Fujio Cho
1937–

President and chief executive officer, Toyota Motor Corporation

Nationality: Japanese.

Born: 1937, in Tokyo, Japan.

Education: Tokyo University, law degree, 1960.

Career: Toyota Motor Corporation, 1960–1966, apprentice and training employee; 1966–1974, Production Control Division; 1974–1984, manager in Production Control Division; 1984–1986, manager in Logistics Administration and project manager in Production Control Division; 1986–1987, manager in Administration; 1987–1988, manager of Toyota North America Project and executive vice president of Toyota Motor Manufacturing USA; 1988–1994, president of Toyota Motor Manufacturing USA; 1994–1996, managing director; 1996–1998, senior managing director; 1998–1999, executive vice president; 1999–, CEO and president.

Awards: Manager of the Year, Automotive Hall of Fame, 2001; Honorary Doctorate in Engineering, University of Kentucky, 2002; Top Managers, BusinessWeek, 2003.

Address: Toyota Motor Corporation, 1 Toyota-cho, Toyota, Aichi 471, Japan; http://www.toyota.com.

■ Fujio Cho was Toyota Motor Corporation's first director of the 21st century. Bearing a degree in law, he had joined Toyota in 1960 and quickly became one of the company's top production experts. He was personally taught by Taiichi Ohno, author of the system of lean production. Cho spear headed Toyota's direct investment in production in the United States from 1988 to 1994 and in 1999 succeeded Hiroshi Okuda as the company's president. Under Cho's leadership Toyota became the number-two automotive company in the world and led the industry in the use of hybrid technology and advanced production techniques.

OHNO'S STAR PUPIL: A LAW GRADUATE LEARNS THE TPS

Fujio Cho was born in Tokyo in 1937. He entered Tokyo University in the mid-1950s, where he studied law—an unlikely discipline for a future industrialist. He graduated in 1960 at the age of 23 and began working for Toyota that same year. He became a member of the Toyota corporate family through "adoption," not birth, as had been the case for his predecessor, Shoichiro Toyoda.

Cho might have remained a minor administrative official in the provincial Japanese company had it not been for Dr. Taiichi Ohno, who would dramatically change the destinies of both Cho and Toyota. Ohno became one of the most revered men in Japan through his formulation of the theory and practice of lean production. In the 1950s and early 1960s Toyota was struggling to make trucks and cars only for the Japanese home market. Eiji Toyoda, the then highest ranking member of the founding family, dreamed of making Toyota a global company and of marketing passenger cars in America. The company, however, was not ready: Toyota vehicles were shoddy and underpowered. Ohno devised a plan for cost-effective production, wherein if the assembly process could be perfectly timed, there would be no need to worry about accumulating expensive inventories. Shoichiro Toyoda, the future heir to the company and the second cousin of Eiji, adopted this procedure in the production division and combined it with a systematic quality-control program.

By the time Cho was rotating through the company as an apprentice, the outlines of the Toyota Production System (TPS) were in place. It worked clumsily at first, but the number of defects on the assembly line soon dropped sharply. Toyota cars were first marketed in America in the mid-1960s. Cho was posted to the Production Control Division in 1966, just as the Toyota Corona began selling in America. There he was thoroughly trained by Ohno, who became his personal mentor.

Ohno made a deep impression on Cho, who become a manager while still in his early 30s. Ohno schooled Cho through lectures, study groups, and hands-on sessions in the factories of Toyota City. Most relevantly he taught Cho the three formulas that were the essence of the TPS: First, top managers needed not only to believe in the system but to convey their commitment to lower-level employees. Second, everyone down to the most menial Toyota worker had to fully participate. Finally, the system needed to be internalized by all employees, who were to be dedicated to its kaizen, or constant improvement and ever-increasing efficiency. Cho was given the duty of sharpening the administrative side of the TPS.

The system was designed to keep inventories as lean as possible through "just-in-time" delivery. Parts arrived on the assembly line just as they were needed, a process that required constant communication between dealer, factory, and supplier. In his zeal to keep inventories lean Cho initially engaged in American-style short-term thinking. When Japan was mired in a recession in 1974, Cho cut inventory to the bone and proudly showed the results to Ohno. Ohno, according to Micheline Maynard in her book The End of Detroit, exploded: "Are you stupid? We are going to be in a boom. We will need more inventories, not less!" (2003).

