By Philip Mattera
Toyota used its professed obsession with quality and efficiency to turn itself into the world’s leading automaker, but a safety scandal that erupted in 2010 seriously damaged the company's reputation. Toyota, whose chief executive apologized during an appearance before the U.S. Congress, later paid $1.2 billion to settle a federal criminal charge of trying to cover up the true cause of the problem. Toyota has managed to keep its heavily subsidized U.S. operations union-free, with the exception of a long-standing (but now defunct) joint venture with General Motors. The company has a much better reputation in the environmental arena, thanks to the enormous success of its Prius, although that hybrid was tainted by the company's safety problems.
Environment and Product safety
In 1999 Toyota Motor Sales was hit with a lawsuit filed by the U.S. Environmental Protection Agency, which asked for penalties of $58 million in connection with an accusation that the company sold 2.2 million vehicles with defective smog-control computers. Toyota chose to fight the case, which dragged on for several years. In 2003 Toyota finally agreed to settle by paying a $500,000 civil penalty, and spending about $34 million on anti-pollution measures. Those measures did not involve the company’s own vehicles, which Toyota insisted were not defective, but rather 3,000 diesel vehicles, including older school and municipal buses.
In recent years Toyota has enjoyed a favorable reputation among many environmentalists because of its role in promoting hybrids such as its popular Prius. In 2007 groups including the Natural Resources Defense Council put heat on Toyota when it initially lined up with other automakers in opposing stricter fuel economy standards. After receiving an outpouring of protests from Prius owners and others, the company took a more favorable stance toward the improved standards.
In November 2009 Toyota announced it would repair the gas pedals of about four million of its cars in the United States to resolve a problem with unintended acceleration. Shortly thereafter it was reported that U.S. safety regulators had opened an investigation into Toyota's Corolla and Matrix cars for randomly stalling while on the road.
In January 2010 the company issued a second U.S. recall, involving 2.3 million vehicles, that was also tied to faulty accelerator pedals. Then it took the unusual step of announcing a suspension of production and sales of eight of its models while it sought to solve the gas pedal problem. The brake problem extended even to Toyota’s vaunted Prius hybrid, which was added to the recall.
The company soon announced it had a fix for the problem and was shipping the necessary materials to dealers to make the repairs. Yet public confidence in the automaker was shaken by reports that it had known about runaway vehicles for years but delayed taking steps such as installing brake override systems.
In April 2010 the U.S. Department of Transportation proposed a fine of $16.4 million, the maximum allowable, against the company for waiting more than four months before notifying regulators about the gas pedal problem. A week later the company suspended sales of its Lexus GX 460 SUV after the influential magazine Consumer Reports issued a do-not-buy warming to its readers because its testing had shown that the vehicle had a dangerous handling problem that could cause rollover accidents.
In July 2010 Toyota admitted for the first time that at least some of the incidents of sudden acceleration were due to problems with sticky accelerator pedals and floor mats. A 2011 U.S. government report concluded that Toyota’s electronics were not responsible for cases of sudden acceleration.
In December 2010 Toyota agreed to pay an additional $32.4 million in fines to settle charges relating to its handling of accelerator pedal and steering relay rod recalls.
In October 2012 Toyota recalled 7.4 million vehicles worldwide to repair a potential fire hazard involving power window switches.
In November 2012 Toyota recalled 670,000 Prius hybrids in the United States to fix problems involving a possible loss of steering and powertrain shutdown.
In December 2012 the National Highway Traffic Safety Administration announced that Toyota would pay a fine of $17.35 million for failing to submit prompt reports about cases in which floor mats in Lexus SUVs were sliding out of position and interfering with gas pedals.
Later that month, Toyota agreed to pay $1.1 billion to settle a class-action suit stemming from claims of unintended acceleration.
In October 2013, after an Oklahoma jury became the first to find the company responsible for unintended accerlation, Toyota agreed to settle the case for an undisclosed amount.
In March 2014 the U.S. Justice Department announced a deferred prosecution agreement under which Toyota would pay $1.2 billion to settle a criminal charge relating to its efforts to conceal the true cause of the acceleration problem.
In June 2016 Toyota recalled 1.4 million cars because of faulty airbags.
After the end of the Second World War, U.S. occupation authorities encouraged the establishment of new trade union organizations in Japan. One of these was the All-Japan Automobile Industry Labor Union, known for short in Japanese as Zenji. U.S. officials instituted deflationary measures in 1949 that prompted Japan's major auto companies to eliminate thousands of jobs. Zenji unsuccessfully protested the cuts, but at Toyota conflict over the issue was serious enough that President Kiichiro Toyoda had to resign to restore labor peace.
