Learn From Toyota's Woes: The Innovators - TheStreet

Toyota Motor

(TM) - Get Report

is struggling to recover its reputation as allegations about quality control problems with its cars have escalated.

First, it was allegedly defective floor mats, then potentially sticky accelerator pedals, then reported defects in the braking system of the Prius hybrid, the car that set Toyota apart as a model of environmentally friendly automotive success.

Worse, Toyota allegedly knew for some time about the various flaws in its automobiles but failed to correct them. The former superstar of the automotive industry is suddenly facing three major recalls, congressional hearings, and an avalanche of criticism. Toyota's stock price plummeted, its image is tarnished and Detroit automakers are grinning with barely concealed glee.

Strangely, Toyota dragged its feet before apologizing for its quality control problems, then did it badly. The gas pedal recalls began on Jan. 21, but Toyota's president and chief operating officer for U.S. sales, Jim Lentz, didn't apologize to U.S. consumers until Feb. 1.

Akio Toyoda, president of Toyota

A few days later, Toyota President Akio Toyoda, grandson of the company's founder, issued a separate but prevaricating apology, saying that the company "was still deciding what to do" about the Prius' braking problems. Toyoda's comments met with blistering criticism from Japanese media, who dismissed his apology as belated and ineffective.

Some commentators have been baffled to see a Japanese company so completely botch an apology. After all, the Japanese have been widely portrayed in American media as masters of apology, able to express volumes of regret with the depth of a bow or the cock of an eyebrow.

The truth is probably simpler. Apologizing in the wake of error is an accepted business practice in Japan, so Japanese companies are usually pretty good at it. But Toyota may have become Americanized in one unhappy respect. Ours is the most litigious nation in the world, and American defense attorneys frequently advise their clients not to apologize after a mistake for fear of inviting expensive lawsuits.

Facing allegations that its products put consumers at risk of injury -- we're talking about acceleration and braking issues here, not peeling paint or leaky windows -- Toyota's lawyers may have advised the company not to say anything that could be used against it in class-action lawsuits brought by angry customers.

The "delay response and deny wrongdoing" approach may be a good defensive strategy, but it's not without risk.

If a product is really defective, a plaintiff's attorney will probably be able to prove it sooner or later. It may cost time and money, but America's legal system is designed to ensure that deserving but impoverished plaintiffs can get their day in court.

Plaintiffs' lawyers usually work for contingent fees, taking a preagreed percentage of whatever money they recover for their clients. The hope of landing a whopping award from a big corporate defendant can be plenty of incentive to keep plaintiffs' counsel at work.

Defense attorneys, on the other hand, typically bill by the hour. A defendant company that pursues a "delay and deny" strategy can end up spending millions in legal fees even if it ultimately wins the lawsuit. A victory that is so expensively bought is hardly grounds to celebrate.

Further, taking a "delay and deny" approach can destroy a company's reputation in the court of public opinion.

Consumers want the products they buy to be safe for ordinary use, especially if those products have some inherent dangers. Even the safest cars are huge, heavy hunks of metal that go fast enough to kill. Consumers want to be sure that they can place their children in those cars, take them wherever they need to go, and retrieve them in one piece at the other end.

That's what made Akio Toyoda's statement that the company was "still deciding what to do" about the problems with the Prius' brakes so offensive. Toyoda undoubtedly didn't intend to suggest that his company was more concerned about profits than customer safety, but that may well have been what consumers heard.

Corporations would be wise to take a lesson from Toyota's woes.

When problems with products or services arise, public apologies need to be simple, unequivocal and sincere. Full acceptance of responsibility is usually wisest; companies are smart to avoid the politician's trick of revealing the truth inch by painful inch.

Companies should express appreciation to customers for their business, and explain exactly what they're going to do to fix problems and prevent them from recurring. Then, of course, they have to follow through and do what they've promised in order to restore consumers' trust.

Most important, a public apology should be developed and delivered as quickly as possible. An imperfect but timely apology is much more likely to be effective than a more elegant apology that comes too late to seem sincere. Consumers appreciate and reward genuine regret; they loathe public relations spin.

It's usually a good idea for a company to consult with counsel when crafting a public apology. However, the lawyer's advice should be used to shape the apology, not to delay or prevent it.

Toyota at last seems to have recognized its need to do better on the apology front. The company has launched a new commercial titled "Commitment" in which Toyota acknowledges its failure to live up to its customers' expectations and its own standards, then describes the steps it's taking to improve quality controls.

The script is masterful: Toyota apologizes for disappointing its customers without admitting any particular wrong. The ad may even help the company in court, because juries are notoriously reluctant to punish defendants who have admitted error and humbly apologized.

Toyota's apology would have been better if it had come sooner. However, if there are no further allegations of quality problems or corporate cover-ups, consumers may forgive and forget. Wall Street certainly seems to think so, as Toyota's stock price edged up following the company's public apologies even after the Prius recall was announced. Apparently, apologizing is not only good ethics, it's also good business.

-- Written by Lauren Bloom in Washington.

Lauren Bloom is a Washington, D.C. attorney and the CEO of Elegant Solutions Consulting, a consulting firm dedicated to helping professionals, business and association management executives build trust with their clients, customers and members by "walking the ethics talk" in their daily practices. She is the author of the "The Art of the Apology -- How to Apologize Effectively to Practically Anyone."