Toyoda on Toyota: "Grasping for Salvation"

Posted by: Kenji Hall on October 02, 2009

Akio Toyoda thinks he knows what’s wrong with Toyota, the world’s biggest car maker. Success has made it cocky. It has been expanding in an undisciplined fashion. It has been in denial about the peril it faces. Now Toyota is “grasping for salvation,” Toyota’s president told a news conference today at the Japan National Press Club in Tokyo. “But I’m not the savior.”

Dramatic stuff. But the 53-year-old grandson of the company’s founder was merely trying to illustrate a point by borrowing language from Jim Collins, author of popular business books like “How the Mighty Fall”. Collins explained that great companies typically go through five stages on their path to ruin. Toyota is at the fourth stage; the final stage is “capitulation to irrelevance or death.”

Toyoda took over in June and is trying to lead the Japanese car through one of the toughest periods in its history. The global recession has brought about a sharp drop in demand for cars. In the U.S., Toyota’s most profitable market, sales have dropped 28% in the first nine months of the year, Toyoda said. The yen’s 7% rise against the dollar in the most recent quarter also erodes the company’s export revenues and makes it harder for the company to lure buyers with discounts and other cash-back incentives. This fiscal year, the company has forecast a group operating loss of $8.4 billion. And just this week, the company issued a safety advisory about a problem—an accelerator pedal that sticks—that potentially affects 3.8 million Toyota cars in the U.S. Investigators are trying to determine if the problem is related to several deaths. “Just boosting sales won’t help us return to profits,” he said.

So what will save Toyota? “We have to make better cars,” Toyoda said.

For some analysts, Toyoda’s prescription was too vague. “He needs to get more specific,” says Tokai Tokyo Research Center’s Makoto Kato. “How does he plan to sell more cars? He should be talking about the company’s financials.”

Toyoda hasn’t granted media interviews since taking over. So it’s hard to know how he plans to improve the car maker’s fortunes. But today he did reveal a bit about how he thinks. For example: his management philosophy. “What is important to every customer,” he said. “That is my management philosophy.”

To understand the customer, Toyota has to know how it measures up against the competition. And the only way to know the differences is to test-drive lots of cars. “After I joined Toyota, there was a period when I drove more than 200 cars in one year--different types, other companies’ cars,” he said. “I want to be able to tell what distinguishes one car from the next.”

That’s not normally how the top executive would approach his job. Arguably, he should be more involved in big-picture-strategy and innovation-brainstorming sessions. But it suggests that he might try to solve one of the biggest criticisms about Toyota: Its cars are uninspiring. The company may move lots of metal--its Camry is a longtime best-seller in the U.S.--but aficionados rarely rave about the way the cars drive. For Toyoda, an amateur race car driver, making cars that please enthusiasts is the best way to attract a loyal following.

Of course, changing Toyota's culture won’t be easy to do--and it won't happen right away. “It’s different for Toyota to be talking like that,” says Deutsche Securities analyst Kurt Sanger. “If he’s spending his whole day driving cars, that’s a problem. If it’s part of his approach to making Toyota a more competitive company, instead of just concentrating on cost or quality, great. But that’s something that takes a long time to change.”

No doubt, Toyoda will have reams of data from customer satisfaction surveys and market research reports to see the bigger picture. But statistics won’t always help him do his job. Years ago, Toyoda recalled that he had tried to buy a bento box lunch but was disappointed that the kiosk had run out of the one he wanted. “The bento maker was only using past data to figure out which of its box lunches were popular,” he recalled. The bento box maker would have sold more it had made more of the one the customer wanted, he said.

--With Hiroko Tashiro

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Reader Comments

RJBJr

October 2, 2009 08:08 AM

Toyota has a fatal flaw. They have always been vulnerable to competition from the American car manufacturers.

Unfortunately, American auto management never took advantage of the opportunities staring them right in the face.

The opportunity is still there as this article shows. The key to beating the Japanese and the Chinese is to release the power of the American worker - if you know how. Wonder if Obama's car czar will seize the day.

kuei

October 2, 2009 08:25 AM

Sounds like Mr. Toyoda was put in his position because of his name, and not his qualifications. He is just a pitch man without any real idea how to run the business. I would never buy a Toyota car, or any foreign car. But, Toyoda makes great cnc machining centers. Since america does not have a real manufacturer of heavy duty cnc equipment Toyoda would be my first choice for machining centers.

