What's Bad for Toyota Is Even Worse for Japan

In today's world, business woes very quickly become symbols of national malaise.

When Akio Toyoda sits down for his grilling before U.S. lawmakers this week, he won't just be representing his company, embattled Japanese carmaker Toyota. He'll also be serving as the public face of a country in the throes of an unexpected national security crisis.

For Japan, it is not North Korean nuclear ambitions, the insurgency in Afghanistan, or even Chinese naval or cyber encroachments that keep bureaucrats up at night. Instead, it's the global fallout from the tarnishing of Toyota, which is likely to reverberate beyond courthouses and corporate boardrooms.

Less than a decade ago, Toyota threw down the gauntlet when it sought to become the world's top carmaker, cornering 15 percent of global market share. It soon surpassed General Motors, but along the way Toyota lost sight of the rigorous quality control that had become its trademark. The number of expert engineers could not keep pace with the number of cars, and pressures to reduce costs meant sacrificing testing. Meanwhile, a single-minded focus on expansion led to a flaccid corporate network, unable to gather timely information from all quarters to forestall emerging dangers -- leading to today's situation, in which the company has been forced to recall thousands of vehicles due to alarming reports of faulty accelerators and brakes, at a cost that will likely run into the billions.

So if the Toyota debacle is a national security debacle, and not just a story about corporate overreach, what are its lessons for entire countries?

First, you are your reputation, even in international politics. A blow to Toyota, now a national symbol of Japan, is a blow to the solar plexus of Japan's national image. The Toyota Way is a Japanese and W. Edwards Deming success story facing a precipitous fall from grace. When an internationally revered name such as Toyota loses its luster, how does that affect the perception of Japanese power? No one is sure, but it is remarkable how senior government officials in Tokyo I've spoken with worry about the crisis's knock-on effects. The Japanese tied their postwar comeback to the U.S. security umbrella and viewed national security and industrial policy as a package. Building from the ground up, Toyota at once embodied the success of this national strategy and became the symbol of Japan's unbreakable postwar bond with the United States.

The scandal's timing reinforces the image of a weakened Japan, reeling from tough economic times and contending with the rapid rise of its regional neighbor and traditional rival, China. We shouldn't make too much of Toyota's troubles -- the company retains unbeatable process innovation and an enviable lineup of popular models -- but it's striking how fast and how far Toyota's reputation has sunk in such a short time. And given Toyota's place of pride in recent Japanese history, it's hard to imagine this affair won't sow doubts among the Japanese about their role among rising Asian powers.

Similarly, the United States, whose power in the world has suffered in recent years in the wake of the financial crisis and revelations about corrupt Wall Street executives, has been trying to regain its global stature as it supports greater multilateralism. Meanwhile, China, which grew more than 8 percent last year and is projected to exceed that in 2010, is increasingly assertive, whether at the Copenhagen climate-change talks in December, in the Davos economic forum in January, or in opposing harsher sanctions against Iran now. You are your reputation indeed.

Second, "soft power" is hard power, but particularly for Japan: The relative importance of Japan's economic power to its national power means that Toyota's crisis likewise has disproportionate potential to undercut its global influence. In advancing the "flying geese" economic model of development, which envisioned Japan as a regional leader heading a flock of Asian economies toward prosperity, Japan became the model of the modern civil power. Then the "lost decade" of wrenching economic recession in the 1990s followed by the crushing global slowdown in 2008 served to showcase the economic problems of an aging miracle. Strapped with social welfare costs that would choke most countries, Japan is desperate to return to even anemic growth (though the most recent quarterly figures are promising). For many Japanese, Toyota's crisis serves to further highlight the fragility of Japan's current position: If your soft power dissipates, it leaves you feeling very vulnerable indeed.

