The purpose of this report is to select a well-known failed project and determine the reasons for its failure. The report describes the project and then analyze the losses incurred by the project. The report examined the concrete reasons for the chosen project’s failure and provide recommendations on how it could have been saved. In spite of the fact that Toyota is a premium automobile company, its Prius 3rd Generation has failed to convince the consumers. The company had decided to update its features in its Prius range of cars but the effort to engage consumers did not go well with them and there were plenty of issues that had come up.
As far as Toyota Prius third Generation is concerned, it had several defects due to which this model had to called off. Reports suggested that Toyota had recalled as many as 752000 gas electric hybrid vehicles across the world as the engines of the automobiles had lost power. All the Prius Third generation vehicles sold between 2013 to 2015 were recalled by the company (Dwivedi, Wastell& Henriksen, 2015). The third-generation hybrid vehicles were supposed to go in the fail-safe mode but there were certain instances in which the vehicles would not go in fail-safe mode. Hence, this could create a disastrous situation for the user. Besides this, the company claimed that the power steering and braking would work well. However, anything at higher speed can cause a lot of trouble. It can increase the risk of crash and create a problem for the user. Hence, the company recalled the vehicles and incurred huge losses (Ebad, 2018). There is a need for the Toyota Management to ensure that they have examined the cause of this huge project failure and can ensure that they accept the changes in the new system well. Although it was a huge investment for the Toyota and the company looked forward to creating a lot of business, but the entire project failed due to certain irregularities.
Background of the Project
The project chosen for this report is Toyota Prius third Generation. The Toyota Prius is a liftback which is developed by Toyota, an automobile giant. The company debuted the third generation Prius in the North American International Auto Show held in 2009 January. The new body design was aerodynamic and better. There is a rear fin under the body which helps in stabilizing the vehicle at high speed.
Toyota Prius third Generation is as under.
This generation of Prius features a bigger and new front-drive engine – the Toyota Hybrid Systems that grew in size from 1.5 L to 1.8 L. With the maximum battery power, this new and stronger engine is capable of generating horsepower of up to 134. The car has an EPA combined rating of 50 miles per gallon (Ebad, 2018). Debuted in the year 2012, this was the first Toyota Prius that offered a plug-in hybrid version option. With 540 miles as its total range, the car offered an all-electric range of 11-mile.
In addition to all the features described above, the body of this generation of Prius was slightly larger in size as compared to the previous two generations of the car. Although its profile was built the same as the previous generation Prius – the wedge shape – it was more aerodynamic with a different roof design. In addition to a double-wave roof design, the third-generation Prius had updated headlights as well as hood, with the rear hatch, the hood, brake callipers and the front axle built using aluminium so as to reduce the weight of the car (Leijen& Scott, 2013). All car wheels also had disc brakes.
For cooling, the third generation Prius used a unique all-electric compressor for air conditioning. This is the first engine built for use by consumers that does not need any accessory belts as it largely uses electric water pumps. In order to manufacture this generation of the car, Toyota also used bioplastics derived from plants, thereby making it eco-friendly. Therefore, the company had ensured that the upgrade to the third generation vehicle is extremely engaging for the buyers and they can witness new features in this one.
Two variants of Prius were introduced by Toyota in 2011 (Leijen, 2014). These variants differed in their body styles. The smaller variant which is the Prius C that targeted buyers who were more value-oriented was a subcontract hatchback while the larger variant called the Prius V was essentially a wagon – an extended hatchback with almost 50% more cargo space compared to the standard Prius car.
The tail lamps as well as the head lamps were updated for the 2012 model of the car, and so were the bumper and the front fascia. The new model featured a touch screen CD AM/FM stereo, Bluetooth capability, auxiliary input jack and USB port. An optional rooftop solar panel was also there which essentially provided power to a ventilation fan (Leijen, 2014). The trim levels of Prius in the U.S. included the Prius 2, 3, 4 and 5. The advanced tech that the Prius Five featured included dynamic radar cruise control and an HDD navigation system. Some great safety features also made their debut, including the lane keep assist feature and the pre-collision system. In addition, the Vehicle Proximity Notification System was also introduced by Toyota for the first time in this model. This system made a noise to let pedestrians – especially those who were visually impaired – know that there is a car present.