Through his humiliation at the hands of Ohno, Cho learned—and would never forget—to look forward to future trends, not back to past or present economic situations. Another important lesson that Ohno impressed upon Cho was that kaizen applied to companies and individuals alike; a good professional was ever in need of improvement. Ohno also taught Cho that the TPS was more than just a system: it became, in fact, the guiding philosophy for the entire Toyota firm. Cho continued to manage production and apply his lessons so effectively that he was put in charge of logistical management by 1984.

FUJIO CHO, AMERICAN CORPORATE CITIZEN

More than any other major Toyota official Cho would be shaped by his American experience, of which he was destined to have plenty. The then president Shoichiro Toyoda was so impressed with Cho that he appointed him as general manager of Toyota Motor Manufacturing USA. When the company decided to open its first North American plant in Georgetown, Kentucky, Cho was sent to America to manage it. The plant opened in May 1988; Cho considered this to be the beginning of Toyota's globalization. He directed operations at the plant, which was tremendously successful, until his return to Japan in 1994.

Cho brought to America the same management style that he had practiced in Nagoya and Toyota City. He walked the shop floor and stared for many minutes at the assembly line, asking questions of and listening to answers from Kentuckians as easily as he had with Japanese. Despite his lack of an engineering degree, Cho gradually acquired a thorough practical knowledge of the mechanics of cars and trucks as well as of the buying habits of Americans. One lesson became very important to him: Americans, he discovered, wanted Japanese quality—especially Toyota quality. The oil embargo and consequent rises in gas prices in the 1970s and 1980s persuaded many boomers and yuppies to abandon Detroit-produced automobiles in favor of more reliable, fuel-efficient Corollas and Camrys. Americans also wanted to know that the Camrys made in Georgetown were every bit as good and reliable as those made in Japan. In an interview with Hiroshi Hirai in the Yomiuri Shimbun, Cho recalled, "I told workers that U.S. consumers would say, 'I want a Camry made in Japan,' if the quality of our cars was worse than those made in Japan" (October 27, 2003).

Cho would not be disappointed by his American charges. The Kentucky plant began manufacturing Camrys, which Cho had been in charge of turning out at the Tsutsumi plant in Toyota City since 1986. Producing the popular, reliable Camry in the United States would be much less risky than producing an unknown make. American consumers proved just as loyal to American-made Toyotas as they had to imported ones, soon opening the way for additional American Toyota plants. Both Toyota and Cho were very much honored and respected for the prosperity the company's success brought to Georgetown. The company was regarded as an outstanding corporate citizen, and in 2002 Cho was awarded an honorary doctorate in engineering by the University of Kentucky.

No sooner did Cho return to Japan than he was introduced to his next mentor, the new Toyota president Hiroshi Okuda. Okuda was hired in 1995 because no qualified member of the Toyoda family could be found. Cho continued to serve as senior managing director as he had for Okuda's predecessors. Okuda proceeded to shake up Toyota to ward off the potential threat from Honda, warning Cho that Toyota suffered from "Big Company Disease." He impressed upon Cho the need to hire younger, more creative board members and make Toyota a less formal, more open company.

From Okuda, Cho would learn that cars needed to be designed more quickly and with more freedom given to the designers at the production stage. Toyota was too centralized a company; head officers needed to meddle with designers in the conceptual, not the production stage. Sometimes, Toyota could be too centralized for its own good. Okuda warned Cho that Toyota could one day suffer the fate of American car companies if it lost its awareness of the demands of kaizen for perpetual self-evaluation and improvement. The growing competitors Honda and Nissan were small, but they were lean, trendy, and slowly gaining ground.

Okuda left Cho in charge of Toyota's all-important North American operations. The TPS was further refined while Toyota captured 10 percent of the world automotive market and closed in on Ford's number-two global position. The company ambitiously set the goal of dethroning General Motors by 2010 and becoming the world's first truly global automaker.

CHO'S VISION FOR THE NEW CENTURY

In 1999 Okuda retired, and Cho became the second consecutive nonfamily Toyota president. Cho accelerated the pace of growth that had been set by Okuda. In the first three months of 2003 Toyota upstaged Ford in global unit sales for the first time. Much of the credit was given to Cho, who now attracted much media attention. Fortune described Toyota as the most respected company in the world, and BusinessWeek wondered in the title of a November 17, 2003, article, "Can Anything Stop Toyota?"

