Toyota Motor Corporation

views updated Jun 11 2018

Toyota Motor Corporation

1 Toyota-cho
Toyota City, Aichi, 471
Japan
0565-28-2121

Public Company
Incorporated: July 1, 1982
Employees: 62,000
Sales: ¥6324 billion (US$39.7 billion)
Market Value: ¥4599 billion (US$28.8 billion)
Stock Index: Tokyo NASDAQ

In 1933 a Japanese man named Kiichiro Toyoda traveled to America where he visited a number of automobile production plants. Upon his return to Japan, the young man established an automobile division within his father’s loom manufactory and in May 1935 produced his first prototype vehicle. General Motors and Ford were already operating assembly plants in Japan but U.S. pre-eminence in the worldwide automotive industry did not deter Toyoda.

Since Japan has very few natural resources of its own, the company had every incentive to develop engines and vehicles that were highly fuel efficient. In 1939, the company established a research center to begin work on battery powered vehicles. This was followed in 1940 by the establishment of the Toyoda Science Research Center (the nucleus of today’s Toyota Central Research and Development Laboratories, Inc.) and the Toyoda Works (presently Aichi Steel’ Works, Ltd.). The next year Toyoda Machine Works, Ltd. was founded for the production of both machine tools and auto parts.

As Japan became embroiled in World War II, the procurement of basic materials for automobile manufacturing became more and more difficult. At one point Toyoda was manufacturing trucks without radiator grills, brakes only on the rear wheels, wooden seats, and a single headlight. Pushing toward the limits of resource conservation as the course of the war began to cripple Japan’s economy, the company started piecing together usable parts from wrecked or worn-out trucks in order to build “recycled” vehicles.

When the war ended in August of 1945 most of Japan’s industrial facilities had been wrecked, and Toyoda’s (or Toyota as it was known after the war) production plants had suffered extensively. It had 3,000 employees, but no working facilities; and the economic situaton in Japan was chaotic. But the Japanese tradition of dedication and perseverance proved to be Toyota’s most powerful tool in the difficult task of reconstruction.

Just as the Japanese motor industry as a whole was beginning to recover, there was mounting concern that American and European auto manufacturers would overwhelm the Japanese market with their economic and technical superiority. Japan’s automakers knew that they could no longer count on government protection in the form of high import duties or other barriers as they had before the war.

Since American manufacturers were concentrating their efforts on medium size and larger cars, Toyota’s executives thought that by focusing on small cars the company could avoid a head-on market confrontation. Kiichiro Toyoda likened the postwar situation in Japan to that in England. “The British motorcar industry,” he said, “also faces many difficulties, but its fate will be largely determined by how strongly American automakers feel they should concentrate on small cars.” It was January 1947 when Toyota engineers completed their first prototype for a small car: its chassis was of the backbone type—never used before in Japan; its front suspension relied primarily on coil springs; and its maximum speed was 54 mph. After two years of difficulties the company seemed headed for success.

However, this was not to be accomplished as easily as expected. Two years later, in 1949, Toyota suffered its first and only serious conflict between labor and management. Nearly four years had passed since the end of the war, but Japan’s economy was still in poor condition: goods and materials of all kinds were in short supply; inflation was rampant; and, worst of all, people in the cities were forced to trade their clothing and home furnishings for rice or potatoes in order to keep themselves alive. That year the Japanese government took measures to control runaway inflation in ways that severely reduced consumer purchasing power and worsened the already severely depressed domestic automotive market. Japanese auto manufacturers found themselves unable to raise the funds needed to support their recovery efforts, for the new governmental policy had discontinued all financing from city banks and the Reconstruction Finance Corporation.

Under these conditions the company’s financial situation deteriorated rapidly. In some months, for example, the company produced vehicles worth a total of ¥350 million while income from sales reached only ¥250 million. In the absence of credit sources to bridge the imbalance, Toyota was soon facing a severe liquidity crisis. It should be noted here that, largely because of wartime regulations and controls, Toyota had come to place strong emphasis on the production end of the business, so that in the early postwar years not enough attention had been paid to the proper balance between production and sales. The Japanese economy at that time was suffering from a severe depression, and because the Toyota dealers were unable to sell cars in sufficient quantities, these dealers had no choice but to pay Toyota in long term promissory notes as inventories kept accumulating.

Finally, Toyota was unable to meet its regular payroll. Delayed payments were followed by actual salary reductions and then by plans for large-scale layoffs—until April of 1949 when the Toyota Labor Union went on strike. Negotiations between labor and management dragged on with the union leaders bitterly opposed to any layoffs. As a result, Toyota was compelled to reduce both production and overhead. Workers staged demonstrations to press their demands, and all the while Toyota kept falling further into debt, until the company finally found itself on the verge of bankruptcy.

Production dropped to 992 vehicles in March of 1949, to 619 in April, and to 304 in May. Crucial restructuring efforts included a proposal to incorporate Toyota’s sales division as a separate company, leading eventually to the formation of Toyota Motor Sales Company Ltd., in April 1950. Toyota Motor Sales Company handled all domestic and worldwide marketing of Toyota’s automotive products until July of 1982 when it merged with Toyota Motor Company.

In the meantime, discussions between labor and management finally focused on whether to admit failure, declare bankruptcy and dissolve the company, or to agree on the dismissal of some employees and on a rebuilding program. In the end management and labor agreed to reduce the total work force from 8,000 to 6,000 employees, primarily by asking for voluntary resignations. At the management level, President Kiichiro Toyoda and all of his executive staff resigned. Kiichiro, Toyota’s founder and a pioneer of the Japanese automotive industry, died less than two years later.

Not long after the strike was settled in 1950, two of the company’s new executives, Eiji Toyoda (now chairman of Toyota Motor Corporation) and Shoichi Saito (later chairman of Toyota Motor Company) visited the United States. Seeking new ideas for Toyota’s anticipated growth, they toured Ford Motor Company’s factories and observed the latest automobile production technology. One especially useful idea they brought home from their visit to Ford resulted in Toyota’s suggestion system in which every employee is encouraged to make suggestions for improvements of any kind. However, on their return to Japan the two men inaugurated an even more vital policy that remains in force at Toyota today, namely, the continuing commitment to invest in only the most modern production facilities as the key to advances in productivity and quality. Toyota moved quickly and aggressively in the 1950’s, making capital investments in new equipment for all the company’s production facilities. Not surprisingly, the company began to benefit from the increased efficiency almost immediately.

Along with improvements in its production facilities, Toyota also worked to develop a more comprehensive line of vehicles in order to contribute toward the growing motorization of Japanese society. During 1951, for example, Toyota introduced the first 4WD Land Cruiser. Moreover, as the domestic demand for taxis rapidly increased, production of passenger cars also rose quickly, from 50 units per month to 250 units per month by 1953.

In production control, Toyota introduced the “Kanban System” (Synchronized Delivery System) during 1954. The idea was derived from the supermarket system where “consumers” (those in the later production stages) took “products” (parts) from the stock shelves, and the “storekeepers” (those in the earlier production stages) replenished the stock to the degree that it was depleted. This “Kanban System” became the basis for Toyota’s entire present-day production system.

By the early 1950’s, just as Toyota had anticipated, the Japanese market was crowded with vehicles from the United States and Europe. It soon became apparent that to be competitive at home and abroad, Toyota would not only have to make additional investments in manufacturing facilities and equipment, but also undertake a major new research and development effort as well. This was the reasoning behind Toyota’s decision in 1958 to build a full-scale research center for the development of new automobiles (which was also to become Japan’s first factory devoted entirely to passenger car production). Toyota also began to offer a more complete line of products. Beginning with the Crown model, introduced in 1955, Toyota quickly expanded its passenger-car line to include the l000cc Corona, then added the Toyo-Ace (Japan’s first cab-over-truck) and a large size diesel truck.

Throughout these years Toyota was also working hard on another important, if less conventional, approach to adapting itself to the rapid motorization of Japan, brought about by a remarkable increase in national income. When, for example, Toyota Motor Sales was capitalized at ¥1 billion, 40% of that amount (¥400 million) was immediately invested to establish an automobile driving school in an effort to help citizens acquire driver’s licenses. Through this and similar efforts, Toyota made a major contribution to Japan’s growing motorization in the years following 1965, a trend that was to lead to a mass domestic market for the automobile.

In 1955, ten years after its defeat in World War II, Japan became a member of GATT (the General Agreement on Tariffs and Trade); but the Japanese auto industry, remained one of Japan’s least competitive industries in the field of international trade. Toyota, foreseeing the coming age of large-scale international trade and capital liberalization in Japan, decided to focus on lowering its production costs and developing even more sophisticated cars, while at the same time attempting to achieve the highest level possible of quality production. This was a joint effort cxonducted with Toyota’s many independent parts suppliers and one which proved so successful that ten years later, in 1965, Toyota was awarded the coveted Deming Prize for its quality control achievements. That was also the year that the Japanese government liberalized imports of foreign passenger cars. Now Toyota was ready to compete with its overseas competitors—both in price and quality.