A voluntary recall notice was filed by Toyota with the National Highway Traffic Safety Administration in early 2014. This was to fix a defect in nearly 800k 3rd generation Lift back hybrids of Prius that were sold by the company in the United States from 2010 to 2014. Toyota said it will be making certain changes to the software of the car that controlled the inverter. Those unspecified changes were aimed at eliminating the chances of the inverter getting overheated during transfer of high power among the two electric motors and the 1.3-kilowatt-hour nickel-metal-hydride battery pack.
That defect can result in the loss of power in the cars thereby forcing them to revert to a fail-safe mode and even shutting down the hybrid system automatically in some cases which brings the car toa stop. Due to the fact that the car indicated a lot of defects, the company had to immediately take strategic steps to ensure that they could either resolve it or recall the vehicle from the market. The Los Angeles Times released a report this month that described a lawsuit filed by the owner of 2 dealerships based out of Southern California against Toyota accusing it of failing to fix the issue with its software update (Wells& Nieuwenhuis, 2012).
Shutdowns remained to be an issue in Prius, said the owner of Claremont Toyota and Capistrano Toyota, who in mid-December also sent the National Highway Traffic Safety Administration a letter stating “There are lives needlessly at risk.” Recalling Prius Third Generation from market created a lot of problem for the company as the management suffered a lot of losses.
Reasons for the failure of the Project
The Toyota Prius Third Generation project was meant to be a success and the company’s management planned to develop a huge clientele for the new and updated Prius model. However, the entire project was a major failure. The failure was due to many reasons that could have been avoided if the engineers would have focused on better engineering. Studies indicate that one of the main reasons why Toyota Prius third-generation did not succeed in the U.S. is because of the cheap gasoline that is available there (Wells& Nieuwenhuis, 2012). This means fuel economy is something that most people do not take into consideration when buying a new car. Another reason is that the gas mileage has gotten an automatic boost in every new vehicle because of the rising standards of corporate average fuel economy for the past seven tears. Even the traditionally fuel thirsty utility vehicles now have an EPA rating that equals to those of compact vehicles from ten years ago.
Third reason is that there are now multiple manufacturers of hybrid cars and Prius is not considered to be the most advanced technology anymore. The plug-in electric cars have now taken over that role from the hybrid car models. The fourth reason that the design of the Prius Lift back that Toyota introduced in 2015 is perceived to be polarizing by the majority of people.
The information that the company is providing to the owners of Prius in the United States indicates that the Intelligent Power Module which resides in the Hybrid Inverter Assembly is the main problem area. The high-voltage (HV) direct current that is stored in the HV battery of the car is converted by the inverter into the HV alternating current for the generator or motor. The inverter also converts the alternating current into direct current at the time of regenerative braking so that it could be stored in the high-voltage battery. As per the statements released by Toyota, certain transistors in the Intelligent Power Module can become damaged – because of the software issues – when the car is operated under high-load driving conditions.
If this happens, multiple warning lamps will get illuminated. In the majority of cases, the car will lose power thereby reverting to a fail-safe mode and even shutting down the hybrid system automatically in some cases which brings the car to a stop, increasing the risk of an accident or a crash. However, the company has not received any reports of crashes associated with this issue. The company will be notifying the owners of the affected cars as a remedy later this month. All authorized dealers of the company will be updating the software to the Power Management ECU and Motor Generator ECU free of cost (Wong, Li& Laplante, 2014). In addition, if any car is found to have this issue, the dealers will be replacing their inverter assemblies before updating the software. Toyota suggests drivers to avoid placing a high load by not applying full throttle on the hybrid system until the remedy is performed. This issue is not present in any other Toyota cars of models, as per the company.
As a result of this defect, the Prius Third Generation model had to be recalled from the market so that its problems and issues can be resolved. In order to ensure that the defects in this new model did not lead to situations such as crashes, accidents and deaths of the users, the entire range was recalled from the market. This enabled the company to save its image in the market and ensure that the users do not have to suffer from any problems.
