• by Julie Lundy Purser , Aneysha Pearce , March 15, 2010

Toyota has long been an auto industry frontrunner, consistently outpacing its peers on any number of fronts. It was the leading automotive company in our 2009 Corporate Reputation Study and as recently as January, Consumer Reports named it the No. 1 automaker for quality, value, environmental friendliness, technology and innovation.

But today, its once stellar reputation is under attack, between production issues and unprecedented recalls after the company's failure to respond to and correct problems in a timely manner. History has shown that companies which have built up reputational goodwill and swiftly and authentically responded to issues have weathered storms better than others.

Will the same hold true for Toyota? Do the recalls, related lawsuits, and hits to its top and bottom lines foreshadow the beginning of the end for Toyota as the world's most respected automaker, or is this merely just a bump in the road?

Today's fragile economy coupled with consumers' heightened skepticism of corporate America suggests a company's reputation is more important than ever. Problems like those Toyota faces have the potential to affect the company over the long term. But given all of the consumer goodwill that Toyota has built up over the years, it may be better positioned to manage through these tough times than other companies.

Consider UPS. In 1997, its reputation was badly damaged by a major strike. Small businesses and customers were forced to take their business to more expensive competitors like FedEx. Distributors across the country lost millions of dollars in business and UPS was left with a $1 billion revenue shortfall for the year.

However, in subsequent years, UPS' reputation and financial performance rebounded nicely as the company kept a laser-sharp focus on the reputation driver that mattered most to its customers: "making business easier." In 1999, the company went public and today has one of the strongest reputations of all U.S. companies. In fact, UPS ranked seventh overall among the 130 companies included in Prophet's 2009 reputation study and today consistently outranks competitor FedEx when it comes to reputation.

Another company that successfully fought through its reputational challenges is Odwalla. In 1996, Odwalla, whose mission was to "nourish people," faced a huge consumer crisis when its apple juice fruit drinks were linked to several cases of e-coli and one death. The situation could have been devastating for Odwalla, but the company faced the crisis head on, re-building its reputation and saving its business.

Odwalla focused on the reputation drivers of delivering high-quality and reliable products and services. And it backed up its words with actions like pasteurizing products that had a potential risk of contamination to ensure their safety. The company's swift and effective action not only paid off with its customers but Coca-Cola later acquired the it in 2001 for $181 million.

Taking lessons from UPS and Odwalla are critical first steps for Toyota. Re-focusing the company's efforts on building cars that consumers can trust will allow Toyota to rebuild the image and reputation that have been integral to its brand and business for several decades.

This reinforced commitment to core business and reputation drivers such as "offers reliable products and services," "offers high quality products and services," and "has products and services that provide a good value" will encourage customers to regain the peace of mind they need to purchase and recommend Toyota to others. Toyota needs to be open and transparent when problems arise and tackle them head on, guided by the knowledge that the dependability and reliability of their cars is at the foundation of its strong reputation.

And Toyota has taken the first steps on a variety of fronts. Its ad campaign, "Commitment," openly communicates how Toyota is addressing quality issues and reassuring consumers of its commitment to making things right. The company is taking responsibility for its actions and working to win back consumer confidence.

It also has dedicated an entire section of its Web site to address the recall issues, including providing information on what it is doing to correct the problems, how consumers can get these specific issues resolved, videos to address vehicle safety and testing, and news updates on the situation. The company is also using Facebook as a platform for consumers to have a voice in the conversation. Toyota's Facebook page has safety and recall information and loyal fans are even creating their own "I support Toyota" campaigns.

These open discussions and conversations with consumers are critical steps on the road to recovery. And while Toyota may be suffering today, the automaker has laid the foundation for effectively addressing these issues and tangibly demonstrating its commitment to making things right. Only time and Toyota's actions in the weeks and months ahead will really tell if this is a permanent fall from grace or a speed bump.