In subsequent years Japan’s GNP expanded rapidly, contributing to the impressive growth in auto sales to the Japanese public. The Toyota Corolla, which went on sale in 1966, quickly became Japan’s most popular family car and led the market for autos of its compact size. Toyota continued to make major investments in new plants and equipment in order to prepare for what it believed would be a higher market demand. In 1971 the government removed controls on capital investment. In the wake of this move, several Japanese automakers formed joint ventures or affiliations with different companies of the United States’ largest automakers.

Two years later, the 1973 Middle East War erupted and the world’s economy was shaken by the first international oil crisis. Japan, wholly dependent upon imports for its oil supply, was especially affected. The rate of inflation increased and demand for automobiles fell drastically. Yet, in the face of the overall pessimism that gripped the industry and the nation, Toyota’s chairman Eiji Toyoda proposed a highly aggressive corporate strategy. His conviction was that the automobile, far from being a “luxury,” had become and would remain a necessity for people at all levels of society. As a result, Toyota decided to move forward by expanding the company’s operations.

The 1973 oil crisis and its aftermath were valuable lessons for Toyota; the crisis demonstrated the necessity for a flexible production system which could easily be adaptable to changes in consumer preferences. For example, Toyota did away with facilities designed exclusively for the production of specific models, and shifted instead to general-purpose facilities which could be operated according to changes in market demand for the company’s various models.

In December of 1970 the United States Congress passed the Muskie Act which set limits on automobile engine emissions. In the U.S. the enforcement of this law was eventually postponed, but in Japan even stricter laws were promulgated during the same time with no postponement of enforcement deadlines. When the Muskie Act was first proposed, automakers all over the world were opposed to it. They argued that it would actually prohibit the use of all internal combustion engines currently used, and they requested that the enforcement of the law be postponed until new technology, able to meet the law’s requirements, could be developed.

Notwithstanding these developments, Toyota moved forward on its own to develop a new generation of cleaner and more fuel efficient engines. After studying all the feasible alternatives, including catalytic systems, rarefied combustion, rotary engines, gas turbine and batter-powered cars, Toyota settled on the catalytic converter as the most flexible and most promising, and succeeded in producing automobiles which conform to what are the world’s toughest emissions control standards. (Meanwhile, imported cars were given a three year grace period to conform to Japan’s strict emissions control standards.)

In 1980 Japan’s aggregate automobile production was actually better than that of the U.S. In the same year, Toyota ranked second only to General Motors in total number of cars produced. Although Toyota made continuous efforts over the years to improve the international cooperation between automakers in such ways as procuring parts and materials from overseas manufacturers, Japan’s successes in the world auto market have nonetheless resulted in the Japanese automobile industry becoming a target of criticism.

The current president of Toyota, Yukiyasu Togo, possesses a solid understanding of the nature of American culture. Togo is said to believe that Toyota’s future success depends in part on the way that it handles public relations with the United States, a nation that he preceives to be extremely bitter about losing trade battles with Japanese industry. By means of intense advertising and controlled public relations under Togo’s direction, Toyota has tried to elevate the principle of free competition in the minds of the American people. At the same time, Togo is carefully committing his company to greater international cooperation in both technological and managerial areas. In the fall of 1985, for example, Toyota announced that it would build an $800,000 production facility near Lexington, Kentucky. The plant, which is expected to begin assembling 200,000 cars per year by 1988, will create approximately 3,000 jobs. Moreover, the General Motors and Toyota joint venture, called New United Motor Manufacturing, Inc., will also begin building up to 50,000 vehicles a year to be sold by Toyota dealers. This strategy, it is hoped, will help to ease the tensions between the U.S. and Japan over their inequitable trade relations.

Principal Subsidiaries

Kanto Auto Works, Ltd. (49.06%); Towa Real Estate Co., Inc. (49%); Toyota Machine Works, Ltd.; Toyota Central Research & Development Laboratories, Inc. (54%); Calty Design Research, Inc. (60%); New United Motor Manufacturing Inc. (50%); Toyota Motor Sales, USA, Inc.; Toyota Motor Manufacturing USA, Inc.; Toyota Technical Center, USA, Inc. (80%).

Toyota Motor Corporation

views updated May 17 2018

Toyota Motor Corporation

1, Toyota-cho
Toyota City, Aichi Prefecture 471
Japan
(0565) 28-2121
Fax: (0565) 23-5800

Public Company
Incorporated: 1937
Employees: 108,000
Sales: ¥9.36 trillion ($94.6 billion)
Stock Exchanges: Tokyo NASDAQ
SICs: 3711 Motor Vehicles and Car Bodies; 5012
Automobiles and Other Motor Vehicles; 3448
Prefabricated Metal Buildings

Toyota Motor Corporation was Japan’s largest car company and the world’s third largest in the mid-1990s. The company produced over 4 million units annually and controlled 9.5 percent of the global market for automobiles. Although its profits declined substantially during the global economic downturn of the early 1990s, Toyota responded by cutting costs and moving production to overseas markets. The company represented one of the true success stories in the history of manufacturing, its growth and success reflective of Japan’s astonishing resurgence following the Second World War.

In 1933 a Japanese man named Kiichiro Toyoda traveled to America, where he visited a number of automobile production plants. Upon his return to Japan, the young man established an automobile division within his father’s loom factory and in May 1935 produced his first prototype vehicle. General Motors and Ford were already operating assembly plants in Japan, but U.S. pre-eminence in the worldwide automotive industry did not deter Toyoda.

Since Japan had very few natural resources, the company had every incentive to develop engines and vehicles that were highly fuel efficient. In 1939, the company established a research center to begin work on battery-powered vehicles. This was followed in 1940 by the establishment of the Toyoda Science Research Center (the nucleus of the Toyota Central Research and Development Laboratories, Inc.) and the Toyoda Works (later Aichi Steel Works, Ltd.). The next year Toyoda Machine Works, Ltd. was founded for the production of both machine tools and auto parts.

As Japan became embroiled in World War II, the procurement of basic materials for automobile manufacturing became more and more difficult. At one point Toyoda was manufacturing trucks with no radiator grills, brakes only on the rear wheels, wooden seats, and a single headlight. Pushing toward the limits of resource conservation as the course of the war began to cripple Japan’s economy, the company started piecing together usable parts from wrecked or worn-out trucks in order to build “recycled” vehicles.

When the war ended in August of 1945 most of Japan’s industrial facilities had been wrecked, and the Toyoda (or Toyota as it became known after the war) production plants had suffered extensively. The company had 3,000 employees but no working facilities, and the economic situation in Japan was chaotic. But the Japanese tradition of dedication and perseverance proved to be Toyota’s most powerful tool in the difficult task of reconstruction.

Just as the Japanese motor industry as a whole was beginning to recover, there was mounting concern that American and European auto manufacturers would overwhelm the Japanese market with their economic and technical superiority. Japan’s automakers knew that they could no longer count on government protection in the form of high import duties or other barriers as they had before the war.

Since American manufacturers were concentrating their efforts on medium-sized and larger cars, Toyota’s executives thought that by focusing on small cars the company could avoid a head-on market confrontation. Kiichiro Toyoda likened the postwar situation in Japan to that in England. “The British motorcar industry,” he said, “also faces many difficulties, but its fate will be largely determined by how strongly American automakers feel they should concentrate on small cars.” It was January 1947 when Toyota engineers completed their first prototype for a small car: its chassis was of the backbone type—never used before in Japan; its front suspension relied primarily on coil springs; and its maximum speed was 54 miles per hour. After two years of difficulties the company seemed headed for success.

However, this was not to be accomplished as easily as expected. Two years later, in 1949, Toyota suffered its first and only serious conflict between labor and management. Nearly four years had passed since the end of the war, but Japan’s economy was still in poor condition: goods and materials of all kinds were in short supply; inflation was rampant; and worst of all, people in the cities were forced to trade their clothing and home furnishings for rice or potatoes in order to keep themselves alive. That year the Japanese government took measures to control runaway inflation in ways that severely reduced consumer purchasing power and worsened the already severely depressed domestic automotive market. Japanese auto manufacturers found themselves unable to raise the funds needed to support their recovery efforts, for the new governmental policy had discontinued all financing from city banks and the Reconstruction Finance Corporation.

