Posted by: Gail Edmondson on November 10, 2006
European auto managers have set the bar high. Every one of them has vowed to match Toyota’s manufacturing excellence. And the chorus is growing louder and more urgent every day. Fiat is the latest convert. At a strategy presentation in Turin on Nov. 9, CEO Sergio Marchionne vowed to bring Fiat’s operating profit to a robust 6% by 2010 and to achieve best-in-class production efficiency. “Toyota is a flawless execution machine. We need to learn how to execute at that level. It’s not optional. It’s the only way to guarantee the long term success of the business. Toyota will only get better.”
Sure, European automakers from Volkswagen to Mercedes to still have plenty of work ahead to bring quality and efficiency up to the grand master’s level. But the good news is that it is still early days in the battle for European consumers. Toyota only has 5,8% of the European market. And Toyota’s luxury brand Lexus is still nearly invisible, though it is starting to grow from its small base at a 100% clip.
Even if half of Europe’s domestic champions can make big strides in quality and efficiency, it will help avoid the mass migration to Japanese brands which US automakers have suffered. Europeans still enjoy a design edge over Asian rivals. That helps. But they need to bolster the value-for-money equation. Otherwise a certain base of loyal customers will erode over time, puncturing factory use and putting the squeeze on profits.
BMW has been quietly taking Toyota’s lesson to heart for years, and the results are impressive. It’s factories are the most flexible among premium automakers. Everyone from the shop floor to the CEO is obsessed with continual improvement — a prerequisite for keeping pace. On top of that, BMW developed a unique ability to customize cars extensively and efficiently — a skill that is hard for Toyota to imitate.
That kind of achievement doesn’t happen overnight. BMW’s new CEO Norbert Reithofer, former head of production, has been obsessed with the Japanese giant since 1990, studying Toyota’s US plants intently. It’s thanks to his foresight and leadership that BMW’s plants are highly competitive. Now that the rest of European automakers are racing to fight Toyota with similar armour, their chances of defending the home market are appreciably improved.