The National Highway Traffic Safety Commission issued a Consumer Advisory late last month urging owners of a long list of Japanese-, EU- or US-made cars to act immediately on a recall notice they may have received about Takata airbags in their cars.
Although the facts are not yet clear, Takata appears to have produced and sold defective airbag products since at least 2008. Regulators seem to suspect that both Takata and some of its auto company customers knew the airbags didn’t work but used them anyway. The immediate connection being made in the press is with GM’s ignition switch issues and related coverup.
I should emphasize that I don’t know any more about Takata than I’ve read in the financial press. The company may have done absolutely nothing wrong. My immediate reaction, however, is not to think of GM but a medium-sized, family-controlled manufacturing company I researched years ago instead.
I was interested in that firm because at that time it made the best cellphone batteries. The company had a bunch of other divisions, as well. One made solar panels for sale to Japanese homeowners. The panels had to meet certain specifications to qualify for a government subsidy that was a major attraction of the panels. The division came close, but couldn’t quite get up to the minimum government requirements …so it mislabeled its panels and sold them as meeting the required specs.
The company had another division, one that made commercial refrigerators. It couldn’t make them well enough that the doors would stay on, though. Naturally, the division shipped them anyway. At the time I was doing my research, it was being sued by restaurant workers who had been badly injured when heavy refrigerator doors fell on top of them.
The solar panels and the refrigerators were enough to convince me that I didn’t want to have an investment in the parent firm.
My research back then alerted me to two things that I’ve since found to be true of traditional Japanese companies:
1. If an older person, or a higher-ranking person, in the company gives operating instructions–no matter how crazy they may be–it’s very difficult (in a way that I as an outsider can’t imagine) to do anything other than try to carry them out. No give and take, no questioning feasibility …just try to make the impossible happen.
2. There’s no “fail hard, fail fast, fail often.” It’s exceptionally difficult for a subordinate to report to a superior that he is unable to perform a task–even if (point 1) the task is absurdly difficult, or just absurd. Reporting failure shames the employee, the boss, the company, the employee’s family… Psychologically, it’s much easier to report success even if it hasn’t been achieved. That’s why the faulty panels and fridges get shipped.
In short, in the absence of heroic efforts (which may be futile anyway) to create a corporate culture of free dialogue, traditional Japanese companies are prone to the risk that situations like the solar panels or the refrigerators will happen.
, This is perhaps the biggest reason I’m not interested in Japanese manufacturers as investments. Let’s hope this isn’t the case with Takata.