Toyota is undertaking a massive recall of vehicles to fix accelerator pedals.  Obviously, Toyota’s reputation has taken a huge hit.  How are their incentives aligned with consumers in terms of fixing the problem?

At a fundamental level, Toyota has a huge incentive to make sure that they solve any problems in cars on the road and in dealerships and that there are no problems in cars they make in the future.  If they put in a claimed fix to the problem and it’s not a real fix and there is an accident, their reputation takes another huge hit.  The people who worked at AIG and caused the problems can find other jobs because they are still nameless to consumers.  But Toyota’ brand name is its reputation and if that goes, suddenly G.M. has a future after all.

There are some conflicts of interest though between consumers and Toyota.  Toyota have two fixes to the pedal problem.  One is to just put in a new pedal.   The second is to add a steel bar to the bottom of the pedal to stop it sticking to the spring.

To the average consumer, a new pedal sounds better than the patched up old one.  And it also sounds more expensive suggesting that Toyota is following a quick and dirty path to a recall with the steel bar.   In an NPR interview, the Toyota CEO said both fixes cost roughly the same amount.  But this does not convince non-experts, especially when Toyota has been so slow to react to the problems.  So, it seems Toyota should go with the new pedal solution for everyone.  Why aren’t they doing that?

This is where some conflict of interest appears: the steel bars can be produced more quickly than the new pedals.  Toyota would like to get the cars on the road fixed as soon as possible to avoid another crash.  So, it has decided to go for a fix which is fast but looks suspicious.  This is the problem.

It has to try to make the solution as “above-the-board” as possible.  Perhaps announce that anyone who got the steel bar can get the new pedal later in the year if they are not happy.  If Toyota really believes the steel bar fix is as good as a new pedal, it should give away something free and valuable to make the solution credible and to say “we are sorry”.  People wanting the new pedal should not get the freebie.

Not sure what the freebie should about a discount on your next Toyota purchase?  It should explicitly say that it can be added to any other discounts offered in the future so people know they are definitely getting a good deal