Under these conditions the company’s financial situation deteriorated rapidly. In some months, for example, the company produced vehicles worth a total of ¥350 million while income from sales reached only ¥250 million. In the absence of credit sources to bridge the imbalance, Toyota was soon facing a severe liquidity crisis. Largely because of wartime regulations and controls, Toyota had come to place strong emphasis on the production end of the business, so that in the early postwar years not enough attention had been paid to the proper balance between production and sales. The Japanese economy at that time was suffering from a severe depression, and because the Toyota dealers were unable to sell cars in sufficient quantities, these dealers had no choice but to pay Toyota in long-term promissory notes as inventories kept accumulating.

Finally, Toyota was unable to meet its regular payroll. Delayed payments were followed by actual salary reductions and then by plans for large-scale layoffs—until April of 1949, when the Toyota Labor Union went on strike. Negotiations between labor and management dragged on with the union leaders bitterly opposed to any layoffs. As a result, Toyota was compelled to reduce both production and overhead. Workers staged demonstrations to press their demands, and all the while Toyota kept falling further into debt, until the company finally found itself on the verge of bankruptcy.

Production dropped to 992 vehicles in March of 1949, to 619 in April, and to 304 in May. Crucial restructuring efforts included a proposal to incorporate Toyota’s sales division as a separate company, leading eventually to the formation of Toyota Motor Sales Company Ltd. in April 1950. Toyota Motor Sales Company handled all domestic and worldwide marketing of Toyota’s automotive products until July of 1982, when it merged with Toyota Motor Company.

In the meantime, discussions between labor and management finally focused on whether to admit failure, declare bankruptcy, and dissolve the company, or to agree on the dismissal of some employees and embark upon a rebuilding program. In the end management and labor agreed to reduce the total work force from 8,000 to 6,000 employees, primarily by asking for voluntary resignations. At the management level, President Kiichiro Toyoda and all of his executive staff resigned. Kiichiro, Toyota’s founder and a pioneer of the Japanese automotive industry, died less than two years later.

Not long after the strike was settled in 1950, two of the company’s new executives, Eiji Toyoda (now chairman of Toyota Motor Corporation) and Shoichi Saito (later chairman of Toyota Motor Company), visited the United States. Seeking new ideas for Toyota’s anticipated growth, they toured Ford Motor Company’s factories and observed the latest automobile production technology. One especially useful idea they brought home from their visit to Ford resulted in Toyota’s suggestion system, in which every employee was encouraged to make suggestions for improvements of any kind. However, on their return to Japan the two men inaugurated an even more vital policy that remained in force at Toyota through the 1990s—the continuing commitment to invest in only the most modern production facilities as the key to advances in productivity and quality. Toyota moved quickly and aggressively in the 1950s, making capital investments in new equipment for all the company’s production facilities. Not surprisingly, the company began to benefit from the increased efficiency almost immediately.

Along with improvements in its production facilities, Toyota also worked to develop a more comprehensive line of vehicles in order to contribute toward the growing motorization of Japanese society. During 1951, for example, Toyota introduced the first four-wheel-drive Land Cruiser. Moreover, as the domestic demand for taxis rapidly increased, production of passenger cars also rose quickly, from 50 units per month to 250 units per month by 1953.

In production control, Toyota introduced the “Kanban” (or “synchronized delivery”) system during 1954. The idea was derived from the supermarket system, where “consumers” (those in the later production stages) took “products” (parts) from the stock shelves, and the “storekeepers” (those in the earlier production stages) replenished the stock to the degree that it was depleted. The Kanban system became the basis for Toyota’s entire production system.

By the early 1950s, just as Toyota had anticipated, the Japanese market was crowded with vehicles from the United States and Europe. It soon became apparent that to be competitive at home and abroad, Toyota would not only have to make additional investments in manufacturing facilities and equipment, but also undertake a major new research and development effort. This was the reasoning behind Toyota’s decision in 1958 to build a full-scale research center for the development of new automobiles (which was also to become Japan’s first factory devoted entirely to passenger-car production). Toyota also began to offer a more complete line of products. Beginning with the Crown model, introduced in 1955, Toyota quickly expanded its passenger-car line to include the 1000-cubic-centimeter Corona, then added the Toyo-Ace (Japan’s first cab-over truck) and a large-sized diesel truck.

Throughout these years Toyota was also working hard on another important, if less conventional, approach to adapting itself to the rapid motorization of Japan, brought about by a remarkable increase in national income. When, for example, Toyota Motor Sales was capitalized at ¥1 billion, 40 percent of that amount (¥400 million) was immediately invested to establish an automobile driving school in an effort to help citizens acquire driver’s licenses. Through this and similar efforts, Toyota made a major contribution to Japan’s growing motorization in the years following 1965, a trend that was to lead to a mass domestic market for automobiles.

In 1955, ten years after its defeat in World War II, Japan became a member of the General Agreement on Tariffs and Trade (GATT); but automobiles remained one of Japan’s least-competitive industries in the international arena. Toyota, foreseeing the coming age of large-scale international trade and capital liberalization in Japan, decided to focus on lowering its production costs and developing even more sophisticated cars, while at the same time attempting to achieve the highest possible level of quality in production. This was a joint effort conducted with Toyota’s many independent parts suppliers and one which proved so successful that ten years later, in 1965, Toyota was awarded the coveted Deming Prize for its quality-control achievements. That was also the year that the Japanese government liberalized imports of foreign passenger cars. Now Toyota was ready to compete with its overseas competitors—both in price and quality.

In subsequent years Japan’s gross national product expanded rapidly, contributing to the impressive growth in auto sales to the Japanese public. The Toyota Corolla, which went on sale in 1966, quickly became Japan’s most popular family car and led the market for autos of its compact size. Toyota continued to make major investments in new plants and equipment in order to prepare for what it believed would be a higher market demand. In 1971 the government removed controls on capital investment. In the wake of this move, several Japanese automakers formed joint ventures or affiliations with U.S. automakers.

Two years later, the 1973 Middle East War erupted and the world’s economy was shaken by the first international oil crisis. Japan, wholly dependent upon imports for its oil supply, was especially affected. The rate of inflation increased and demand for automobiles fell drastically. Yet, in the face of the overall pessimism that gripped the industry and the nation, Toyota’s chairman Eiji Toyoda proposed a highly aggressive corporate strategy. His conviction was that the automobile, far from being a “luxury,” had become and would remain a necessity for people at all levels of society. As a result, Toyota decided to move forward by expanding the company’s operations.

The 1973 oil crisis and its aftermath were valuable lessons for Toyota. The crisis demonstrated the necessity for a flexible production system that could easily be adapted to changes in consumer preferences. For example, Toyota did away with facilities designed exclusively for the production of specific models, and shifted instead to general-purpose facilities which could be operated according to changes in market demand for the company’s various models.

In December of 1970 the U.S. Congress passed the Muskie Act, which set limits on automobile engine emissions. In the United States the enforcement of this law was eventually postponed, but in Japan even stricter laws were promulgated during the same time with no postponement of enforcement deadlines. When the Muskie Act was first proposed, automakers all over the world were opposed to it. They argued that it would actually prohibit the use of all internal combustion engines currently used, and they requested that the enforcement of the law be postponed until new technology, able to meet the law’s requirements, could be developed.

Notwithstanding these developments, Toyota moved forward on its own to develop a new generation of cleaner and more fuel-efficient engines. After studying all the feasible alternatives—including catalytic systems, rarefied combustion, rotary engines, gas turbine and battery-powered cars—Toyota settled on the catalytic converter as the most flexible and most promising, and succeeded in producing automobiles that conformed to the world’s toughest emissions-control standards. (Meanwhile, imported cars were given a three-year grace period to conform to Japan’s strict emissions-control standards.)

In 1980 Japan’s aggregate automobile production was actually better than that of the United States. In the same year, Toyota ranked second only to General Motors in total number of cars produced. Although Toyota made efforts over the years to improve the international cooperation between automakers, in such ways as procuring parts and materials from overseas manufacturers, Japan’s successes in the world auto market nonetheless resulted in the Japanese automobile industry becoming a target of criticism.

Shoichiro Toyoda, president of Toyota during the mid- and late 1980s, possessed a solid understanding of American culture. Toyoda reportedly believed that Toyota’s future success depended in part on the way it handled public relations with the United States, a nation that he perceived to be extremely bitter about losing trade battles with Japanese industry. By means of intense advertising and controlled public relations under Toyoda’s direction, Toyota tried to elevate the principle of free competition in the minds of the American people. At the same time, Toyoda carefully committed his company to greater international cooperation in both technological and managerial areas.

