Sunday, February 12, 2012

Is ‘Deceiving the Customer’ the new Competitive Advantage?

In a front page article in the Sunday Times (5th Feb, 2012) they report that “the car giant Toyota secretly requires its dealers to turn a blind eye to an array of faults with brand new cars.”

It’s reported that “former dealers and technicians have spoken of their outrage about the ethics of the policy, which meant that they had to ignore some defects found during routine services and repairs on new cars. The policy does not appear in the warranty manuals given to customers but its existence is set out in internal documents seen by The Sunday Times and in a confidential manual given only to dealers.”
They go on to report that “the secret policy instructs dealers only to fix defects in new cars if they relate to safety and reliability or if they have been flagged up as a problem when the customer brought the vehicle into the garage. According to former dealers and technicians, this means garages could disregard a category of faults during routine service – including clutch problems, clicking steering columns, corroded alloy wheels, rusty brake discs, oil leeks and faulty wing mirrors – if they had not been mentioned by the customer.
What’s even worse (if that’s not bad enough) is that “dealers also felt that the secrecy policy was a rip off because customers could suddenly be told of a list of previously unmentioned faults when the warranties expired. The customer would then have to pay for the work on the car.”
Of course as with many stories in the press we are left to make our own judgement and expect the views on the ‘truth’ of this story will be split both ways. The newspaper reports that “Toyota said last week the minutes (where this issue was formally raised) reflect only the ‘misguided’ concerns of one dealer. It said the issue had been properly addressed at the time and had not been raised since the meeting” – though to be honest, having seen how some big corporates work, that doesn’t surprise me – I can image the poor employee been hauled over the coals and in no uncertain terms told if he/she ever brings the issue up again that they will never work again…. “The national council of Toyota dealers last week wrote to this newspaper saying its members regarded the warranty as among the best in the industry.” Which depending how cynical you are – could bring big smile to your face.
It gets worse because the paper reports that “Toyota’s warranty auditors perform spot checks on dealers an can fine them up to four times the cost of any non-safety related repairs they found to have been carried out without receiving a customer complaint,” and then the bit that got my attention and made me realise that this was probably true – “Toyota said that the maximum fine was very rarely imposed.” – which, for me, confirmed that the policy did exist.
In fact later in the article it’s reported that “Toyota has claimed that its secrecy policy is commonplace in the industry,” – so I guess we all better rush out and by ‘push-bikes’ or some other mode of transport….
Apparently Jon Williams, the managing director of Toyota GB, was on the phone to The Sunday Times within hours of the reporters putting their story to him. He promised to drop everything and travel to London the following day. William and two other executives who accompanied him produced an independent report that said the firms warranty policy had the highest rate of dealer approval in the UK motor industry. The Toyota executives initially denied that Toyota had any policy of refusing to recognise ‘add-on-repairs’ – a term for faults that are not reported by the customer – until the Sunday Times reporters produced the organisations confidential warranty policy manual, which clearly states that this is the case.
The report concludes by stating that “it is unclear why Toyota chooses to burden its customers with extra bureaucracy by insisting that they book their cars in to the workshop all over again when technicians find defects with their cars, rather than repairing them on the spot.” Though can personally think of many reasons why they might have to re-book, where, for example, the ‘extra’ time to fix the ‘new’ fault might simply be too long for the technicians to complete with the work load they already have for that day. Which could lead to delay in fixing other customers cars – who had booked and were expecting to pick up their vehicle on the same day.
They also conclude with the fact that “nor is it obvious why Toyota operates a complex audit system that can penalise dealers for repairing faults under warranty that are unknown to the customer if, as Toyota says, its technicians are free to tell customers of any faults they discover.”
What’s scary about this story, if only partially true, is how the world has changed in 50 years. There was a time – yes there really was – when employees took pride in building and manufacturing products, and not just cars. A time when there was a genuine desire for the customer to ‘be happy’, where the logic was that not only would the customer repeat purchase but would also ‘encourage’ their friends to purchase, by telling them about their customer experience.
So I guess the moral of this story is to complain about everything – just to be safe.
As a post script, in today’s Sunday Times (12th Feb 2012), they report that “the car giant Toyota faces investigation by the motor industry regulator over its secrecy policy of ignoring some faults in new cars,” – so maybe the truth will be heard.
However many questions will remain unanswered for now, including, what this will do to customer confidence in the automotive sector and maybe more importantly what kind of people work for organisations that allegedly deceive the customer – but this is another story for another day.
The Sunday Times. Toyota accused of deceiving customers. 05.02.2012. p.1-2.
The Sunday Times. If the customer doesn’t make a complaint, don’t fix the car. 05.02.2012. p.12-13.
The Sunday Times. Toyota faces inquiry over ignoring faults. 12.02.2012. p.16.

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