In 1953 Zenji was on the offensive again, demanding substantial wage gains in contract negotiations. Toyota and Isuzu reached compromises with the union, but Nissan stood firm, which led to a three-month strike (and later lockout) that ended when Nissan management successfully persuaded many workers to ally themselves with a new, less militant union. In the wake of the defeat, Zenji collapsed, and company-oriented unions took over at all the major automakers.
The harmonious union-management relations that followed did not translate into job satisfaction on Toyota's shop floor. In 1972 journalist Satoshi Kamata took a job as a temporary worker at a Toyota plant, and later wrote a book describing what he called a “factory of despair” because of the punishing pace of the assembly line and the strict regimentation.
When Toyota and General Motors established their New United Motor Manufacturing Inc. (NUMMI) joint venture in 1983, the two companies agreed to accept the United Auto Workers (UAW) as the employees’ collective bargaining representative even before anyone had been hired. Deciding that cooperation was called for, the UAW signed a contract with NUMMI that provided a high degree of management control over the workplace. Soon the NUMMI facility, like Toyota's domestic plants, drew criticism for overworking its employees, and running a system of “management by stress.” In mid-2009 General Motors announced it was leaving the NUMMI joint venture; Toyota soon announced plans to close the operation.
When Toyota decided to set up its own manufacturing operation in Kentucky in the mid-1980s, the company did not extend the welcome mat to the UAW. Toyota was successfully pressured to use union labor for the plant construction, but the production work has remained non-union. The UAW avoided serious organizing drives at Toyota’s U.S. operations until 2007, when worker unrest over issues such as high injury rates changed labor-management dynamics at the company’s Kentucky operation. Some workers were also angered over a leaked company memo suggesting that Toyota was seeking to lower its U.S. wage rates. Yet the union still has not asked for a representation election. The Kentucky branch of the activist group Jobs With Justice convened a Workers Rights Board in 2007 that heard testimony about the unfair treatment of workers and issued a series of recommendations.
Toyota has also faced disputes over its U.S. pay practices. In 2003 workers in the paint shop at the company’s Kentucky operations filed a complaint with the state labor department because they were not being paid for time spent donning and removing protective clothing, and walking to and from work stations. In 2006, after the U.S. Supreme Court ruled in a separate case that such time is compensable, Toyota offered $4.5 million in back pay. Only a portion of the affected workers agreed to the settlement, while other proceeded with a class-action lawsuit.
According to Labor Relations Week (June 25, 2009), NUMMI had to pay its workers more than $862,000 after a U.S. Department of Labor investigation found that the company had failed to include overtime pay when calculating end-of-year production bonuses. In 2009 Toyota for the first time moved to reduce its U.S. workforce through widespread job buyouts.
In 2006 Toyota was the focus of an international campaign protesting the alleged firing of union organizers in the Philippines. A 2008 report by the National Labor Committee charged Toyota with continuing to overwork its employees in both domestic and overseas operations.
Toyota affiliate Denso Guangzhou Nansha was one of the companies affected by a wave of strikes carried out by Chinese workers in 2010 to demand substantial pay increases. The walkout at the supplier forced Toyota to suspend production at one of its assembly plants in China for several days.
In the autumn of 2012 Toyota was one of the companies targeted in an surge of labor militancy in South Africa. After a three-day strike, the company agreed to wage increases.
In May 2006 a female employee of Toyota Motor North America filed a sexual harassment lawsuit against the company’s president, Hideaki Otaka, accusing him of making unwanted sexual advances. Otaka denied the charges but gave up his post. The woman’s lawyer alleged that the company had taken no action in response to her complaints prior to the filing of the lawsuit, which sought damages of $190 million. The case was settled out of court with no details disclosed.
In February 2016 the Consumer Financial Protection Bureau announced that Toyota Motor Credit Corporation would pay up to $21.9 million to African-American and other minority borrowers who, the agency had alleged, had been required to pay higher interest rather than white borrowers, without regard to their creditworthiness.
Toyota has received state and local government subsidies for all of the assembly plants it has built in the United States, beginning with the one in Georgetown, Kentucky in the 1980s, which got an estimated $147 million. In 2003 Toyota received a subsidy package of $133 million when it decided to build a plant in San Antonio, Texas. Four years, later, the company and its major suppliers received a $294 million state package for a plant in Blue Springs, Mississippi; local governments were expected to kick in another $60 million.
Other Information Sources
Violation Tracker summary page
Watchdog Groups and Campaigns
Key Books and Reports
Driven by Corporate Responsibility? Ten Top Car Manufacturers--A CSR Analysis (SOMO, February 2010).
The Toyota You Don't Know (National Labor Committee, 2008).
Toyota: Fifty Years in Motion by Eiji Toyoda (1987).
Note: This page draws from a corporate profile originally prepared by the author for the Crocodyl website in June 2009.
Last updated July 1, 2016.