Guest

October 2, 2009 11:36 AM

Please correct the spelling of Toyota.

bill

October 2, 2009 01:25 PM

I love what u do for me TOYOTA.

bill

October 2, 2009 01:25 PM

I love what u do for me TOYOTA.

PNW Trojan

October 2, 2009 04:50 PM

You ARE right, Toyoda-san! Arrogance and complacency reign, not just in japan, but I will tell you that those of us who have had Toyota cars AND trucks, for years, are growing increasingly DISGUSTED with the LOUSY DIS-SERVICE, your dealers now provide. We have not gone to the dealer for sometime now...even for major 60k and 90k service. We may have our LAST 2 Toyotas, and your HUNGRY and HUMBLE competition is looking mighty promising. Imagine LOSING out to the Koreans and Chinese, and one day, the Indians like Tata! Better sharpen that katana and short sword, and find someone TRUSTWORTHY, to handle the coup de gras for you.

Rafael

October 2, 2009 06:06 PM

Guest
October 2, 2009 11:36 AM
Please correct the spelling of Toyota.

Dear Guest,
The cars and the company are called Toyota but the family name is Toyoda. It is spelled correctly.

@RJBJr

October 2, 2009 08:41 PM

Toyota always vulnerable to American competition? Funny how this vulnerability has manifested itself: in the bankruptcy of GM and Chrysler. Oh, and you say unleash the power of the American worker is a good thing? Nah, I have had enough of the unleashing of the power of UAW. Dude, you need to get real, fast!

Robert Laughing

October 2, 2009 09:14 PM

RJBJr; Its TOO EASY for Detroit to BUY Congress; why squander VALUABLE resources on R&D, Customer Service, Quality WITH Dependability, Resale? Just buy a few Stooges in DC....unfortunately, American car and truck buyers are on to that SLEAZY ploy. Maybe the working people (the few, the proud, the disgusted?) will KICK OUT the sleazy factor from DC in Nov 2010 and again in 2012?

Tom

October 2, 2009 09:52 PM

"We have to make better cars." While Toyota's tend to be, as the article says, not particularly inspirational vehicles, I don't think anyone would have too many issues regarding the quality of the cars themselves.

It looks like Toyota got caught out in the automotive downturn by being in a situation where they were effectively the largest car manufacturer in the world and so suffered the largest loses when the market turned. How to fix that? Ensure that you can be profitable at all levels of production.

This is a concern as Toyota has, for many years been considered as the model for productive business, and so if the present economic situation has exposed flaws in the Toyota model, we may have to see what solution they come uo with.

rsa

October 2, 2009 10:44 PM

Recall after recall has made it clear that Toyota's quality is way overhyped. The new Tundra was recalled just months after its launh for the same problem its older version was recalled! Their engine sludge problem is widely pusblished. Yet, Toyota's mighty PR machine - along w/ its once-formidable war chest to fund print & TV advertising - often managed to keep its quality problems secret enough to fool the common consumer into believing it was the best auto brand under the sun. Toyota's obscenely arrogant dealers don't seem to help the situation either.

rsa

October 2, 2009 11:14 PM

Recall after recall has made it clear that Toyota's quality is way overhyped. The new Tundra was recalled just months after its launh for the same problem its older version was recalled! Their engine sludge problem is widely pusblished. Yet, Toyota's mighty PR machine - along w/ its once-formidable war chest to fund print & TV advertising - often managed to keep its quality problems secret enough to fool the common consumer into believing it was the best auto brand under the sun. Toyota's arrogant dealers don't seem to help the situation either.

Tristan

October 3, 2009 12:43 AM

Toyota's problem is one of capacity. It has too much capacity particularly in its home market. It will have to learn like the big three that you cannot always grow your way out of this.

They will need to close plants and sack workers.

A strong Yen is inevitable. For any country running long-term current account surpluses maintaining a weak currency is like holding down a hot air balloon. You can do it - but only for awhile.

The export led growth that lifted countries like HK, Singapore and Korea cannot last forever.

And if 1.3 billion Chinese think this model will lift them all out of poverty then they are in for a shock.

Real reform is needed all throughout Asia.

