Recalls: Which Reactions to Past Screw-ups Should Toyota Follow, and Avoid

Businesses make terrible mistakes. It's how they react that can determine whether they thrive—or even survive. Toyota was slow to acknowledge its problems, but ultimately recalled 8 million vehicles and apologized. Whether it ends up back on track like the brands at right or has a bumpier ride like those at left, one thing's for sure: it's not there yet.

PROBLEM: Employees of the military contractor were hit with criminal charges alleging they had killed 17 innocent Iraqi civilians outside Baghdad. Last year, a federal judge threw out the charges, though a civil suit is still pending and Blackwater is banned from operating in Iraq.
RESPONSE: Rebranded to Xe Services in 2009. While the company's new name didn't stick—it's still regularly referred to as "Xe, formerly known as Blackwater"—its old image as rogue mercenaries did.

PROBLEM: A Humane Society investigation turned up gruesome footage of employees prodding sick cows to slaughter, which can introduce disease into the food supply. The company issued the largest beef recall ever, 143 million pounds, much of it destined for public-school cafeterias.
RESPONSE: Westland shut down within months after the recall; the principals are being sued for $150 million.

VIOXX, 2004
PROBLEM: Merck's arthritis drug, Vioxx, was found to increase risk of heart attacks and strokes. After studies indicated problems, Merck withdrew the drug. Congress held hearings on sales tactics, calling them misleading.
RESPONSE: More than 47,000 people sued. In 2007, Merck paid $4.8 billion to settle personal-injury claims.

PINTO, 1978
PROBLEM: A design flaw caused gas tanks to explode in rear-end collisions; 27 people died. A memo showed Ford execs had weighed cost of recall ($121 million) against estimated lawsuits ($50 million).
RESPONSE: Under pressure from the National Highway Traffic Safety Administration and Ralph Nader, Ford recalled 1.5 million Pintos in 1978. The brand was scrapped in 1980.

MATTEL, 2007
PROBLEM: Chinese-made toys contained lead paint, as well as powerful magnets that could be swallowed. Mattel recalled more than 20 million playthings, including the Barbie and Sesame Street brands. The Consumer Product Safety Commission fined its Fisher-Price division $2.3 million.
RESPONSE: Mattel severed ties with Chinese supplier, whose CEO later hanged himself. Its response was quick, damage was limited, and the stock is up 10 percent in 2010.

PROBLEM: Tread separation on some lines of tires caused Ford Explorer rollovers and a reported 250 deaths and 3,000 injuries. Firestone and Ford engaged in an ugly feud over who was to blame.
RESPONSE: Firestone recalled all 6.5 million of its tires on the road. All but 200,000 were brought in and replaced for free.

In 2001, Firestone cut ties with Ford; it recaptured market share and returned to profitability in two years.

PROBLEM: E. coli turned up in its unpasteurized juices; reports linked it to rotten apples. One child died, 35 people sued. Odwalla lost $14.5 million and paid a $1.5 million fine to settle criminal charges of distribution of adulterated food.
RESPONSE: Introduced flash pasteurization and donated $250,000 to food-illness research. By '98, profits were at pre-recall levels.

PROBLEM: Seven people in Chicago died from cyanide poisoning, traced to tampered bottles of Extra-Strength Tylenol. Nationwide panic ensued. Market share plungedfrom 35 percent to 8 percent.
RESPONSE: Parent company Johnson & Johnson immediately recalled 31 million bottles worth $100 million. Within two months, it introduced triple-sealed caps. By early '83 it had recaptured 70 percent of lost market share.