In 1984, for example, Toyota entered into a joint manufacturing venture with American giant General Motors called New United Motor Manufacturing, Inc. (NUMMI). This state-of-the-art facility allowed Toyota to begin production in the United States cautiously at a time of increasing protectionism, as well as learn about American labor practices. At the same time, it provided General Motors with insight into Japanese production methods and management styles. The plant was slated to build up to 50,000 vehicles a year. In the fall of 1985, moreover, Toyota announced that it would build an $800,000 production facility near Lexington, Kentucky. The plant, which was expected to begin assembling 200,000 cars per year by 1988, created approximately 3,000 jobs.

By the end of the 1980s, Toyota’s position as a powerful, exceptionally well-run car company was nearly unassailable. After a decade of prodigious growth, the company stood atop the Japanese automobile industry and ranked number three worldwide, a position it had held since 1978 and strengthened in the ensuing years. By the beginning of the 1990s, Toyota commanded an overwhelming 43 percent of the Japanese car market, and in the United States it sold, for the first time, more than one million cars and trucks. Aside from these two mainstay markets, Toyota was solidifying its global operations, particularly in Southeast Asia, and carving new markets in Latin America, where the burgeoning demand for cars promised much growth. Toyota also spearheaded the Japanese automobile industry’s foray into the luxury car market, leading the way with its Lexus LS400 luxury sedan, which by the mid-1990s was outselling market veterans BMW, Mercedes-Benz, and Jaguar.

Despite these favorable developments, all of which pointed toward further growth and underscored the car company’s vitality, Toyota’s management continued to strive for improvements. In 1990, for example, when the company was posting enviable financial results and its manufacturing processes provided a model for other companies to follow, Shoichiro Toyoda eliminated two layers of middle management, effected substantial cuts in the company’s executive staff, and reorganized Toyota’s product development. With the highest operating margin of any car maker in the world, Toyota was a formidable force.

Toyota had little control over external forces, however, and as the 1990s progressed, a global economic downturn brought the prolific growth of Japan’s largest car manufacturer to a halt. The recession stifled economic growth throughout the world, while a rising yen made Japanese products relatively more expensive in overseas markets. Toyota’s profits declined for four consecutive years between 1991 and 1994, falling to the lowest level in more than a decade. Midway through Toyota’s net income slide, the company gained new leadership when Totsuro Toyoda succeeded his brother in September 1992. Under Totsuro Toy oda’s stewardship, a cost-cutting program was enacted that reduced expense account budgets 50 percent, limited travel expenditures, and eliminated white-collar overtime. Toyoda also continued the trend toward moving production to less-expensive overseas markets by ordering the construction or expansion of six assembly plants in Great Britain, Pakistan, Thailand, Turkey, the United States, and Japan.

As Toyota’s profit decline continued, however, the mounting losses persuaded Toyoda to intensify his cost-cutting measures. Design changes in the company’s vehicles coupled with reductions in manufacturing and distribution costs saved Toyota ¥150 billion in 1993, and another ¥100 billion in savings was expected to be realized in 1994. In 1994, the fourth consecutive year of negative net income growth, Toyota recorded ¥125.8 billion in consolidated net income, just over a quarter of the total posted in 1990, when the company earned ¥441.3 billion. Although Toyota’s financial prospects remained bleak as it entered the mid-1990s, the recovery of Japan’s economy and a return to more robust economic times in Europe meant that relief was in sight. Solidly positioned to take advantage of this expected economic revitalization, Toyota continued with its decades-long emphasis on becoming and remaining the world’s premier car maker.

Principal Subsidiaries

Toyoda Automatic Loom Works, Ltd.; Aichi Steel Works, Limited; Toyoda Machine Works, Ltd.; Toyota Auto Body Co., Ltd.; Toyota Tsusho Corporation; Aisin Seiki Co., Ltd.; Nipponsdenso Co., Ltd.; Toyoda Spinning & Weaving Co., Ltd.; Towa Real Estate Co., Ltd.; Toyota Central Research & Development Laboratories, Inc.; Kanto Auto Works, Ltd.; Toyoda Gosei Co., Ltd.; Hino Motors, Ltd.; Daihatsu Motor Co., Ltd.

Toyota Motor Corporation

views updated May 29 2018

Toyota Motor Corporation

1, Toyota-cho
Toyota City, Aichi 471-8571
Japan
Telephone: (81) 565-28-2121
Fax: (81) 565-23-5800
Web site: http://www.global.toyota.com

Public Company
Incorporated: 1937 as Toyota Motor Co., Ltd.
Employees: 214,631
Sales: $119.66 billion (2000)
Stock Exchanges: Tokyo New York
Ticker Symbol: TM
NAIC: 42111 Automobile and Other Motor Vehicle Wholesalers; 332311 Prefabricated Metal Building and Component Manufacturing; 336111 Automobile Manufacturing; 336112 Light Truck and Utility Vehicle Manufacturing; 33612 Heavy Duty Truck Manufacturing; 336211 Motor Vehicle Body Manufacturing (pt); 336312 Gasoline Engine and Engine Parts Manufacturing; 336322 Other Motor Vehicle Electrical and Electronic Equipment Manufacturing (pt); 33633 Motor Vehicle Steering and Suspension Components (Except Spring) Manufacturing; 33634 Motor Vehicle Brake System Manufacturing (pt); 33635 Motor Vehicle Transmission and Power Train Parts Manufacturing; 336399 All Other Motor Vehicle Parts Manufacturing (pt)

Toyota Motor Corporation was Japan’s largest car company and the world’s third largest by the year 2000. The company was producing almost five million units annually in the late 1990s and controlled 9.8 percent of the global market for automobiles. Although its profits declined substantially during the global economic downturn of the early 1990s, Toyota responded by cutting costs and moving production to overseas markets. The company represented one of the true success stories in the history of manufacturing, its growth and success reflective of Japan’s astonishing resurgence following World War II.

The Emergence of Japanese Automobile Manufacturing in the 1930s and 1940s

In 1933 a Japanese man named Kiichiro Toyoda traveled to the United States, where he visited a number of automobile production plants. Upon his return to Japan, the young man established an automobile division within his father’s loom factory and in May 1935 produced his first prototype vehicle. General Motors and Ford already were operating assembly plants in Japan, but U.S. preeminence in the worldwide automotive industry did not deter Toyoda.

Since Japan had very few natural resources, the company had every incentive to develop engines and vehicles that were highly fuel efficient. In 1939, the company established a research center to begin work on battery-powered vehicles. This was followed in 1940 by the establishment of the Toyoda Science Research Center (the nucleus of the Toyota Central Research and Development Laboratories, Inc.) and the Toyoda Works (later Aichi Steel Works, Ltd.). The next year Toyoda Machine Works, Ltd. was founded for the production of both machine tools and auto parts.

As Japan became embroiled in World War II, the procurement of basic materials for automobile manufacturing became more and more difficult. At one point Toyoda was manufacturing trucks with no radiator grills, brakes only on the rear wheels, wooden seats, and a single headlight. Pushing toward the limits of resource conservation as the course of the war began to cripple Japan’s economy, the company started piecing together usable parts from wrecked or worn-out trucks in order to build “recycled” vehicles.

When the war ended in August 1945 most of Japan’s industrial facilities had been wrecked, and the Toyoda (or Toyota as it became known after the war) production plants had suffered extensively. The company had 3,000 employees but no working facilities, and the economic situation in Japan was chaotic. But the Japanese tradition of dedication and perseverance proved to be Toyota’s most powerful tool in the difficult task of reconstruction.

Postwar Challenges and Innovations: The Birth of the Small Car

Just as the Japanese motor industry as a whole was beginning to recover, there was mounting concern that American and European auto manufacturers would overwhelm the Japanese market with their economic and technical superiority. Japan’s automakers knew that they could no longer count on government protection in the form of high import duties or other barriers as they had before the war.

Since American manufacturers were concentrating their efforts on medium-sized and larger cars, Toyota’s executives thought that by focusing on small cars the company could avoid a head-on market confrontation. Kiichiro Toyoda likened the postwar situation in Japan to that in England. “The British motorcar industry,” he said, “also faces many difficulties, but its fate will be largely determined by how strongly American automakers feel they should concentrate on small cars.” It was January 1947 when Toyota engineers completed their first prototype for a small car: its chassis was of the backbone type (never used before in Japan), its front suspension relied primarily on coil springs, and its maximum speed was 54 miles per hour. After two years of difficulties the company seemed headed for success.

This was not to be accomplished as easily as expected, however. Two years later, in 1949, Toyota suffered its first and only serious conflict between labor and management. Nearly four years had passed since the end of the war, but Japan’s economy was still in poor shape: goods and materials of all kinds were in short supply, inflation was rampant, and people in the cities were forced to trade their clothing and home furnishings for rice or potatoes to survive. That year the Japanese government took measures to control runaway inflation in ways that severely reduced consumer purchasing power and worsened the already severely depressed domestic automotive market. Japanese auto manufacturers found themselves unable to raise the funds needed to support their recovery efforts, for the new governmental policy had discontinued all financing from city banks and the Reconstruction Finance Corporation.