Flexible labour laws, Capital Laws, Currency and Competition Laws are the way to Economic Growth.


Kinzan

October 3, 2009 02:13 AM

I think the criticism of Toyoda's test-driving cars is a prime example of the failure of modern MBA-type management. He should not be talking financials - He has Financial people to do that. Toyoda needs to understand the company's products as well as the competition's; only test-driving will tell him that. Business is about providing a product and/or service to a customer - By understanding the cars better; he'll understand what he's really up against. Also, Senior Management needs to experience the raw data, not some underling's perception of what should be presented. Experiencing real problems that real people encounter everyday will give him a better perception of what his subordinates are trying to tell him - Don't forget, they have their own agenda as well as trying to cover their own mistakes. Hands-on experience will give him a leg up. Now,can he use that information effectively and devise the right response - That's another story to tell.

Interconnect

October 3, 2009 04:15 AM

Akio Toyoda San! With your legacy and very little experience of internship this is a lesson to the genuine recall of 3.8 million Toyota Cars only in the US. Motorisation today is in China, Indo-Pak subcontinent, Russia and the Middle East region. Toyota has no ansswer to Nano from the sub-continent, no one has. The markets where sales maintained record growth and still growing, with people in ques for buying their first cars, replacement from motor bike. Toyota has not invested in consumer credit in emerging/developing markets as the sub-continent of Indo-Pak. Toyota has no social programs as in the US for school children, environemnt, education. Imagine the combined population of China, Indo-Pak subcontinent with the size of market, growth, demographics, ROI (Rertun on Investment) market capitalisation combined in the region than the US. The social programs of Toyota in the US than in the region of China, Indo-Pak subcontinent. Imagine the potential for return for manufacturing industries in general and automobile industry in particular in the region, with the skilled work force in millions at wages with no match anywhere in the world. With the potential to export from Indo-Pak subcotninent to China as Pakistan has Free Trade and Preferential Trade Agreements with China and Toyota can export cars from Pakistan to China availing the previlege which the country has for exporting to China, with its geographical location for trade with China most suited. Yet the consumer, trade, franchises are highly ignored for quality of products produced by Toyota in the region particularly in Pakistan where there was never a product recall, or solicitation for concern of quality from Toyota Pakistan franchise with major equity with Toyota family. At the Tokyo Motor show organised by JAMA local made Toyota from Pakistan was never invited to display product to the international viewers to see how progressive are Toyotas Made in Pakistan. Toyotas made in Pakistan be given equal opportunity to be displayed at the Tokyo Motor show as a symbol of Toyota's creation aiming for the times when they will export to the international markets.

Hendra S Raharjaputra

October 3, 2009 05:29 AM

I thougt no company's car in all over the world hit the best sales right now, include America. We can't blame the new CEO of Toyota, cause the result of new CEO could not seen in only 5 months. Toyota still has long range journey to improve its performance, while some of American's Car bankcrupt.

Jimmy Trikeriotis

October 3, 2009 06:20 AM

Mr. Toyoda.

Your comments and way moving forward makes sense to me and it should inspire most or all the CEOs of the auto industry who simply think that their cars offer something better. your company offers a good car that most people can buy and they know that service and parts are available and not expensive.
To where to go from now with the current multiple problems that you face and you are not alone, is not easy and perhaps the key is to creat better cars which in my opinion is not difficult if you re consider the way to make cars and make revolutionary steps and not evolutionary.
The market is ready as it becomes clear that people dont have money and the banks are not lending and the job prospects are bleak and the economy is not going to be better any time soon.

take the lead as you have the best foundation to do so.

Jimmy Trikeriotis

October 3, 2009 06:20 AM

Mr. Toyoda.

Your comments and way moving forward makes sense to me and it should inspire most or all the CEOs of the auto industry who simply think that their cars offer something better. your company offers a good car that most people can buy and they know that service and parts are available and not expensive.
To where to go from now with the current multiple problems that you face and you are not alone, is not easy and perhaps the key is to creat better cars which in my opinion is not difficult if you re consider the way to make cars and make revolutionary steps and not evolutionary.
Yje market is ready as it becomes clear that people dont have money and the banks are not lending and the job prospects are bleak and the economy is not going to be better any time soon.

take the lead as you have the best foundation to do so.

