1.

0 Introduction

Business ethics plays a significant role in any industry as it compiles the studies of business situations, activities and decisions where issues of right and wrong are addressed (Crane & Matten 2007, p.5) Ethics is concerned with the study of morality and the application of reason to illuminate specific rules and principles that determine right and wrong for any given situation (Crane & Matten 2007, p.8). Apparently, Toyota Motor Corporations, known as Toyota abbreviated as TMC; a multinational corporation headquartered in Japan and use to be the world largest automobile maker by sales and production (Toyota 2010) are facing ethical issues and challenges which affects the entire company. The importance level of business is highly affected to the society as compare to the past. Therefore, ethical decisions are extremely important to practices with the guidance of its core values which are

y y y y y y y y

Open and honest communication Customer satisfaction Social responsiveness Quality in everything we do Respect for people and property Recognition and reward for effort Teamwork Fair and equal opportunities

With these core values, Toyota would be able to conducts its business with high expectation of ethical standards. Social responsibility carried out by Toyota as one of the leading automobile company in the world such as go green activities, community care, education approach, traffic safety programs and etc. The range of social

activities brings out sustainability and globalization approach to the world. Indeed, this is a good practice for every business company as Toyota has initiated in performing more outstanding than other companies. 2.0 Ethical Dilemmas Currently Facing by Toyota Social impact- Problems with the accelerator pedal Toyota is notorious of its safety history such as the problems with accelerator pedals issue which involves different range of Toyota cars, the most recent case that Toyota takes action with their gas pedal issues was after the incident of Saylor Family, car crashes in California Highway while driving Toyota Lexus ES350, causes the whole family died, the incident was happened on August 2009(4 Killed In Fiery Santee Crash Believed Identified 2009). After the incident of Saylor Family, Toyota Motor America recalls 4 million gas pedals for repair, to believe that it cause from uncontrolled acceleration. Every carmaker has recalls but this is by far the largest recall Toyota ever had in the U.S (Brown 2009). Toyota issued a statement pointing to the installation of an improper floor mat from another vehicle which causes the death of Saylor Family. More than 1000 Toyota and Lexus owners have reported the same issues since year 2001 on their vehicles; it involves many cases such as slapping into trees, parked cars and brick walls. However, many believes that the issues goes beyond the floor maps as Toyota has been neglecting the safety issues of customers, 2007 NHTSA survey showed 10% of 600 Lexus owners had experience the same problem(Vartabedian ,Bensinger 2009). The crashes resulted in at least 19 deaths and scores of injuries over the last decade. Most sudden accelerations did not result in a crash, but there were notable exceptions.

Environmental impact- Global warming issues Automobile industry, said to be one of the countrys major revenue but however the more advance in the industry, the more environmental impact that will be create, it range from climate change and dwindling natural resources to noise, smog and water pollution. The resulting climate changes and the adverse affects having on ecosystems and human living environments is cause for concern. Global energy consumption and CO2 emissions, the cause of global warming, has been gradually increasing since the industrial revolution. Due to approximately 20% of the worlds total CO2 emissions from energy sources is cause by the transportation sector(Appendix 2), therefore, reducing CO2 emissions is an important task that the automobile industry must deal with to improve air quality (Global warming prevention initiatives 2010). 2.1 Toyota facing brand challenge - Reputation and brand image An organizations brand is fragile. Brand is about what customers think about a company and say about a company. For years customers have attached Toyota with quality and that image brought Toyota to the top of the automotive industry. All this while, Toyota brand is synonymous with having a high safety standard and many car owners purchase their vehicles for this reason but unlikely, Toyota has neglected their problem since year 2001, delaying recall investigation to save money. Customer however have found themselves as the victim and has bring the case to court (Torrance woman sues Toyota over deadly 2008 crash 2010). The reliability, trust worthy of a brand is significantly important for every customer. The unethical behaviour that Toyota is practicing has revealed and Toyota finally admitted that they engaged in unethical behaviour when it comes to investigating the safety of its vehicles. Toyota not only dragged its feet when looking into safety defects, but also patted itself on the back for doing so (Mack 2010).

2.2 Massive recalls - Impact on Japans economy Japan minister for economy mentioned the current crisis at Toyota has led to a recall of millions of vehicles across the world, this will results in become an impact on Japan's economy in terms of globally sales and production as Toyota is the largest automobile maker in the world, generally took place on Japans major revenue (Japanese Minister says Toyota recall may effect economy 2010). Also, market share decline in the United States (Jie , Smart 2010). Financial statement showed there is a drastically drop in sales in majorities of the countries (Toyota Financial Report 2009)and the cost for massive recalls were expected to be high, suggested it could cost $5 billion, if that's only a little over $100 per vehicle (Brown 2009).

