Point of View/ Kazuyoshi Abe: New frontiers for world's biggest automaker
Special to The Asahi Shimbun
Toyota Motor Corp. expects to sell more than 8.5 million cars on the global market in 2006. Since General Motors Corp.'s projection is 8.4 million vehicles for the same year, Toyota is set to become the world's largest automaker.
Since the Japanese automaker was established in 1937 in Koromo, then a remote district of Aichi Prefecture that was later renamed Toyota, its head office has not moved. The company will become the world's top automaker when it celebrates its 70th anniversary in November 2007.
Toyota was established as a spin-off of Toyoda Automatic Loom Works by Kiichiro Toyoda. Toyoda was the oldest son of Sakichi Toyoda, the inventor of an automatic weaving machine and known as one of Japan's 10 leading inventors of the time. In the nearly seven decades since its foundation, the automaker underwent various dramatic changes before establishing itself as the global industry leader.
Initially, some officials of the loom works opposed the decision to branch out into automobiles, a risky venture that even financial combines run by the Mitsubishi and Mitsui groups dared not embark on. Opponents feared that automobile production would be a money guzzler that might also eat into the profits of the lucrative loom works business and bring it down.
In December 1949, the automaker faced possible bankruptcy because it was unable to cover a debt of 200 million yen. It was Takeo Takanashi, a Bank of Japan branch manager, who saved the company from embarrassment. Takanashi called on 24 banks, including Tokai Bank (now UFJ Bank) and Mitsui Bank (now Sumitomo Mitsui Banking Corp.), and had them jointly extend a cooperative loan to save the company from going broke. In 1950, Toyota implemented restructuring measures, including the axing of 1,600 employees and the splitting of sales and manufacturing divisions into separate entities.
Labor unions staged a strike for two months in opposition to dismissals. To settle the dispute, Kiichiro Toyoda stepped down and was replaced by Taizo Ishida, who headed the loom works, which was the most profitable of the group companies at the time.
Under the slogan of "thrift and economy," the company introduced cost-cutting measures and a suggestion system to advance the concept of kaizen (continuous improvement). Furthermore, it concentrated production sites by creating 12 factories within Aichi Prefecture and was able to get itself back on track.
The "Toyota production system," which aims to eliminate waste, was created by Taiichi Ono. It incorporates the "just-in-time" system of minimizing inventory and making just enough products to meet demand. In order to implement the system, the kanban method was devised. The method uses kanban, or signs, that tell suppliers to deliver parts to the production line as and when they are needed. These production systems have been exported to the United States and Europe, where they are now widely recognized as "lean production systems."
On Nov. 4, Toyota announced operating results for the six months that ended in September. According to the company, on a consolidated basis, it recorded net revenues of 9.9 trillion yen, up 10.3 percent from the same period of the previous year, and after-tax net income of 570 billion yen, down 2.3 percent. In terms of car sales, it sold 3.83 million vehicles, an increase of 7.5 percent compared with the first six months of the previous fiscal year. As a whole, it did very well.
Projections based on these figures for the year that ends in March 2006 show the company producing a net profit of 1.23 trillion yen, recording an increase in profit for four straight years. Toyota is expected to sell 8.03 million vehicles, topping the 8 million mark for the first time. Furthermore, based on these projections, the company's worldwide vehicle sales are expected to reach 8.5 million vehicles in the calendar year that ends in December 2006.
GM is advancing corporate restructuring to tide over financial difficulties, and its production is declining. As a result, it is clear that Toyota will soon emerge as the global industry leader. As a way to raise restructuring funds, GM sold 8.7 percent of the 20 percent stake it holds in Fuji Heavy Industries Ltd. to Toyota in October for 35 billion yen.
Toyota and GM agreed to continue technical cooperation when Toyota president Katsuaki Watanabe and GM chairman Richard Wagoner Jr. met in November. At a time when American automakers, including GM and Ford Motor Co., are on the defensive against their Japanese counterparts, Toyota and Honda Motor Co., Toyota's rise to the No. 1 spot could trigger antipathy in the U.S. auto industry. In order to ease such antagonism, Toyota should positively advance cooperation with GM. To that end, the company will also start production at a newly built plant in Texas.
Shoichiro Toyoda, now honorary chairman of the automaker, expanded into the housing industry. But unlike the auto business, the housing division is not doing so well. This year, as a way to get out of the slump, it tied up with Misawa Homes Co., a leading housemaker, in an attempt to catch up with its competitors such as Sekisui House Ltd. and Daiwa House Industry Ltd.
Shoichiro's oldest son, Akio Toyoda, who became Toyota vice president in June, is expected to assume the company's presidency four years from now. Traditionally, leaders of the Toyoda family have branched out into new businesses, and Akio is expected to advance into aircraft manufacturing or the space business. In particular, the company has already obtained approval for aircraft engine production in the United States, and industry officials are keeping a close eye on how and when its plans will take shape.
In order to ease pressure against Toyota, after Toyota chairman Hiroshi Okuda steps down as chairman of Nippon Keidanren (Japan Business Federation), Toyota vice chairman Fujio Cho will stay on with the association as its vice chairman. Furthermore, the company is expected to assume a greater role in the Japan Automobile Manufacturers Association as the top automaker in the world and continue to meet greater challenges in the auto industry and the business world at large.
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The author is a journalist specializing in economic affairs.(IHT/Asahi: November 16,2005)