Jimmy Trikeriotis

October 3, 2009 06:22 AM

Mr. Toyoda.

Your comments and way moving forward makes sense to me and it should inspire most or all the CEOs of the auto industry who simply think that their cars offer something better. your company offers a good car that most people can buy and they know that service and parts are available and not expensive.
To where to go from now with the current multiple problems that you face and you are not alone, is not easy and perhaps the key is to creat better cars which in my opinion is not difficult if you re consider the way to make cars and make revolutionary steps and not evolutionary.
The market is ready as it becomes clear that people dont have money and the banks are not lending and the job prospects are bleak and the economy is not going to be better any time soon.

take the lead as you have the best foundation to do so.

Rich

October 3, 2009 10:09 AM

It is very simple Toyota has become GM 1975. They have lost touch with the low to middle end buyer as well as not communicating directly to the people in their plants that they really are managing in their best interests.
You must build in the markets you sell in if you are going to continue to expand your sales base.
Henry Ford and Mr Honda both
understood this.

Karl

October 3, 2009 10:34 AM

Anyone can 'Google' this- SLUDGE POEM, and read it. Toyota's CEO quit two weeks after it was posted about him. Anyone can 'Google' this- SLUDGE POEM 2, and read it. Toyota's President in Japan was removed from his position a little over a year after it was posted about him. 'SLUDGE POEM 3' is about Akio Toyoda. You can 'Google' it & you might find it. Thank you.

Karl

October 3, 2009 01:51 PM

'SLUDGE POEM 3' is about Akio Toyoda. (You can 'Google' it!)

Kak

October 3, 2009 01:57 PM

Every growth has its back pain and Toyota is no exception. But Toyota temporary problems will make them strongers in the future. The fundamentals of Toyota is unsurpassed and without doubt. From customers loyalty, quality, Public Relationship, vendors and dealers relationship to employees, Toyota excels in every measurement. Their down to earth management style with vision of harmony in team building is their secrets.

If GM comes with One Consultant, Toyota has 1,000s of consultant who are their employees. How do Toyota creates all their employees as a consultant. That is their secret. There has been only a handful of companies who have copied successfully Toyota Production System.

If we revisit this topic in 2019, Toyota will still be at the top, and we will be discussing why anybody cannot match or replace Toyota. Hmm. Interesting.

Karl

October 3, 2009 04:15 PM

The Japanese & the U.S. carmakers are exactly alike! They both produce cheap vehicles, with major defects and then they have their LEGAL TEAMS make sure that they are protected, and they also make sure that the Mainstream Media won't EXPOSE them on National TV. 'Google' this- ENGINE SLUDGE, and go to the consumeraffairs website about 'Toyota Engine Problems' and read them. Make sure to click on 'Airbags' and read those complaints too. Then 'Google' this- TOYOTA, GENERAL MOTORS HAVE BEEN NAMED IN A WHISTLEBLOWER LAWSUIT, and read it.

Karl

October 3, 2009 05:30 PM

Has everyone 'Googled' this- TOYOTA RECALLS 1.3 MILLION CARS, and read it? WOW! What happened to Toyota? What about 'Googling' this- BUY A COROLLA GET BURNED LITERALLY. What happened to Toyota? WOW! Has everyone 'Googled' this- SLUDGE POEM, and read it yet? Oh my!

eunice

October 4, 2009 08:27 AM

Toyota should look more into other areas like Africa. most people are in love with the brand. OMG i cant believe it!

X Toyota Owner

October 4, 2009 05:18 PM

Toyota used to make excellent cars and for the most part continued to do so until recently. I stopped buying Toyotas after owning a half dozen, about 2 years back after a couple of annoying minor defects in a new vehicle, costly and indifferent toyota dealers, and a very snooty representative on their help line. Never again. Mr. Toyoda can bow and scrape as much as he wants, but the company's recent behavior with long-loyal customers like me is better described by only the first 3 letters of its name.

