Toyota's global strategy to look within

Toyota's global strategy to look within

Car company must beware of arrogance, complacency on march to become world's biggest, division president says

By JEREMY CATO
Merrill Lynch
Thursday, October 28, 2004 - Page G3

OTTAWA -- 'The enemy of Toyota is Toyota," says Ken Tomikawa, the Toyota Canada president who has driven Japan's No. 1 auto maker to a record 10.6 per cent share of the Canadian new-vehicle market so far this year, a 0.7-per-cent jump over the same period in 2003.

The goal for the rest of the decade is much grander.

Earlier this year, it was revealed that Toyota is working away at a new strategy called Global 15. That is, Toyota intends to achieve a 15 per cent global share between 2006 and 2010, and thus become the No. 1 auto maker in the world (General Motors currently has about 14.7 per cent of global share). That would represent a big jump from Toyota's current 11.3 per cent share of global sales.

Tomikawa's point, made during a dinner to discuss the company's aggressive truck strategy, is as Toyota goes down this path toward becoming the world's biggest car company, it will run into trouble only if arrogance and complacency set in and grip the company.

Don't think it isn't possible. As recently as the end of the last decade, Ford had a corporate strut perfectly reflected in since-ousted CEO Jacques Nasser. Then, the bottom fell out of Ford's plans and $6.45-billion (U.S.) in losses ensued. Ford has not yet recovered.

Go back a little farther and recall the hip condescension of Chrysler during the heart of the Bob Lutz/Bob Eaton years.

And GM? What was good for GM was good for the country, right?

Look at those three now. Ford and GM don't make money on selling cars at all; if not for their finance arms, both would be in big trouble. Chrysler, since being taken over by Daimler-Benz, has fallen to the depths and is only now showing a few signs of returning to consistent profitability. But we can't be sure Chrysler's is a lasting recovery yet.

Tomikawa, like other senior bosses at Toyota, is concerned about arrogance. He says he worries about the new, young, swaggering Toyota employees who have never experienced bad times and who seem to be comfortable with the idea that Toyota is just naturally superior to all the other auto makers.

"This is a problem we must address in Toyota," says the hard-driving Tomikawa, a short, intense sales and marketing executive who loves his golf and, alas, his cigarettes.

Toyota, of course, is on a global roll. It is increasing its market share steadily, enjoys a remarkable degree of environmental cachet, its Lexus luxury car division is a leader in quality and has been for more than a decade and the corporate coffers are full with some $30-billion in cash and equivalent reserves, driven by profits such as the nearly $11-billion Toyota earned in fiscal 2003.

Toyota is the world's most profitable per-vehicle volume car company. Period.

The arrogance of success is a real worry, though. Detroit's auto makers have suffered from it and so have Europe's.

Consider Volkswagen. Through the 1990s, Europe's largest auto maker was a shining example of smart platform engineering to produce a multitude of good products. This year, VW is on track to lose as much as $1-billion in North America alone. Analysts suggest VW wasted resources on a bold but ultimately unwise attempt to get into the luxury car business with models like the Phaeton.

Mercedes-Benz, meanwhile, is battling with well-documented quality issues. Some suggest they are a byproduct of aggressive global expansion plans -- the takeover of Chrysler, the purchase of a controlling interest in Mitsubishi -- that have led to senior management diverting attention from the core Mercedes brand.

Tomikawa says Toyota CEO Fujio Cho warns constantly about what he calls "big company disease." They both recognize the disease, but preventing it from infecting the organization is a different matter.

To inoculate the company from complacency, Toyota is moving ahead aggressively with radical improvements to what are already the world's best product development and manufacturing systems.

Officials say that when a massive wave of new models begins arriving in 2005, the company will have found ways to save a staggering 30 per cent in development and manufacturing costs over the current generation of models.

Insiders say Toyota's manufacturing engineers believe they have devised a new system to enable new products to be built on assembly lines half the length of today's. This will be the system Toyota uses when it opens a new truck plant in Texas in 2006.

Then there is the matter of styling. It is a significant weakness. The truth is, Toyotas for the most part are considered bland, uninspired designs.

That will change under a new styling mandate. Design now has a higher status within Toyota. No longer does it fall under engineering, moreover, Toyota is hiring new designers from around the world.

Tomikawa, however, insists that in all this Toyota is not focusing on surpassing other car companies; Toyota will worry about itself and focus on its own worst enemy, the one within.

It may work. Don't forget that about two decades ago, Toyota quietly set out to gain 10 per cent of global market share. Toyota has long since passed that target and Global 15 is next.

For the rest of the world's auto makers this is not good news.

As John Wormald, a partner with auto-researcher Autopolis in London, said in a recent Barron's article: "the powerhouse is about to erupt. Toyota is going to put Detroit and the world's other large car companies through the meat grinder."