But globalization cuts both ways. Although Toyota faces a massive challenge, the automaker has a vast following. It will survive. Toyota is a sought-after employer in the United States. It is little wonder that four U.S. governors of states with Toyota plants rapidly came to the defense of the Japanese automotive giant. Tapping into this reservoir of trust can be the elixir for recovery. Remember that Tylenol, which suffered an enormous hit to its image in the 1980s when its product was maliciously contaminated with cyanide, soon restored its reputation. The outsized Toyota mystique may be gone, but this is a company that got to where it is by planning in decades, not months or days. If there is one company in the world that can bear down, dig in, and fix this over time, it is Toyota. The upcoming congressional hearings may be painful in Japan, but Toyota will make good cars and the United States and Japan will soon enough focus on matters more pressing than sticky accelerators.



Egypt's Reluctant Revolutionary

Mohamed ElBaradei was greeted by cheering crowds upon his return to Cairo. Now for the hard part.

Austrian Airlines Flight 863 touched down in Cairo at 5:30 p.m. today, completing its journey from Vienna two and a half hours late. A jubilant crowd of Egyptians waited in Cairo's airport lobby, anywhere between 1,000 and 4,000 people, tracking the flight's progress carefully as they waved Egyptian flags and sang the national anthem. Dr. Mohamed ElBaradei -- former director general of the International Atomic Energy Agency (IAEA), Nobel Peace Prize laureate, and potential presidential contender -- was returning home.

ElBaradei's return represents a headache for Hosni Mubarak, Egypt's 81-year-old president. Mubarak is widely believed to be shepherding his son, Gamal, into the presidency, possibly as early as the upcoming 2011 presidential election. But this past December, ElBaradei dropped a bombshell that complicated Mubarak's plans: He would consider a run for Egypt's presidency -- provided that the government ensured a fair campaign and revised the restrictive amendments to the Egyptian Constitution that outline who can contend for the presidency.

ElBaradei's third term at the IAEA expired on Nov. 30, 2009. Since then, he has been living in Vienna, where the IAEA is based, reportedly tying up loose ends after 12 years at the helm of the organization. In January, he gave an interview to Foreign Policy where he elaborated on his career at the IAEA and expanded on his future in Egyptian politics.

There was no shortage of skeptics who maintained that ElBaradei's return would elicit little more than an ambivalent reaction from the Egyptian public. Yes, the "Draft ElBaradei" campaign boasts an official-looking website and a Facebook group of over 60,000 members. But how many of those e-supporters would actually be motivated -- and risk the potential government crackdown -- to attend ElBaradei's homecoming? "In Egypt, we have a big gap between virtual life and reality," worried Amr Choubaki, an Egyptian analyst with the al-Ahram Center for Political and Strategic Studies. "Many people participate in the movement on the Internet, but the majority of them don't go to the street."

For today, at least, the enthusiasm for ElBaradei's campaign exceeded expectations. The fear of a crackdown, especially following the arrest of two opposition activists of the April 6 Movement on Thursday, turned out to be unnecessary. Hassan Nafaa, a political science professor at Cairo University, credited the late arrival of ElBaradei's flight as part of the reason for the strong turnout. "It was actually a help to us, because people realized the airport was safe," he said. "Those at the airport were able to contact their friends and tell them that there was no intervention from the security services."

FP contributor Issandr Amrani's Twitter feed (@arabist) provided a running commentary on the events transpiring at Cairo International Airport. Egyptian security attempted to convince ElBaradei to avoid the crowd by leaving through the VIP lounge, but he refused. The crowd's size kept him from leaving through the airport lobby, however, so he exited through another terminal -- which, as onlookers pointed out, precluded the need to give a speech.

If ElBaradei does decide to pursue a presidential run, he will have at least one factor working for him: the unmistakable appetite for change in Egypt after nearly three decades of Mubarak. "People are bored and tired of the Mubaraks -- not only of the father, but of the wife, and of the two sons -- who have dominated Egyptian politics for so long," said Saad Eddin Ibrahim, a sociologist and noted Egyptian dissident. "[ElBaradei] is equipped as well as anyone can be for the position ... now the only question is whether he can build the infrastructure and the enthusiasm to overcome the obstacles that remain."