Interconnect

October 5, 2009 05:30 AM

Akio Toyoda San your concern with "extremely regrettable" fatal crash in which a floor mat in one of fatal crash with four precious lives have been lost is highly appreciable. This is human from a corporation as Toyota to value customers, this time seen for US customers.
Consumers from around the world expect the same concern for their safety, security, in vehicles produced, sold, marketed by Toyota, their agents, franchies, partners, licensees worldwide should be equally responsible for the lives, safety of the vehicles worldwide.
In my comments earlier on this story, I told Akio Toyoda San the biggest market in the world is the region of China, Indo-Pak sub-continent, Russia which would exceed the population of the United States. This region where the demographics of the young adult population averages 60% estimated for the age of 20 or under. Imagine the youngest youth of the world to be your customer. Imagine the safety, security, of people, safety of vehicle, standardisation should be your equal concern. This world is looking towards your equal concern and expect us to be more loyal to Toyota than you would expect. Make Toyotas where they are consumed in the region, and export from here. Here's the work force, here's the consumer.

Mark Allen Roberts

October 7, 2009 08:31 PM

I am a big fan of Toyota’s (I have three) yet when my son needed a car we bought a Mazda…why?

I have bought/leased Toyotas for 15 years, so I went to my local dealer and had a new experience...arrogance. So just as quickly as I drove to that dealership I went two doors down and bought a Mazda, not significantly less money, but I “felt” they valued me, my business.

Toyota’s lack of market knowledge was showing and as I discuss in my blog : Attention leaders: Don’t look now but your lack of market knowledge is showing… http://nosmokeandmirrors.wordpress.com/2009/07/03/attention-leaders-dont-look-now-but-your-lack-of-market-knowledge-is-showing/ . This arrogance is learned from the top down.


Mazda brought quality up to Toyota standards and all being equal I buy from people who make me feel like they value my business.

As I said to the salesperson…you sell Toyota’s not Lexus, get over yourself and understand your market!

Mark Allen Roberts
www.outbsolutions.com

NOGOVTCARS

October 12, 2009 09:05 AM

Toyota will not only survive, they will come out stronger and better, assuming their govt does not naionalize them as has been done in the U.S. 5 years form now Toyota and Ford will dominate, with GM and Chrysler cranking out trash similar to those produced during the soviet-empire days. Only the govt will be buying govt cars...

sean

November 17, 2009 06:39 PM

well i dont want to bother reading everybodys opinionated comments, mine? toyota is the best, and good reason, whoever thinks that toyota needs to focus on financial more than build quality, just look at how toyota over the last 20 years has taken control of the market? a 4 and 6 cylinder that outlasts americans by 100,000 miles or more, and making a V8 that out performs the american one.

To: RJBJr

January 30, 2010 02:15 AM

"The key to beating the Japanese and the Chinese is to release the power of the American worker - if you know how."

Ya, yeeehaaaww, go round up all the UAW folk (probably out on strike) and open the plants back up, here's the golden opportunity to win back some past customers.

GOOD LUCK!!! The American car industry slid into it's dismal demise due to the last 35+ years of greed and miserably engineered products, not having a recall here and there to fix something. I owned enough of them to know first hand!!

Toyota is not perfect by any means but they are miles ahead of anything rolling out of Detroit these days IMHO. This whole frantic, paniced, "Oh my God my car might crash" paranoia will get fixed and they will continue building well engineered products. Good grief, a handfull of cases out of millions of vehicles. The big 3 could top that any day of the week.

Notice that the recall affects the CTS made parts from North America. Cars assembled in Japan with the Denso made Japanese parts are clear.

Same old story.......

@ RJBJr

January 30, 2010 08:13 PM

"The key to beating the Japanese and the Chinese is to release the power of the American worker - if you know how."

Ya, yeeehaaaww, go round up all the UAW folk (probably out on strike) and open the plants back up, here's the golden opportunity to coax back some past suckers.

GOOD LUCK!!! The American car industry slid into it's dismal demise due to the last 35+ years of greed and miserably engineered products, not from having a recall here and there to fix something. I owned enough big 3 vehicles to know first hand!!

Toyota is not perfect by any means but they are miles ahead of anything rolling out of Detroit these days IMHO. This whole frantic, panicking, "Oh my God my car might crash" paranoia will get fixed and they will continue building well engineered products. Good grief, it's a handful of cases out of millions of vehicles. The big 3 could top that any day of the week.

Notice that the recall affects the CTS made parts from North America. Cars assembled in Japan with the Denso made Japanese parts are just fine.

Same old story.......

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BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.

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