The juggernaut

According to top trade publication Automotive News, Toyota sold a record 6.78 million cars and light trucks globally in 2003. GM sold 8.59 million and Ford 6.54 million.

In 2003, Toyota Motor Corp.'s sales rose in every region of the world.

The slowest gains came in North America, where sales rose 6.8 per cent, compared with a 38.8-per-cent surge in Asia and an 11.8-per-cent jump in Europe.

Those results reflect a trend. Between 1998 and 2002, Toyota's global sales rose 16.8 per cent to 6.17 million units.

GM's global sales rose 4.4 per cent to 8.50 million during the same period, thanks to a sharp rise in 1999, followed by market share erosion over each of the following three years.

During that time, Toyota increased share at nearly four times GM's pace.

ON THE HORIZON

Toyota will push ahead with a host of significant new models in the next few years.

Here's a look at some of them:

The 2005 model year:
Lexus RX 400H hybrid SUV
Toyota Highlander hybrid SUV
Toyota Sienna hybrid minivan
Toyota Tacoma compact pickup
Lexus GS sedan
Toyota Avalon
Toyota Scion tC coupe (United States only)

2006 model year:
Lexus HPX MPV
Toyota FJ Cruiser large SUV
Lexus IS coupe, sedan, convertible

2007 model year:
Toyota Highlander SUV
Toyota RAV4 small SUV
Lexus LX large SUV
Toyota Sequoia large SUV
Lexus ES sedan
Lexus LS sedan
Toyota Camry sedan

Hmmm interesting! Looks like the anti-import stuff is going to start up again..especially in car towns like Detroit and Windsor. Well Toyota needs to continue to offer cars that appeal to everyone, especially young people. The Corolla XRS and Scion line is a good start. However one thing I fear is they too will fail to keep their previous and (dare I say) current qualilty reputation. I suppose time will tell if the current line up of vehicles will withstand the test of time. I traded in my 1993 Celica GTS with 330,000 km on the odometer when I bought my XRS. I was told the car was sold withing a few weeks to a 4th owner. My guess is that car will go strong for another few years hopefully. I just hope my XRS last that long.

Mark

Yeah, XRS is built very solid with a premium car feel. The 2ZZ engine despite being a high revving race-bred engine, has been as reliable as the 1ZZ engine in the last 4 years.

Lexus IS Coupe!!!!!! I Love Toyota~!~!!@!@#$%frert%#@!~

by '06 ill be more than able to buy one also

Yeah, I am counting the days till I see the next IS in the showroom. Yuuuuuuuuummmmmmmmmmmmmmmmyyy! I know it is going to be a beauuuutifull. I get butterflies in my stomach...LOL. Can't wait!

i thought they are selling the Toyota Volta late next yr for $75,000us i guess they delay the project...

I read in articles from here and there toyota now almost beat GM
GM produce 8 milion car in a year but at a loss and cuting back here and there
While Toyota produce almost 8 Miliion cars and make a large profit from their car sales plus they still making few new factories worldwide.. damn.. toyota gonna be the mircosoft of car industries. damn freakin rich car company.

I don't know if you guys agree, but I'm already seeing issues with 9th generation Corollas in terms of mecahanical stuff and reliability. Highly unlikely my next car is a Toyota. I should also comment that before, I thought of myself as a die-hard Toyota fan. I'm not going to walk out on a lease or anything - seems alright after the repairs but definitely won't buy back after the lease.

I've had 1 cosmetic and 1 major mechanical fault immediately upon delivery from factory. One of my dad's friends reported a series of major repairs (on a co-worker's car) on the water pump mecahnism.

I don't know if it's arrogance that set in, or if it's just that North American factories esp Cambridge, Ontario (Canada) has lousy QA. My dad's 94 and 98 Camry's were both made in Japan (I think) and they didn't have any defects or reliability issues.

Unfortunately, you have a lemon. It is one of the rarest things for a Toyota. Read the top twenty lemon cars of this year here:

http://www.lemonlaw.com/lemonlist.html

You can see there are 4 Hondas, other Nissans etc., but not a single Toyota. My experience with Toyotas has been nothing short of amazing. My 04 Corolla S was as perfect as new when I traded it in with one very cold winter behind it. Now my XRS has exceeded my expectations at every level. It is like a mini Lexus with the refinement and quality of premium four door sedan car and the performance of a hard edged aggressive sports car from every angle. A Corolla hitting 0-60s in the high 6 seconds completely stock sure sounds like ane elephant running like a Cheetah, but that is true. As for the plant in Ontario, it will come to you as a surprise it has been awarded the best Toyota plant 4 times (yes even over the Japanese plant) and has been chosen as the only plant outside of Japan for Lexus.