Losses incurred by the Project
The failure of the Prius Third Generation project led to huge losses for the company. In January 2010, it was estimated by Automotive News that a loss of as much as $1.5 million in profit per week could be incurred by Toyota dealers till the time there is sales ‘freeze’. At the same time, the company notified the National Highway Traffic Safety Administration that it will expand its late November recall so that an additional 1.1 million vehicles could be covered.
The graph below indicates the decline in the sales of Prius model due to the defects and issues in the model.
Source: Duckworth& Moore, 2019
The graph indicates that the sale of Prius Third Generation cars started declining every year starting 2012. In 2013, the sale of the Prius Third Generation cars was low. However, this sale subsequently decreased in 2014 and so on. The decline in the sales was due to the failure of Prius Third Generation cars and inability of the company to convince its buyers.
There are several reports published that indicate the massive losses of the company after its Prius Third Generation car project failed. The company’s January 2010 sales fell over 15 percent from its sales in 2009 mainly because of weeks of bad press. The company had not suffered such a huge loss in the prior decade. In addition the stock price of Toyota fell nearly 10% over the period of eight months – from September 2009 to April 2010. On the contrary, the stock price of Ford Motor Company grew 80 percent over the same time, indicating that some competitors benefited significantly from the problems of Toyota (Wong, Li& Laplante, 2014).
The Wall Street Journal reported in March 2010 that over the next financial year, the financial impact on Toyota can go over $5 billion, including increasing incentive campaigns and marketing to offset the effect of negative publicity; warranty costs; and litigation costs. In early 2010, for example, the company featured competitive lease prices, a 0% interest five-year loan offer; and no cost maintenance across the majority of its product line-up. While the company had already estimated $2 billion in recall cost for 2010, analysts estimated much higher future costs, including an estimate of $5.5 billion made by J.P. Morgan. Despite having very little debt and a $29 billion cash value, Toyota’s A+ rating was placed on a negative watch by the ratings agency Fitch. The agency said the sales suspension as well as the recall casts a negative light on the reputation of the company and the quality that it offers (Duckworth& Moore, 2019). A reduction in the credit rating of Toyota can make it more difficult and expensive for the company to raise money in future. In April 2010, the company said it will be paying a fine of $16.4 million to the National Highway Traffic Safety Administration for a delayed recall of cars with issue of sticking accelerator pedals. Toyota elected to pay the fine while denying any wrongdoing or misconduct. $16.4 million is the largest amount of fine allowed under the federal law of the United States. Hence, this indicates that the loss incurred by the company due to the failure of Prius Third Generation project was huge and the company can take several years to recover it from its subsequent models.
To conclude, it can be indicated that the key reason behind the failure of Prius Third Generation car project is the inability of the engineers to focus on better engineering of the cars. Therefore, it can be recommended that there is a need for the management of Toyota to focus on research and development and understand the needs of the consumers. This can ensure that the updated models of the car company in its Prius range have features needed by the consumers and also safe for them to use. There should not be security issues that can create situations such as crashes or accidents. The cars to be sold to the users must be safe for them for driving. Hence, the company needs to focus on better research and development in an effective way.
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Duckworth, H. A., & Moore, R. A. 2019. Social responsibility: Failure mode effects and analysis. CRC Press.
Ebad, S. A. 2018. An exploratory study of ICT projects failure in emerging markets. Journal of Global Information Technology Management, 21(2), 139-160.
Leijen, P., & Scott, J. 2013. Failure analysis of some Toyota Prius battery packs and potential for recovery (No. 2013-01-2561). SAE Technical Paper.
Leijen, P. 2014. Real world battery diagnostics model based and prius case study. In 2014 IEEE 23rd International Symposium on Industrial Electronics (ISIE) (pp. 2457-2462). IEEE.
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Wong, W. E., Li, X., & Laplante, P. A. 2017. Be more familiar with our enemies and pave the way forward: A review of the roles bugs played in software failures. Journal of Systems and Software, 133, 68-94.