And there is no shortage of obstacles. The odds are still overwhelmingly against ElBaradei wresting power from the hands of the Mubaraks. To build on the momentum achieved during his homecoming, ElBaradei must overcome a number of daunting challenges: the coercive power and legal restrictions raised by the Mubarak regime, the fractured nature of the anti-Mubarak opposition -- and perhaps even his own ambivalence about playing a role in Egyptian public life.


The Egyptian police have no shortage of tools to wield against ElBaradei should he move ahead with his campaign. Ibrahim, who has a decade's worth of familiarity with the regime's repressive tactics -- most recently, in 2008, he was sentenced by an Egyptian court to two years in prison for "defaming Egypt" -- raised a litany of ways the regime could make ElBaradei's life difficult. "The first is rumors -- about him, about his family. Next, they will use allegations that he is out of touch with Egypt, that he has been gone from the country for so long that he does not know what life is like there," Ibrahim stated. "Finally, they will use intimidation and threats, against him personally and against his family."

But the Egyptian government will not only use its sizeable security apparatus against the opposition, it will also use its lawyers. Article 76 of the Egyptian Constitution currently stipulates that presidential candidates must have a senior leadership position in a legal party for at least a year prior to running for president. Since citizens looking to form a party must receive the approval of a committee dominated by Mubarak's National Democratic Party (NDP) -- a condition that ElBaradei referred to as "laughable" in an interview with the Egyptian independent daily al-Shorouk -- the Mubarak regime has effective control over who runs for president, and ElBaradei is technically not eligible. "The constitution is written in a way that I cannot run unless I join an existing party, which, to me, is not how a democratic system works," ElBaradei told Foreign Policy in January.

But given the abject state of the Egyptian opposition movement, any kind of legislative or constitutional victory is highly unlikely. After briefly flirting with a democratic opening in 2004 and early 2005, Mubarak quickly reasserted his dominance over Egypt's political scene. He seized firm control of the levers of power with 88.6 percent of the vote in the 2005 presidential election, while the NDP seized 311 of 454 seats in the Egypt's People's Assembly.

This was a shattering blow to the Egyptian opposition. "They have suffered from a lack of popular personalities, a lack of ideas -- and a lack of a popular constituency," stated Amr Hamzawy, a senior associate at the Carnegie Endowment for International Peace. To change the constitution, as ElBaradei has insisted, he'll need strong allies within the government. But, at the moment, it appears unlikely that the opposition groups will be able to deliver.

ElBaradei’s conditions for playing a role in Egyptian public life have also exacerbated these difficulties. He has stated that unless radical revisions are made to the Egyptian Constitution – which the Mubarak regime has flatly stated will not occur before the 2011 election – he will not run for president. It is unclear, however, if he intends to rally popular support within Egypt for those changes to be made. "Asking [Mubarak] to change the rules of the game as a condition to play in the game is, in my mind, maybe unrealistic," noted Hamzawy. "You have to have a different attitude: You have to be on the ground and struggle, create momentum, and lead an opposition movement, and then see what will come out."

In his interview with Foreign Policy in January, ElBaradei assumed the role of a beleaguered draftee into Egypt's presidential race; he stated that he would be perfectly happy to retire from public life but was being encouraged to run from those close to him. The fact that he refrained from giving a speech at the Cairo airport, to the disappointment of his supporters, could be another sign that he's holding back.

The looming question is whether the Mubarak regime will provide the political space for ElBaradei to be an agent for change within Egypt -- but something less than a full-fledged revolutionary. Dr. Hassan Nafaa, the political science professor at Cairo University, noted that he had spoken to ElBaradei and that they had agreed he would gather 20 to 25 prominent Egyptian professors and activists to discuss the next step of his fledgling campaign. "I hope this is a fruitful discussion for him, and also it will be for us to understand what we can expect from him, and how we can organize a campaign to pressure the government to amend the constitution," Nafaa said.

So begins Egypt's 2011 presidential campaign -- and even if most of ElBaradei's involvement is from the sidelines, his return presents some potential for reform in the long-stagnant world of Egyptian politics. "A lot of hopeful Egyptians are rallying to his support," said Ibrahim. "And, at the very least, it will be good if he can shake up the regime."

-/AFP/Getty Images