and growing
shortage of labor domestically, and the Japanese Government allowed foreign workers to
work in Japanese factories, which introduced a problem: workers needed to be trained, and
they had little literacy in Japanese language. In Japan, during 2006 and precedent years,
there was a lack of engineers adequately trained in the use of CAD applications. Diagrams
were outsourced:
The designer was not the same person who created the CAD diagram. Because of this the
designer can miss drawing errors, which were previously caught by veteran engineers. As
numbers of skilled workers became thinner, errors began to show (The Toyo Keizai, in Miller
(2006)).

Japan’s problems on education were not just related to specialized or technical aspects.
Schools that were once recognized for their hard working students were having problems
with their scores, falling behind students from other countries. At Japanese universities,
students became more interested in literature and liberal arts than engineering, and
applicants to engineering programs fell at an alarming rate (Miki, 2006).
In terms of design, using high technology design process had advantages, but also
disadvantages, because it used a special language that not everyone was able to
understand.
In Tokyo, Toyota Motor Corp. managers cited several reasons for the rise in recalls:
B Greater use of electronics in increasingly complex cars.
B Higher production overall, which meant that a defect was present in more vehicles.
B An inclination to follow stricter US standards for recalls, rather than loser Japanese
Standards.
B Vehicles began to be kept longer by the owner, even for more than eight years that made
them more prone to failure.
B More sharing parts across platforms and vehicle lines with unknown long term durability
problems.
B Before, certain recalls could be kept secret, and the Japanese government outlawed
them, so official recalls by all automakers climbed (Treece, 2007).
It was to the CEO’s to determine why the problems that generated the recall were not
detected, and what actions need to be implemented in order to avoid it from reoccurring.
These actions need to be communicated as soon as possible, to the public. Based on that,
what should the Toyota’s CEO do?

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PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 3 NO. 5 2013
Keywords: Note
Decision making, 1. The same part was used in different vehicles and models.
Supply chain management,
Quality control,
Brand reputation,
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Further reading
Evans, J. and Lindsay, W. (2005), Managing for Quality and Performance Excellence, Thompson Higher
Education, Mason, OH.
(The) Japan Times (2006), ‘‘Toyota vows to improve quality recall regime’’, The Japan Times, August 4,
available at: http://search.japantimes.co.jp/cgi-bin/nn20060804a5.html (accessed July 1, 2011).
Masatami, T. (2006), Apology to the Public Regarding the Toyota Hilux Recall, Press Conference.

Maynard, M. (2003), The End of Detroit: How the Big Three Lost Their Grip on the American Car Market,
Currency Doubleday, New York, NY.
Suzaki, K. (1987), The New Manufacturing Challenge: Techniques for Continuous Improvement, The
Free Press, New York, NY.

Tsutsui, W.M. (1998), Manufacturing Ideology: Scientific Management in Twentieth-Century Japan,


Princeton University Press, Princeton, NJ.

Corresponding author
Cynthia Montaudon Tomas can be contacted at: cynthia.montaudon@ugto.mx

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