While the country of Japan remained in a seemingly endless recession and Japanese management in general was criticized, Cho presided over a company awash in cash reserves and still reaping enormous profits. Writers no longer talked about the Japanese Miracle but of the Toyota Miracle, for which Cho was given his fair share of the credit. When asked by Hisashi Kitahara in the Yomiuri Shimbun what the secret of the Toyota Miracle was, Cho pondered for a long time, then gave an astonishing reply. Instead of spouting out a long lecture on kaizen or lean production, Cho reduced the essence of Toyota to the ability of its workers to stop the assembly line when the situation demanded, resulting in a total absence of defective cars: "It is that our employees should be courageous enough to bring the production process to a halt, if necessary" (December 3, 2003).

Cho was much more affable, personable, and low-key than the blunt-spoken Okuda. He was, however, no less determined to realize the company vision of capturing 15 percent of the world vehicle market by 2010 and dethroning GM. Cho told Alex Taylor III of Fortune that the 15 percent goal was less a fixed target than a vision to motivate Toyota employees to adhere to kaizen : "When you achieve an objective, you strive to reach the next objective" (December 8, 2003). One of Cho's favorite slogans was "Beat Toyota."

Cho had a formidable task ahead of him. In order to achieve his stated goal, he would have to sell over nine million cars and trucks against very stiff competition. The potential markets of India and China would not yet be large enough to absorb this production; thus, Toyota's new market would have to come mainly from America and partly from Europe. To compete in those markets, Cho needed to address the issues of styling and image. Many found Toyotas to be reliable but a growing number of young, upscale Japanese were turning to the flashy new models marketed by Nissan and Honda. Cho, worried about Toyota's aging consumer base, felt that the company's cars lacked sex appeal: "Our salespeople are not 100 percent satisfied with styling," Cho said in Fortune (December 8, 2003). Consequently, he hired the British-born designer Simon Humphries.

Cho knew that his company was a centralized bastion of traditionalist conformity rooted in the culture of Nagoya, not cosmopolitan Tokyo. As such, he believed that his team could not design smart, global cars while ensconced in Toyota City. Thus, he began to decentralize the design process. Toyota teams located in France and Southern California competed with those in Japan for the best designs. They produced the Toyota Scion, which was geared to appeal to defecting, young, urban Japanese consumers who might have otherwise been tempted to buy Hondas. Recognizing that the somewhat boxlike compact was something of a gamble, Cho intended to first try out the Scion in California in 2003 and then across the United States in 2004. Within a year or two the appeal of the car would be reviewed to determine if sales could reach 100,000.

Cho recognized that engineers and other "car people" alone could not make and sell the vehicles that would push Toyota to number one in the industry. While the safety features, transmission, mileage, and engine were all important, so were the style and total image of the vehicle. Cho knew that he needed to sell all of those aspects in a single vehicle. In addition he wanted Toyota to occupy the leading edge in the sustainable car culture that he and others such as Edouard Michelin and his former superior Shoichiro Toyoda, who had become president of Keidanren, had talked about. The Japanese government provided an extra incentive by setting a deadline by which all Japanese companies would have to be producing cars that used hydrogen and/or electric power. Having huge resources in capital, research, and development, Cho took the lead in marketing the Toyota Prius, one of the world's first hybrid cars. Detroit was several years behind when the Prius was unveiled; the car soon began selling better in America than in Japan. Cho, encouraged, set plans to sell 300,000 hybrids worldwide by 2005. In October 2003 he began selling the second-generation Prius in the United States; by the autumn of 2004 he planned to unveil the hybrid Lexus RX330.

THE GAIJIN OF TOYOTA: HIRING AMERICANS

Cho perceived that North America would remain absolutely paramount to the success of his company. In 2002 and 2003 Toyota sold more vehicles there than in Japan, amounting to almost 80 percent of total worldwide profits. Moreover, America was his key test market. If a car, truck, or sport-utility vehicle (SUV) sold well there, Cho and his colleagues could confidently sell it in Japan and around the world as well. The Lexus had first been introduced in America. In beginning to surpass U.S. automotive companies on their home ground, Cho increasingly marketed Toyota Motor Corporation USA as an American company. In June 2003 he promoted James Press to be sales and marketing manager and Gary Convis to be in charge of manufacturing; the presence of two American gaijin —a derogatory Japanese term for foreigners—among Toyota's top executives was unprecedented.

Cho had no problem with the hiring of these gaijin, considered it to be a wise business strategy; he noted in Fortune, "Toyota has been globalized step by step. We are trying to introduce American elements into the company " (December 8, 2003). Cho began to Americanize the Toyota management system as well, although Convis and Press were not the ones in charge of Toyota's American branch. That role fell to the blunt-spoken Yoshi Inaba, a marketer, not an engineer; under Inaba, the American Toyota was slowly moving away from consensus management and toward more rapid decision making.