2.3 Unhealthy living lifestyle The need to drastically reduce CO2 and global energy consumption on a global basis was affirmed as a long-term goal for Toyota. The greenhouse gases have indeed brings harm to peoples health. These fuel emissions which have a molecur makeup that entices them to react with sunlight and nitrous oxides. When this reaction happens, the molecur actually alerts to form what is known as ground level smog. Ground level smog contributes to the air pollution caused by the cars that irritate respiratory symptoms and this will create chances for cancer and eye irritation. Japan committed to reduce CO2 by 6% during the first commitment period from 2008 to 2012 under the Kyoto Protocol (Global Warming Prevention Initiatives 2010). Emission in transportation category makes up about half of the emission in transportation category and is from passenger cars when organize of CO2 in Japan by category. This phenomenon showed it is important to take action in reduction in

emission of CO2 from passenger cars. Eco driving is indispensable to achieve the goal (Appendix 1).

3.0 Dealing with Ethical Dilemmas Toyota has developed and tested a precision-cut steel reinforcement bar that will be installed into the accelerator pedal assembly; thereby eliminating excess friction that has caused pedals to stick in rare instances (Toyota reveals details on pedal solution 2010). The excess friction that causes the pedal to stick will be solved with this reinforcement. Toyota had been strictly tested on the effectiveness of newly reinforced pedal assemblies that previously known as a tendency to stick. Majority of the customers will be contacted to discuss about when to bring their vehicles for repair. Many dealers will work extended hours to complete the recall as the parts are being shipped to the respective dealers.

3.1 Develop customers trust and brand reputation Toyota has built up their reputation along the years as an image of safety, reliability and quality to the customers. However, due to the recalls happened in year 2008, Toyota have made significant changes to ensure the approach of more responsive, safety-focused organization. Toyota tend to be more responsiveness by closely dealing with their customers and taking fast, decisive actions to ensure customers vehicle are in safe condition. Toyota had place more resources into the field such as rapid response SMART teams to make on-site inspections in order to better gather, analyze and respond to customer feedback in a more effective ways (Angelo 2010). Also, Toyota will re-emphasizing the basics of the Toyota Production System, which involve pulling whats known as an andon cord to stop the production line

whenever they notice any problem throughout the operations (Angelo 2010). (Cardona 2010) claims that this is not only a safety issue. It is also about image, prestige and branding. She strongly believes that Japanese cars are far better than American ones, when they have a technical problem the competition try to take advantage of it. Rebuilt customers trust and brand loyalty is not an easy task but to ensure mistakes will not repeat for the second time is a must in order to achieve sustainability in the market. Toyota has made decision based on descriptive ethical theory because Toyota utilise their resources such as man power and capital to develop a special team, with the sufficient resources, special team; SMART teams are able to provide rapid respond and more alert on any problems(Andrew & Dirk 2007, p.128). (Larry 2010) claims that she will probably never buy Toyota; it is not only because of the actual safety problem, but because of how it is so obvious how Toyota tried to cover up the problem to make it sound different that the facts are showing.

3.2 Recovery from profit slump Slump in sales and production for vehicles was indeed a bad financial situation for the company. (Ogawa, 2008), an analyst at Daiwa SB Investments, described the figures as "very, very, very bad". "There is a chance that they could fall into the red in the next business year as well. This is also not just a problem for Toyota. What is good for Toyota is good for the Japanese economy." In order to recuperate companies reputation and image of customers towards Toyota, they had been initiate in repairing another 1 million vehicles on a voluntary basis in the United States and China over an oil leak in some of its models (Japanese Minister says Toyota recall may effect economy 2010). The automaker mentioned that they had informed owners of the vehicles that they can go to dealerships to get their faulty part repair done (Japanese

Minister says Toyota recall may effect economy 2010). If Toyota would have take action earlier, the cost for repairing the recalls will not be in such a huge amount and this tragedy might not be happen and boom out as the largest recall for the company. Based on the solutions provide by Toyota as mentioned above, Toyota has made decision based on normative theory because after the incident of pedal issue, Toyota initiate to repair another 1 million vehicles over an oil leak in some of their models, they are aware of customers right and their responsibility which the problems causes by them. They also called up their customers to inform them about their schedules on when they are able to repair their cars; it shows the sincerity of the company being regret and they are trying their best to solve the problems as much as they can. In fact, this is a good practices Toyota should always follow in order to gain back customers trust on their brand, with the trust from customers, sales volume of cars will increase (Andrew, Dirk, 2007, p.88). 3.3 Initiatives to Diversify Energy and Reduce CO2 Emissions throughout the Vehicle Life Cycle Toyota had initiated the fuel efficiency improvement technologies with hybrid vehicles. Hybrid were introduced with motor speed reduction device, offering better start and acceleration performance and energy efficiency enhanced by the Atkinson Cycle engine, which improves heat efficiency by delaying the inlet valve closing to achieve higher expansion ratio with lower compression. Besides, Hybrid vehicle adopts Japans first electrically operated engine-cooling water pump which, because it is battery-powered, works only when necessary and thereby keeps the engine-cooling function nearly at the optimal state, and this is expected to improve vehicle fuel efficiency (Toyota sustainability report 2010). Toyota has made decisions mentioned based on descriptive ethical theory because Toyota has sufficient resources like

