STEVE INSKEEP, host:
For decades, Toyota was a trailblazer. Its management techniques were a model for others. Times have changed. First came the economic stagnation of the 90s, often called Japans lost decade, and now Toyotas problems leave Japan asking what went wrong.
NPRs Louisa Lim reports.
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Unidentified Man: History has shown a good company will fix its mistakes, but a great company will learn from them.
LIM: So begins Toyotas latest commercial. But the company is up against multiple recalls - the badly fitting floor mats, gas pedals that stick, and faulty brake software. Its also investigating complaints about steering problems in the Corolla, the top-selling car in the world. Toyota's facing the worst crisis in its history and the onus rests on its CEO, Akio Toyoda. His behavior hasnt helped. His first apology came two weeks after the recalls began, turning a crisis into a PR catastrophe.
Kenneth Grossberg, professor of marketing at Waseda University in Tokyo, blames a gulf in corporate culture, between the West and Japan.
Professor KENNETH GROSSBERG (Marketing, Waseda University): It is proper behavior not to air your linen in public. It is not considered a cover-up in terms of Japanese culture, it is considered proper etiquette. You don't talk about it.
LIM: In Japan, Toyota is almost totemic. It's the most profitable company, the biggest taxpayer, and until now, its management techniques known as the Toyota Way were widely envied and emulated. Like many other Japanese companies, even though its reach is global, it's stuck to the Japanese way.
Professor STEFAN LIPPERT (Temple University, Tokyo, Former Management Consultant, McKinsey and Company): Many Japanese managers are convinced that the economics of homogeneity, of being ethnocentric, outweigh the advantages of being a globally integrated enterprise. There is a comfort level in management meetings that are done in Japanese that, of course, also increases performance.
LIM: Stefan Lippert at Temple University in Tokyo is a former McKinsey management consultant. He believes Toyota's appointment eight months ago of Akio Toyoda, the grandson of its founder, shows its commitment to tradition to the Japanese way of doing things. Now, Toyota's troubles underline the stark choice faced by Japanese businesses - or Japan Inc. if you like.
Prof. LIPPERT: That's not the end of Japan Inc. Japan Inc. just has to decide what it wants to be. Does it want to follow the old model, being an ethnocentric Japan-based organization that exports to the world; or does it want to be globally integrated? So, to what extent should they open up their organization for international talent, to what extent should they compromise on their corporate spirit, which is the kaisha spirit, which is basically a very Japanese spirit?
LIM: His colleague, Temple University Director of Asian Studies, Jeff Kingston, believes the lessons are clear.
Professor JEFF KINGSTON (Temple University, Director of Asian Studies): This has to be a turning point for corporate Japan, a wake-up call that they need to become less insular, they need to become more international. They have to, you know, regain some of that competitive edge that they had in the 1980s that made them into world-beating companies.
LIM: But changing Japanese companies, with their long years of tradition and entrenched bureaucracy, is like turning around a ship in motion. For long-term employees, even the concept of change is unsettling.
When asked if it is time to consider changes to the Toyota Way, one Toyota Group employee, who would only give his name as Mr. Yasuda, is quietly horrified.
Mr. YASUDA (Toyota Employee): (Through translator) I'd never think that this could be the end of the Toyota Way or that we should ever change our ways at all. We just need to tackle this minor issue that affects only a small number of people. Maybe in the past, we didn't take it seriously enough.
LIM: The Toyota Way includes principles such as going to where the problem is and asking the five whys of troubleshooting. But the company didn't follow these ideas when dealing with the safety issues. Writing in The Wall Street Journal, CEO Toyoda says it must adhere more closely to its principles.
But whether Toyota can find its way back or whether that really is the answer to its woes will be watched closely in Japan by its friends and rivals alike.
Louisa Lim, NPR News, Shanghai.
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