Cho only took Americanization so far. He was not Carlos Ghosn, the French Brazilian who took over Nissan, and Toyota was not Nissan. Where Ghosn slashed a number of jobs at his then-struggling firm, Cho found no need to do so. For Cho, lifetime employment was not only sustainable in a solvent company with sales worth ¥8 trillion but essential to the continued success of kaizen. Cho believed that the jettisoning of lifetime employment in many other Japanese companies was a serious danger to the social stability of his country. Layoffs were a dishonorable practice that Toyota would only consider as a last resort.

Cho maintained a corporate culture that was still highly conservative by Japanese, let alone American standards. Toyota remained centralized and hierarchical and in many ways was the most "Japanese" of major Japanese companies. Nissan, with its new lean structure and French manager, wanted to be aggressive; Toyota, with its commanding position, did not. As a giant company that had conquered Chrysler, overtaken Ford, and was setting its sights on General Motors, Toyota had no desire to risk a direct confrontation with Detroit. Cho proceeded carefully.

Cho continued to dedicate himself to the principles of lean production and kaizen that he had learned at the feet of Ohno, whom he quoted consistently. In order for the long-term goals that the company had set to be accomplished, the TPS would have to become ever more nimble and efficient. While Cho and his company were well ahead of most of the competition, they refused to become complacent. Cho knew that in the 21st century consumer wants would be shifting more rapidly than ever; Toyota would need to be able to shift just as rapidly to meet those wants.

Cho gave a high priority to the application of information technology in upgrading the TPS. New models could be developed and their production processes computer generated at the very same time. By 2004 some Toyota plants were using a new technique that allowed them to hold vehicle bodies on assembly lines with one rather than three supports. The streamlined Global Body Line production process made it possible to switch from one model to another on a single line, permitting Cho to place more robots at any given line location. It would soon be possible to custom produce a Lexus, a truck, an SUV, a Camry, or a Prius on the same line on the same day at any plant in the world. This would give Toyota an enormous advantage over less flexible competitors who would constantly have to retool or shift production to other plants to meet customer demand.

Through his example of implementing selective Americanization while remaining deeply Japanese, Cho led the way to a new and revived Japanese management/production model. In contrast to the business writers of the 1990s, scores of whom were pronouncing the death of that Japanese model, the ongoing success of Cho inspired the 2004 book by Jeffrey K. Liker lauding The Toyota Way.

See also entry on Toyota Motor Corporation in International Directory of Company Histories.

sources for further information

Bremner, Brian, and Chester Dawson, "Can Anything Stop Toyota?" BusinessWeek, November 17, 2003, pp. 115–120, 122.

Dawson, Chester, et al., "The Americanization of Toyota," BusinessWeek, April 15, 2002, pp. 52–54.

Hirai, Hiroshi, "Toyota Boss: Competition Spirit Key to Success," Yomiuri Shimbun (Tokyo), October 27, 2003.

Keller, Maryann, Collision: GM, Toyota, Volkswagen, and the Race to Own the 21st Century, New York, N.Y.: Currency Doubleday, 1993.

Kitahara, Hisashi, "Few Firms Can Emulate Toyota," Yomiuri Shimbun (Tokyo), December 3, 2003.

Liker, Jeffrey K., The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer, New York, N.Y.: McGraw Hill, 2004.

Maynard, Micheline, The End of Detroit: How the Big Three Lost Their Grip on the American Car Market, New York, N.Y.: Currency Doubleday, 2003.

McKenna, Joseph R., "The Challenger Mindset of Fujio Cho,"Tooling Around, April 2002, p. 1.

Spear, Steven, and H. Kent Bowen, "Decoding the DNA of the Toyota Production System," Harvard Business Review, September–October 1999, pp. 97–106.

Taylor, Alex, III, "The Americanization of Toyota," Fortune, December 8, 2003, pp. 165–166, 168, 170.

Togo, Yukiyasu, and William Wartman, Against All Odds: The Story of the Toyota Motor Corporation and the Family That Created It, New York, N.Y.: St. Martin's Press, 1993.

Toyoda, Eiji, Toyota: Fifty Years in Motion; An Autobiography of the Chairman, Eiji Toyoda, Tokyo: Kodanshi International, 1987.

"Toyota: Japan's Unstoppable Juggernaut," Automotive Industry, June 2002, p. 10.

—David Charles Lewis