manpower, capital and its advance technologies to produce a more environmental friendly vehicle (Andrew & Dirk 2007, p.128). However, (Hurricane 2007) claims that Hybrid cars don't really help the environment that much, it might be slightly more fuel efficient (however remember the Honda Civic HF 50mpg on GASOLINE from mid 1980s?), when getting electricity from the power grid they are contributing to the problem, also, great majority of our electricity in the world comes from burning coal and oil, both of which contribute huge amounts of GH gases. 100% electric cars will be no better than Gasoline powered cars.

4.0 Ethical analysis 4.1 Ethical Response: Develop customers trust and brand reputation When the gas pedal issue reveal, Toyota take action by providing different solutions, conducting SMART teams, called up customers to avoid similar incidents happen on their brands as it will directly affected the companys reputation and the safety of every Toyota customers. Toyota is building a long term relationship with the customers. Due to the temporal immediacy of moral intensity in situational factors (Andrew & Dirk, 2007, p.153), Toyota realized that time is the main factor of repairing all the defected pedals. There are over 4 million massive recalls from the pedal issues and it could be another huge amount of recalls pop out every moment. Conducting SMART teams, called up customers to book for repair appointments; this method indeed the most efficient way to repair a huge amount of gas pedal. Toyota main objective is to ensure there is no more similar issues on pedal occur on their cars. The method that Toyota are using fulfilled the value of Toyota that they are aiming for the complete elimination of traffic deaths and injuries.

4.2 Ethical Response: Recovery from profit slump

Toyota volunteers to repair another 1 million vehicles United States and China over an oil leak in some of its models. From this method, Toyota shows their concern to customers on their safety, customers will experience the premium services that they have but on the other hand, Toyota pay another huge amount of money to repair on a non profit business activities. Although the cost of amount is high, but it is worth to carry on because this is based on situational factors (Andrew & Dirk, 2007, p.153), Toyota has the responsibility to bear the cost from their massive recalls. Toyota's basic management principle is to help the society through its business activities, while realizing stable growth founded on a long-term perspective. Toyota believes that improving corporate value will lead to greater trust in and understanding of the company over the long term (Toyota 2010). 4.3 Ethical Response: Initiatives to Diversify Energy and Reduce CO2 Emissions throughout the Vehicle Life Cycle The purpose of Toyota introduces the new Hybrid cars is to save the environment. Toyota contributes the latest technology so that less pollution will be created and at the same time transform environment to a healthy living lifestyle. Hence, Toyota is looking into sustainability approach such as prevent global warming issues using a more advance technology. Toyota has based on the issue related on situational factors to decide on these solutions as they realized the important of future generation will be benefits from what they contribute to the society and the significant level of global warming that will cause to several disease (Andrew & Dirk, 2007, p.152). Therefore, Toyota had tried their best to launch and produce a more advance and environment friendly car and also active in organising safety campaigns to the public. 5.0 Recommendation on Critics In order to solve the current dilemmas that Toyota is facing, I would suggest Toyota

to emphasize on the product quality management; by implementing a more crucial process on product quality management, it will results in creating a more reliability experience towards customers on Toyota brand. Toyota needs to train and produce quality manpower and the advancement on technology that they are using. Toyota to ensure their products to meet their respective requirement before customers purchases their vehicle. If identify any parts faulty, the faulty parts must be repair immediately to prevent future potential minor or major effects. In terms of manpower, Toyota should focus on giving training; procedures handling, productivity and responsiveness on emergency cases in order to have a bunch of quality employees since safety issues is the main concern in Toyota as automobile industry are very aware of handling it. If these are achieved, Toyota will not have to deal with the current dilemmas now which lead so much of losses of capital and reputation.