Under these conditions the company’s financial situation deteriorated rapidly. In some months, for example, the company produced vehicles worth a total of ¥350 million while income from sales reached only ¥250 million. In the absence of credit sources to bridge the imbalance, Toyota soon was facing a severe liquidity crisis. In large part because of wartime regulations and controls, Toyota had come to place strong emphasis on the production end of the business, so that in the early postwar years not enough attention had been paid to the proper balance between production and sales. The Japanese economy at that time was suffering from a severe depression, and because the Toyota dealers were unable to sell cars in sufficient quantities, these dealers had no choice but to pay Toyota in long-term promissory notes as inventories kept accumulating.

Finally, Toyota was unable to meet its regular payroll. Delayed payments were followed by actual salary reductions and then by plans for large-scale layoffs—until April 1949, when the Toyota Labor Union went on strike. Negotiations between labor and management dragged on with the union leaders bitterly opposed to any layoffs. As a result, Toyota was compelled to reduce both production and overhead. Workers staged demonstrations to press their demands, and all the while Toyota kept falling further into debt, until the company finally found itself on the verge of bankruptcy.

Production dropped to 992 vehicles in March 1949, to 619 in April, and to 304 in May. Crucial restructuring efforts included a proposal to incorporate Toyota’s sales division as a separate company, leading eventually to the formation of Toyota Motor Sales Company Ltd. in April 1950. Toyota Motor Sales Company handled all domestic and worldwide marketing of Toyota’s automotive products until July 1982, when it merged with Toyota Motor Company.

In the meantime, discussions between labor and management finally focused on whether to admit failure, declare bankruptcy, and dissolve the company, or to agree on the dismissal of some employees and embark upon a rebuilding program. In the end management and labor agreed to reduce the total workforce from 8,000 to 6,000 employees, primarily by asking for voluntary resignations. At the management level, President Kiichiro Toyoda and all of his executive staff resigned. Kiichiro, Toyota’s founder and a pioneer of the Japanese automotive industry, died less than two years later.

Company Perspectives:

We believe the potential for growth in our industry is extremely promising. Today, only about one-third of the world’s population enjoys the benefits of motor transport, while the remaining two-thirds do not have access to the convenience of automotive transport. Huge growth is in store for our industry in the emerging economies. Therefore, tremendous potential exists for quantitative expansion.

In addition, there is also room for qualitative growth, for adding value and improving the quality of the driving experience. Along with continuing initiatives to improve conventional vehicle functions, two major opportunities, already emerging, are intelligent transportation systems, ITS, and in-vehicle mobile terminals. ITS will route traffic more smoothly, reduce the risk of accidents, and make cars more fun to drive. Mobile terminals will bring a major leap forward in the types of information drivers and passengers can access on the road.

In view of this growth potential, we will continue to place emphasis on maintaining our position as a leading automobile manufacturer.

Not long after the strike was settled in 1950, two of the company’s new executives, Eiji Toyoda (now chairman of Toyota Motor Corporation) and Shoichi Saito (later chairman of Toyota Motor Company), visited the United States. Seeking new ideas for Toyota’s anticipated growth, they toured Ford Motor Company’s factories and observed the latest automobile production technology. One especially useful idea they brought home from their visit to Ford resulted in Toyota’s suggestion system, in which every employee was encouraged to make suggestions for improvements of any kind. On their return to Japan, however, the two men inaugurated an even more vital policy that remained in force at Toyota through the 1990s: the continuing commitment to invest in only the most modern production facilities as the key to advances in productivity and quality. Toyota moved quickly and aggressively in the 1950s, making capital investments in new equipment for all of the company’s production facilities. Not surprisingly, the company began to benefit from the increased efficiency almost immediately.

Along with improvements in its production facilities, Toyota also worked to develop a more comprehensive line of vehicles to contribute toward the growing motorization of Japanese society. During 1951, for example, Toyota introduced the first four-wheel-drive Land Cruiser. Moreover, as the domestic demand for taxis rapidly increased, production of passenger cars also rose quickly, from 50 units per month to 250 units per month by 1953.

In production control, Toyota introduced the “Kanban” (or “synchronized delivery”) system during 1954. The idea was derived from the supermarket system, where “consumers” (those in the later production stages) took “products” (parts) from the stock shelves, and the “storekeepers” (those in the earlier production stages) replenished the stock to the degree that it was depleted. The Kanban system became the basis for Toyota’s entire production system.

By the early 1950s, just as Toyota had anticipated, the Japanese market was crowded with vehicles from the United States and Europe. It soon became apparent that to be competitive at home and abroad, Toyota would not only have to make additional investments in manufacturing facilities and equipment, but also undertake a major new research and development effort. This was the reasoning behind Toyota’s decision in 1958 to build a full-scale research center for the development of new automobiles (which also was to become Japan’s first factory devoted entirely to passenger-car production). Toyota also began to offer a more complete line of products. Beginning with the Crown model, introduced in 1955, Toyota quickly expanded its passenger-car line to include the 1,000-cubic-centimeter Corona, then added the Toyo-Ace (Japan’s first cab-over truck) and a large-sized diesel truck.

Throughout these years Toyota also was working hard on another important, if less conventional, approach to adapting itself to the rapid motorization of Japan, brought about by a remarkable increase in national income. When, for example, Toyota Motor Sales was capitalized at ¥1 billion, 40 percent of that amount (¥400 million) was immediately invested to establish an automobile driving school in an effort to help citizens acquire driver’s licenses. Through this and similar efforts, Toyota made a major contribution to Japan’s growing motorization in the years following 1965, a trend that was to lead to a mass domestic market for automobiles.

In 1955, ten years after its defeat in World War II, Japan became a member of the General Agreement on Tariffs and Trade (GATT); but automobiles remained one of Japan’s least competitive industries in the international arena. Toyota, foreseeing the coming age of large-scale international trade and capital liberalization in Japan, decided to focus on lowering its production costs and developing even more sophisticated cars, while at the same time attempting to achieve the highest possible level of quality in production. This was a joint effort conducted with Toyota’s many independent parts suppliers and one that proved so successful that ten years later, in 1965, Toyota was awarded the coveted Deming Prize for its quality-control achievements. That was also the year that the Japanese government liberalized imports of foreign passenger cars. Now Toyota was ready to compete with its overseas competitors—both in price and quality.

In subsequent years Japan’s gross national product expanded rapidly, contributing to the impressive growth in auto sales to the Japanese public. The Toyota Corolla, which went on sale in 1966, quickly became Japan’s most popular family car and led the market for autos of its compact size. Toyota continued to make major investments in new plants and equipment to prepare for what it believed would be a higher market demand. In 1971 the government removed controls on capital investment. In the wake of this move, several Japanese automakers formed joint ventures or affiliations with U.S. automakers.

Two years later, the 1973 Middle East War erupted and the world’s economy was shaken by the first international oil crisis. Japan, wholly dependent upon imports for its oil supply, was especially affected. The rate of inflation increased and demand for automobiles fell drastically. Yet, in the face of the overall pessimism that gripped the industry and the nation, Toyota’s chairman Eiji Toyoda proposed a highly aggressive corporate strategy. His conviction was that the automobile, far from being a “luxury,” had become and would remain a necessity for people at all levels of society. As a result, Toyota decided to move forward by expanding the company’s operations.

Key Dates:

1918:: Sakichi Toyoda establishes Toyota Spinning & Weaving Co., Ltd.
1933:: Automobile Department is created within Toyoda Automatic Loom Works.
1935:: First Model Al passenger car prototype is completed.
1937:: Toyota Motor Co., Ltd. is formed.
1950:: Toyota Motor Sales Co., Ltd. is established.
1956:: Toyota creates the Toyopet dealer network.
1957:: Toyota Motor Sales, U.S.A., Inc. is formed.
1962:: Toyota Motor Thailand Co., Ltd. begins operations.
1982:: Toyota Motor Company and Toyota Motor Sales merge to form Toyota Motor Corporation.
1995:: Hiroshi Okuda becomes company president.
1997:: The Prius, Toyota’s first “eco-car,” is launched.
1998:: Toyota acquires majority share in Daihatsu Motor Co., Ltd.

The 1973 oil crisis and its aftermath were valuable lessons for Toyota. The crisis demonstrated the necessity for a flexible production system that could easily be adapted to changes in consumer preferences. For example, Toyota did away with facilities designed exclusively for the production of specific models and shifted instead to general-purpose facilities that could be operated according to changes in market demand for the company’s various models.

Environmental Awareness in the 1970s

In December 1970 the U.S. Congress passed the Muskie Act, which set limits on automobile engine emissions. In the United States the enforcement of this law was eventually postponed, but in Japan even stricter laws were promulgated during the same time with no postponement of enforcement deadlines. When the Muskie Act was first proposed, automakers all over the world were opposed to it. They argued that it would actually prohibit the use of all internal combustion engines currently used, and they requested that the enforcement of the law be postponed until new technology, able to meet the law’s requirements, could be developed.

Notwithstanding these developments, Toyota moved forward on its own to develop a new generation of cleaner and more fuel-efficient engines. After studying all the feasible alternatives—including catalytic systems, rarefied combustion, rotary engines, gas turbine and battery-powered cars—Toyota settled on the catalytic converter as the most flexible and most promising and succeeded in producing automobiles that conformed to the world’s toughest emissions-control standards. (Meanwhile, imported cars were given a three-year grace period to conform to Japan’s strict emissions-control standards.)

International Growth in the 1980s

In 1980 Japan’s aggregate automobile production was actually better than that of the United States. In the same year, Toyota ranked second only to General Motors in total number of cars produced. Although Toyota made efforts over the years to improve the international cooperation between automakers, in such ways as procuring parts and materials from overseas manufacturers, Japan’s successes in the world auto market nonetheless resulted in the Japanese automobile industry becoming a target of criticism.

Shoichiro Toyoda, president of Toyota during the middle and late 1980s, possessed a solid understanding of American culture. Toyoda reportedly believed that Toyota’s future success depended in part on the way it handled public relations with the United States, a nation that he perceived to be extremely bitter about losing trade battles with Japanese industry. By means of intense advertising and controlled public relations under Toyoda’s direction, Toyota tried to elevate the principle of free competition in the minds of the American people. At the same time, Toyoda carefully committed his company to greater international cooperation in both technological and managerial areas.

In 1984, for example, Toyota entered into a joint manufacturing venture with American giant General Motors called New United Motor Manufacturing, Inc. (NUMMI). This state-of-the-art facility allowed Toyota to begin production in the United States cautiously at a time of increasing protectionism, as well as learn about American labor practices. At the same time, it provided General Motors with insight into Japanese production methods and management styles. The plant was slated to build up to 50,000 vehicles a year. In the fall of 1985, moreover, Toyota announced that it would build an $800,000 production facility near Lexington, Kentucky. The plant, which was expected to begin assembling 200,000 cars per year by 1988, created approximately 3,000 jobs.

By the end of the 1980s, Toyota’s position as a powerful, exceptionally well-run car company was nearly unassailable. After a decade of prodigious growth, the company stood atop the Japanese automobile industry and ranked number three worldwide, a position it had held since 1978 and strengthened in the ensuing years. By the beginning of the 1990s, Toyota commanded an overwhelming 43 percent of the Japanese car market, and in the United States it sold, for the first time, more than one million cars and trucks. Aside from these two mainstay markets, Toyota was solidifying its global operations, particularly in Southeast Asia, and carving new markets in Latin America, where the burgeoning demand for cars promised much growth. Toyota also spearheaded the Japanese automobile industry’s foray into the luxury car market, leading the way with its Lexus LS400 luxury sedan, which by the mid-1990s was outselling market veterans BMW, Mercedes-Benz, and Jaguar.

Despite these favorable developments, all of which pointed toward further growth and underscored the car company’s vitality, Toyota’s management continued to strive for improvements. In 1990, for example, when the company was posting enviable financial results and its manufacturing processes provided a model for other companies to follow, Shoichiro Toyoda eliminated two layers of middle management, effected substantial cuts in the company’s executive staff, and reorganized Toyota’s product development. With the highest operating margin of any carmaker in the world, Toyota was a formidable competitor.

Toyota had little control over external forces, however, and as the 1990s progressed, a global economic downturn brought the prolific growth of Japan’s largest car manufacturer to a halt. The recession stifled economic growth throughout the world, while a rising yen made Japanese products relatively more expensive in overseas markets. Toyota’s profits declined for four consecutive years between 1991 and 1994, falling to the lowest level in more than a decade. Midway through Toyota’s net income slide, the company gained new leadership when Totsuro Toyoda succeeded his brother in September 1992. Under Totsuro Toyoda’s stewardship, a cost-cutting program was enacted that reduced expense account budgets 50 percent, limited travel expenditures, and eliminated white-collar overtime. Toyoda also continued the trend toward moving production to less expensive overseas markets by ordering the construction or expansion of six assembly plants in Great Britain, Pakistan, Thailand, Turkey, the United States, and Japan.

As Toyota’s profit decline continued, however, the mounting losses persuaded Toyoda to intensify his cost-cutting measures. Design changes in the company’s vehicles coupled with reductions in manufacturing and distribution costs saved Toyota ¥150 billion in 1993, and another ¥100 billion in savings was expected to be realized in 1994. That same year, the fourth consecutive year of negative net income growth, Toyota recorded ¥125.8 billion in consolidated net income, a little more than a quarter of the total posted in 1990, when the company earned ¥441.3 billion.

“The New Global Business Plan”: 1995 and Beyond

When Hiroshi Okuda was promoted to company president in 1995 his chief ambition was to revitalize Toyota’s standing in the global marketplace. In June he unveiled Toyota’s New Global Business Plan, which placed renewed focus on innovation and international expansion. Okuda’s targets were clearly defined: to raise production to six million vehicles a year; to increase Toyota’s international market share to 10 percent; and to increase its share of the domestic market to 40 percent. He believed the first two goals would be achieved through the construction of new manufacturing plants in foreign markets, along with an increased emphasis on the“localization”of parts production. The purpose of localization was to reduce the time and expense involved with shipping components across great distances, enabling Toyota to increase its overall automobile production and devote greater resources to research and development. By widening the scope of operations in Toyota’s overseas locations, Okuda envisioned a more streamlined, costeffective manufacturing process. Furthermore, the stimulation of local economies was an effective public relations tool, enhancing the value of the Toyota brand name in foreign markets.

Okuda wasted no time putting his vision into practice. In 1995 Toyota announced its intention to set up a manufacturing operation in Indiana, in the hope of becoming a major participant in North America’s highly competitive large truck market. In 1997 the company opened new plants in Canada and India, and in December it announced plans to build a second European plant in Valenciennes, France, to begin production of a new line of cars specifically designed for the European consumer. The year 1997 also saw increased production in Toyota’s Thailand operations, with a total output of 240,000 vehicles. In 1998 the company also raised its export levels from the Thailand plants to 20,000 units, with most of the vehicles destined for the Australian and New Zealand markets. That same year, the company opened a new operation in Brazil, and in 1999 it began construction of a transmission production plant in the Walbrzych Special Economic Zone in Poland, which would begin exporting the parts to Toyota’s manufacturing centers in France, Turkey, and the United Kingdom by 2002.

One of the most promising automobile markets to open up in the late 1990s was in China. By March 1998 Toyota already had stakes in four Chinese parts manufacturing plants, one of them a wholly owned subsidiary. The company took a more significant step in November 1998, when it established the Sichuan Toyota Motor Co., Ltd., Toyota’s first vehicle production plant in China. A joint venture with the Sichuan Station Wagon Factory and Toyota Tsusho Corp., the new plant was scheduled to begin manufacturing coaster-class buses by 2001.

Okuda also assumed an aggressive approach to Toyota’s role in the domestic market. In late 1996 he made drastic cuts to Toyota’s vehicle prices in Japan, a move that incensed the competition. In August 1998 Toyota extended its hold over the domestic market with the purchase of a majority stake in Daihatsu. The company also implemented a number of environmental initiatives during this period, both at home and abroad. In July 1999 it inaugurated an initiative that aimed to eliminate all landfill waste by 2003, and in 2000 it introduced stricter environmental regulations in its U.S. manufacturing plants, which actually went beyond the current EPA standards.

One of the most radical innovations to arise from Okuda’s revolution was the Prius, Toyota’s first hybrid car. Launched in October 1997, the Prius combined a highly efficient gas engine with a self-regenerating electric motor, reducing carbon dioxide emissions by half. Although initial estimates showed that production would have to surpass 200,000 vehicles a year for the Prius to turn a profit, by March 1998 demand was already surpassing supply, and the future of the eco-car on the domestic market looked promising. Prius finally hit the U.S. and European markets in late 2000, amid increased fuel prices and mounting concerns over global warming.

Although a weakened euro caused Toyota to suffer losses in Europe toward the end of the 1990s, the new operation in France, scheduled to begin production in 2001 at a rate of 150,000 vehicles a year, was expected to reverse this trend. The company also experienced strong sales in the United States and Japan during this time, and in 2000 Toyota’s total worldwide production exceeded five million vehicles for the first time ever.