Referencing list 4 Killed In Fiery Santee Crash Believed Identified, 10 NEWS.com, 28 August, 2009, Retrieved 21 November 2010 from http://www.10news.com/news/20609225/detail.html Angelo, S S., 2010, Recall Is Not a Four-Letter Word, Toyota USA Newsroom, 10 August, 2010 from http://pressroom.toyota.com/pr/tms/our-point-of-viewpost.aspx?id=3296 Brown, J., 2009, Toyota Recalls 4 Million Gas Pedals Over Concerns of Uncontrolled Acceleration, PBS NEWSHOUR, 25 November, 2009 from http://www.pbs.org/newshour/bb/transportation/july-dec09/toyota_11-25.html Cardona, L., 2010, Toyota recalls and the economy, 03 November, 2010, Retrieved 19 November, 2010 from http://www.pbs.org/nbr/blog/2010/03/toyota_recalls_and_the_economy.html Crane, A., Matten, D., 2007, Determine descriptive ethical theories, Oxford University Press, USA Crane, A., Matten, D., 2007, Defining morality, ethics and ethical theory, Oxford University Press, USA Crane, A., Matten, D., 2007, what is business ethics?, Oxford University Press, USA Crane, A., Matten, D., 2007, Normative ethical theories: a European perspective, Oxford University Press, USA Crane, A., Matten, D., 2007, Temporal immediacy, Oxford University Press, USA Crane, A., Matten, D., 2007, Situational influences on ethical decision-making, Oxford University Press, USA Global warming prevention initiatives 2010, 1995-2010 TOYOTA MOTOR CORPORATION. Retrieved 20 November, 2010 from http://www.toyota.co.jp/en/environment/warming/co2/index.html Global Warming Prevention Initiatives 2010, 1995-2010 Toyota Motor Corporation, Retrieved 20 November, 2010 from http://www.toyota.co.jp/en/environment/ecodrive/index.html Hurricane 2007, Toyota cutting hybrid costs, claims every car produced will be hybrid by 2020, Motor Authority 2006-2009, 16 May, 2007, Retrieved 22 November, 2010 from http://www.motorauthority.com/blog/1027404_toyota-cuttinghybrid-costs-claims-every-car-produced-will-be-hybrid-by-2020 Japanese Minister says Toyota recall may effect economy 2010, Peoples Daily Online, 02 March, 2010, Retrieved 22 November, 2010 from http://english.peopledaily.com.cn/90001/90778/90858/90863/6906202.ht ml

Jie, M., Smart, R., 2010 , Toyota recall to have global effect, risk company's public perception, Xinhua News Agency, 09 November, 2010, Retrieved 21 November, 2010 from http://news.xinhuanet.com/english2010/business/201002/09/c_13169625.htm Larry 2010, Toyota recalls and the economy, 03 November, 2010, Retrieved 19 November, 2010 from http://www.pbs.org/nbr/blog/2010/03/toyota_recalls_and_the_economy.html Mack, C., 2010, Toyota admits to purposely neglecting safety concerns and delaying recall investigations to save money, The College Driver, 22 February, 2010 from http://thecollegedriver.com/posts/908-Toyota-admits-to-purposelyneglecting-safety-concerns-and-delaying-recall-investigations-to-save-money Ogawa, K., 2008, Sales Slump Puts Toyota on Track for First Loss in 70 Years, Buzzle.com 2010, 22 December, 2008. Retrieved 19 November, 2010 from http://www.buzzle.com/articles/242373.html Torrance woman sues Toyota over deadly 2008 crash, The Connors Group, 03 December, 2010. Retrieved 05 December 2010 from http://www.tradingmarkets.com/news/stock-alert/tm_torrance-woman-suestoyota-over-deadly-2008-crash-1347625.html Toyota Financial Report 2009, Financial Summary, FY2009 Third Quarter, Retrieved 22 November, 2010 from http://www.toyota.co.jp/en/ir/financial_results/2009/q3/summary.pdf Toyota Motor Corporations 2010, Sustainability report 2010. Retrieved 22 November, 2010 from http://www.toyota.co.jp/en/csr/report/10/download/pdf/sr10_p24_p31.pdf Toyota Motor Corporations 2010, Relations with stakeholders 2010. Retrieved 22 November, 2010 from http://www.toyota.co.jp/en/csr/relationship/shareholders.html Toyota reveals details on pedal solution 2010. Retrived 22 November, 2010 from http://web.ebscohost.com.ezproxy.sunway.edu.my/ehost/detail?vid=5&hid=105 &sid=dc25d999-5873-4a55-b5f11e0d51913717%40sessionmgr113&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d %3d#db=a3h&AN=J0E136990094310 Vartabedian, R., Bensinger, K., 2009, Runaway Toyota cases ignored, Los Angeles Times, 8 November, 2009, Retrieved 20 November, 2010 from http://www.latimes.com/news/local/la-fi-toyota recall82009nov08,0,6120294.story

Appendix 1

2010 CO2 Emission Reduction Targets, Results and New Targets Region Worldwide*5 Emissions Volume per sales unit Volume per sales unit Volume 2010 Target 20% reduction from 2001 35% reduction from 1990 20% reduction from 1990 2007 Results 32% reduction from 2001 55% reduction from 1990 25% reduction from 1990 New 2010 Target 35% reduction from 2001 60% reduction from 1990 30% reduction from 1990

TMC (Japan) TMC (Japan)

Appendix 2