Principal Subsidiaries

Toyota Motor Sales, U.S.A., Inc.; Toyota Motor Thailand Company Limited; Daihatsu Motor Co., Ltd. (51%); New United Motor Manufacturing, Inc. (U.S.A.; 50%); Toyota Motor Credit Corporation (U.S.A.); Hino Motors, Ltd.

Principal Competitors

Ford Motor Company; General Motors Corporation; Honda Motor Co., Ltd.

Toyota Motor Corporation

views updated Jun 08 2018

Toyota Motor Corporation

founded: 1937

Contact Information:

headquarters: 1, toyota-cho
toyota city, aichi prefecture 471-71 japan phone: +81-565-28-2121 fax: +81-565-23-5800 url: http://www.toyota.co.jp and http://www.toyota.com

OVERVIEW

Toyota is the largest auto producer in Japan and ranks third worldwide. The company primarily makes passenger cars, trucks, and buses. To a lesser degree, Toyota is involved in automobile leasing and rental, aviation services, cellular telephone services, factory automation equipment, financial services, forklifts, and industrial vehicles. Toyota sells automobiles under the brand names of Lexus and Toyota. It maintains manufacturing facilities in China, Japan, Thailand, the United States, and the United Kingdom. Toyota Motor Credit Corporation serves as the financing arm of the company in the United States, providing loans and other financial services to car buyers at Toyota and Lexus dealerships.

COMPANY FINANCES

In fiscal 1997, which ended March 31, 1997, Toyota posted net earnings of $3.11 billion on sales of $98.74 billion, compared with a net of $2.42 billion on sales of $101.12 billion in fiscal 1996. The company posted net income of $1.56 billion on sales of $95.83 billion in fiscal 1995, compared with earnings of $1.28 billion on sales of $95.03 billion in fiscal 1994. The company's sales in Japan accounted for 66 percent of total revenue in fiscal 1997, with the remaining 34 percent coming from foreign sales.

Toyota's market share in Japan reached 40 percent in 1997, and Toyota stock reached a historic high on the Tokyo Stock exchange on May 6, 1997. In April 1998, Toyota's U.S. sales were up 10.5 percent from 1997, with Toyota's U.S. truck sales rising 89.4 percent because of the new Sienna minivan.

ANALYSTS' OPINIONS

International investors are grumbling about Toyota's attitude toward its shareholders. Among the objects of these complaints are a mere 7 percent return on equity, investments in unprofitable diversifications, and no dividend or buyback offerings to share the wealth. There is also fear that the drive for more market share, with its emphasis on discounts and rebates, will be at a heavy cost for the company. There are also predictions for a pretax profit decrease in 1998 due to the Asian car market slump.

HISTORY

Toyota's roots go back to September 1933 when the automotive department of Toyoda Automatic Loom Works was established. Within two years, the first Toyota dealership was opened, though Toyota Motor Company wasn't officially founded until August of 1937.

During the next decade, 100,000 Toyota vehicles were manufactured, and in April of 1950, Toyota became a separate, independent company. Over the next several years, the company introduced its Land Cruiser, a four-wheel-drive vehicle in 1951, a full-size model called the Crown in 1955, and the smaller Corona in 1957. The Crown was sold mostly for use as a taxicab. By 1962, 1 million Toyota vehicles had been produced. Shortly thereafter, in 1967, the Toyota Auto Dealer Channel was established to further the growth of Toyota dealerships worldwide.

In 1982 Toyota Motor Company Ltd. and Toyota Motor Sales Ltd. merged to form the Toyota Motor Corporation, linking production and sales to streamline the system. From that time until 1995 production of Toyota's increased from approximately 3 million annually to nearly 5 million. In 1997 the 100 millionth Toyota rolled off the assembly line.

STRATEGY

In order to fortify its product line, Toyota has introduced a number of localized products. These include the new Sienna in North America and the new European Corolla.

A huge consolidation effort took place in 1997, reducing the number of divisions of Toyota Motor Sales USA from 10 to 6. The hope is that the company will be better able to focus on strategic issues and decisions.

Plans call for Toyota Motor Sales USA to boost its market share from 7.8 to 10 percent by the year 2000. New products will have to be manufactured locally due to the politics of the trade deficit.

A fire in 1997 at the Aisin Seiki Company, brake supplier to Toyota, will change the way Toyota works with suppliers. The fire caused not only the Aisin plant to shut down but hundreds of other Toyota supply plants, because with the just-in-time system, they could not make parts without orders in hand. Toyota will try to have at least two suppliers for each part in the future.

Diversification is a key element of Toyota's strategy. President Okuda announced in 1997 that the company plans to expand its nonvehicle manufacturing businesses, particularly in telecommunications. It is speculated that cars will be linked more and more to telecom networks in the future.

A move into satellite repair centers was anticipated in 1998. These stand-alone dealer-owned repair shops are in answer to the growing trend of owners not returning to the dealership for service once their warranty expires.

Europe is seen as one of the markets offering opportunities for growth. At present, Japanese carmakers have a 10 percent market share in Europe. They want to see this up to 15 percent by 2005. Toyota plans to do this by opening a new 150,000-car assembly plant in northern France, as well as by expanding its Derbyshire factory and building an engine manufacturing facility in North Wales.

Cashing in on the theme park trend, Toyota will add two driving courses and three pavilions to a planned entertainment complex on the Tokyo waterfront. The site will have a museum and virtual reality center, but the highlight is the ability to test drive Toyota's cars of the future.

CURRENT TRENDS

Two areas on which Toyota is focusing include environmental responsibility and corporate globalization. Since environmental responsibility will, at some point, become a legal necessity, Toyota will have to make modifications anyway. By making a move toward these modifications, and toward developing cleaner, greener vehicles, it will create good publicity, good will, and spend money that would eventually have to be spent anyway. Globalization also works this way. By creating manufacturing plants around the world, hiring local workers, and taking an interest in local communities, Toyota defrays some of its import and transportation costs, creates new markets for itself, and boosts local economies, boosting good will toward the Toyota brand.

Localization efforts continued with the production of the Sienna minivan at the Toyota plant in Kentucky. November of 1997 saw The Supplier's Guide mounted on the Web site. This will give suppliers an easy way to offer their products to Toyota.

Toyota has a history of customer satisfaction. Consumers are often repeat buyers, creating a loyal customer base and word-of-mouth advertising. The recent trend toward customer-oriented service, made popular in the early 1990s in America by Saturn, has worked in Toyota's favor, and it has used this trend to make clear its customer service and satisfaction record.

The auto industry has seen a number of mergers and alliances in recent years. Toyota plans to make Daihatsu, the minivehicle manufacturer, a subsidiary by increasing Toyota's stake from 34.5 percent to more than 50 percent. Toyota's stake in Hino Motors, a truck manufacturer, will also be increased from 20 percent to more than one-third, giving Toyota management control.

May 1998 sales were among Toyota's best, thanks to the use of rebate incentives. This auto industry trend boosted sales not only for Toyota but also other car manufacturers. Executive vice president Yale Gieszl feels that cutting back incentives could stop the recent increase in sales.

PRODUCTS

Toyota's main products are car and truck models including Camry, Corolla, 4Runner, Celica, Land Cruiser, Tercel, and Lexus. Toyota engine technology can also be seen in marine engines and recreational boats.

FAST FACTS: About Toyota Motor Corporation

Ownership: Toyota is a publicly owned company traded on NASDAQ.

Ticker symbol: TOYOY

Officers: Shoichiro Toyoda, Chmn.; Iwao Isomura, VChmn.; Hiroshi Okuda, Pres.; Y. Ishizaka, Pres., Toyota Motor Sales, U.S.A.

Employees: 150,700

Chief Competitors: Toyota's major competitors in the automotive industry include: BMW; Daimler-Benz; Ford Motor Company; General Motors Corporation; Honda; Nissan; and Volkswagen.

To expand on its green policies, Toyota has begun manufacturing both a hybrid electric vehicle and an all-electric vehicle. In May of 1998, the city of New York purchased 37 Toyota RAV4-EV electric vehicles for use by city agencies. Toyota also has begun using its D-4 direct injection engine, which allows cars to run more efficiently, increasing mileage up to 30 percent more than conventional engines.

Toyota sees great potential in the liter-car (1000cc) market. The Storia, Daihatsu's liter car will be marketed by Toyota with a target of several thousand vehicles per month. These cars, which fall between a minicar and a subcompact, get about 21 km per liter.

CORPORATE CITIZENSHIP

Toyota's corporate citizenship is demonstrated in a number of ways including environmental stewardship, educational funding, technological leadership, and contributions to the communities in which Toyota operates. Within Toyota's guiding principals, established as such in the late 1980s and early 1990s, Toyota enunciates the above-mentioned goals. Having them built into the corporate mission statement indicates a push toward accepting these principals as a way of doing business.

In terms of Toyota's commitment to environmental issues, an earth charter was developed in the early 1990s, listing environmental goals through the year 2000, by which time Toyota hopes to have achieved these goals. The basic policy consists of a comprehensive approach, preventive measures, and social contributions. The comprehensive approach includes developing technologies to minimize environmental impact and implementation of environmental programs throughout Toyota's design, production and marketing, parts suppliers, vehicle distributors, and dealers. The action plan to meet these goals includes making as many parts recyclable as possible, developing production processes with the least amount of industrial waste possible, and developing cars with the lowest possible amount of noise and exhaust emissions. To this end, 1997 saw the introduction of the following technologies: a direct-injection system to increase engine efficiency, hybrid electric systems, pure electric "zero emission" vehicles, and new fuel-cell systems. Toyota also has shown an interest in participating in civic activities geared toward environmental awareness, such as reforestation and university environmental research.

In August of 1998, Toyota was scheduled to open a new recycling plant for shredding steel and nonferrous metal. It also will recover urethane foam, copper, glass, and other materials. With a projected 100 tons of shredder residue to be processed per day, one-half of the automobile shredder residue by weight will be recovered.

By the year 2002, Toyota hopes to buy at least 5 percent of its supplies from minority suppliers, an increase of 2 percent over present practices. Overall, North American spending for supplies is more than $7 billion per year.

Furthering the company's commitment to the environment, Toyota researchers are hard at work cultivating trees. The new species will be hardy enough to grow in urban settings and help reduce smog through natural respiration processes.

Finally, Toyota's citizenship reaches out to promote education. The Toyota USA Foundation was created solely to grant money to innovative K-12 programs, particularly those in math and the sciences, though it also supports the arts, culture, and civic and community affairs. Any public or private K-12 school with programs that it feels meet the Toyota USA Foundation's guidelines may apply for a financial grant.

CHRONOLOGY: Key Dates for Toyota Motor Corporation

1933:: The automotive division of Toyota Automatic Loom Works is established
1937:: Toyota Motor Company is incorporated
1950:: Toyota becomes a separate independent company; Toyota Motor Sales Company, Ltd. is established to handle marketing
1958:: Builds a full-scale research center for the development of new automobiles
1962:: Produces its one millionth car
1970:: Toyota creates the catalytic converter to reduce engine emissions on their cars
1982:: Toyota Motor Sales and Toyota Motor Company merge to form Toyota Motor Corporation
1997:: Produces its 100 millionth car

GLOBAL PRESENCE

Toyota vehicles excel in a global market. Toyota enjoys sales in Europe, North America, Asia, and Oceania. By offering lower-end models, such as the Tercel and Corolla, the company reaches a younger market, which includes a number of first-time car buyers. The company's Lexus brand name is marketed to an older, more affluent customer base, and recent sport vehicles, such as the 4Runner and Land Cruiser, reach the young professional. By diversifying the type of vehicles available, Toyota has broadened its market share.

Toyota Motor Corporation responded to the increased globalization of economies with its global business plan, announced in June of 1995. The main goals of increased localization and increased importation are meant to accelerate Toyota's international business as early as 1998.

According to the plan, the goal of increased localization will be achieved in several ways. First, Toyota intends to increase the proportion of overseas-built vehicles in worldwide sales. The 65 percent goal (excluding sales within Japan) was reached in 1998, as projected. Toyota also plans to strengthen its network of suppliers, transferring technology and creating regional parts complementary programs, whereby other companies may manufacture Toyota parts regionally. The plan for localization then is broken down into a region-by-region outline, offering specifics for localization within North America, Europe, Asia, and Oceania.

The second element of Toyota's plan calls for increased importation of foreign makers' passenger cars. The heart of this portion of the plan is Toyota's pledge to help sell other makers' vehicles internationally in joint dealerships, primarily those with VW/Audi and the GM-built Toyota Cavalier. Toyota also pledges to "increase opportunities for business by seeking out new suppliers and technology" and "help raise the competitiveness of our current suppliers."

To increase its presence in Europe, Toyota plans to build a passenger car plant in France. Along with this comes a plan to double, and possibly redouble, output at the Deeside Engine Plant in Wales, in order to supply engines to the French plant. The aim is to sell 600,000 cars per year in Europe by the year 2000.

EMPLOYMENT

Working for Toyota is very much a team affair. Small work groups are organized to increase employee satisfaction and provide support for the company's goals. The various departments and managerial levels are instilled with a "we're all in this together" philosophy. Toyota believes this is the key factor not only to employee satisfaction but also to the production of a superior product.

Toyota's human resources philosophy is based on respect and trust. Norbert D'hiet, head of Toyota's European human resources department, said, "The whole of our corporate culture resides in the notion of mutual trust, which means respecting our employees. This respect not only applies to the relationship between managers and employees but to the quick and efficient way in which we respond to questions concerning human resources."

Because of a mix of cultural, legal, and economic factors, Toyota employees are less likely to suffer the layoffs and plant shutdowns their American counterparts do. Before a Japanese company can lay off employees, it needs to demonstrate an attempt to cut costs, including a freeze on new hiring, executive pay cuts, and early-retirement options. Experts, however, see the Japanese eventually adopting more Western-style labor practices.

SOURCES OF INFORMATION

Bibliography

"car makers to big 3: let us in." detroit news, 25 january 1996.

chappell, lindsay. "toyota shakes up u.s. sales operation." automotive news, 30 march 1998.

henderson, angelo b. "toyota's sales in u.s. curbed by tight supply." wall street journal, 17 february 1998.

lawder, david. "toyota posts april u.s. gains." reuters, 3 may 1998. available at http://www.infoseek.com

martin, neil. "fat and unhappy: toyota's old-fashioned ways incite the wrath of international investors." barron's, december 1997.

mitchener, brandon. "toyota plans to boost share in europe, a tough task in slow-growing market." wall street journal, 16 may 1997.

sawyers, arlena. "toyota to test satellite repair centers." automotive news, 6 january 1997.

shuchman, lisa. "toyota tries to ease trade tensions by selling more u.s. models in japan." wall street journal, 30 january 1998.

sorge, marjorie. "toyota eyes 10% north american market share." automotive industries, february 1997.

thornton, emily. "only god and toyota can make a tree (cultivating a smog-eating forest in japan)" business week, 30 march 1998.

thornton, emily. "seeking immortality: why toyota is turning to telecommunications." far eastern economic review, 30 january 1997.

"toyota announces 1997 progress report on its new global business plan." pr newswire, 25 march 1998. available at http://www.infoseek.com.

"toyota announces sale of electric vehicles to city of new york." pr newswire, 7 may 1998. available at http://www.infoseek.com.

toyota motor corporation. hoover's online, january 1998. available at http://www.hoovers.com/cgi-bin/show_mlist_index?sno=3874561&index_code=41889.

toyota motor credit corp. hoover's online, january 1998. available at http://www.hoovers.com/cgi-bin/show_mlist_index?sno=3874561&index_code=47870.

toyota motor sales, usa. hoover's online, january 1998. available at inc.http://www.hoovers.com/cgi-bin/show_mlist_index?sno=3874561&index_code=43972.

For an annual report:

on the internet at: http://www.toyota.co.jp/lighthouse/annual_report/cover/cover.html

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. toyota's primary sics are:

3711 motor vehicles and car bodies

3714 motor vehicle parts and accessories

Company Profiles for Students

Toyota Motor Corporation

Toyota Motor Corporation

Principal Subsidiaries

Further Reading

Toyota Motor Corporation

Toyota Motor Corporation

Principal Subsidiaries

Further Reading

Toyota Motor Corporation

Toyota Motor Corporation

The Emergence of Japanese Automobile Manufacturing in the 1930s and 1940s

Postwar Challenges and Innovations: The Birth of the Small Car

Company Perspectives:

Key Dates:

Environmental Awareness in the 1970s

International Growth in the 1980s

“The New Global Business Plan”: 1995 and Beyond

Principal Subsidiaries

Principal Competitors

Further Reading

Toyota Motor Corporation

Toyota Motor Corporation

Contact Information:

OVERVIEW

COMPANY FINANCES

ANALYSTS' OPINIONS

HISTORY

STRATEGY

CURRENT TRENDS

PRODUCTS

FAST FACTS: About Toyota Motor Corporation

CORPORATE CITIZENSHIP

CHRONOLOGY: Key Dates for Toyota Motor Corporation

GLOBAL PRESENCE

EMPLOYMENT

SOURCES OF INFORMATION

Bibliography

For an annual report:

For additional industry research:

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