Toyota culture overpowers rivals
afr.com
Doron Levin Bloomberg
Toyota Motor Corporation makes life miserable for Detroit's car makers in more ways than anyone can count.
Consider Toyota's Camry family sedan, the top-selling model in the United States last year, its seventh sales crown since 1996.
The Camry, once a compact economy car, has evolved into a consumer benchmark for quality and reliability.
Toyota benefits from a manufacturing system that produces Camrys so efficiently and at such low cost that US-based car makers have a tough time keeping up.
The world's most profitable car maker, with more than $US10 billion ($13.3billion) in net income last year, uses its financial clout to invest in further improvements and innovations, such as hybrid technology, helping it gain market share in the US, even as rivals bemoan the cost of developing their own hybrids.
"Toyota just saves and saves in a million little ways and then uses that money as a club against its competitors," says Jim Olson, a former Toyota executive and guest lecturer in business at Winthrop University, South Carolina.
In 1990, The Machine that Changed the World, a book based on a research project, predicted Toyota's production system - called lean manufacturing by the authors - was destined to revolutionise car making.
The authors, James Womack, Daniel Jones and Daniel Roos, asserted Toyota's philosophy of waste reduction was as historic as the invention of the moving assembly line.
The book's prophecy is being borne out by events. Every car maker in the world, and many non-automotive manufacturers, now study Toyota. Executives at General Motors, Ford and Delphi - the former GM parts subsidiary that filed for bankruptcy on
October 8 - are pushing to cut health care and other so-called legacy benefits from non-competitive labour agreements, which they blame for poor financial performance.
Health care, for example, adds $US1500 to the cost of making a GM vehicle. Yet even if health care, pension costs and high union wage scales were somehow to shrink, the manufacturing expenses of US car makers would still be uncompetitive.
By rooting out wasted costs, effort and time - as well as excess capital investment - Toyota has been able to turn factory usage and labour productivity into major advantages.
Last year, Toyota's North American factories built 1.44million vehicles. That number is 107per cent of Toyota's theoretical capacity, as the plants worked two shifts a day without overtime.
In contrast, GM and Ford factories used only 86per cent of rated plant capacity last year.
Harbour Consulting, a Michigan firm that analyses factory efficiency, reported in June the average Toyota vehicle built last year in North America needed about 19.5hours of labour for assembly, while each GM vehicle took about 23hours and each Ford about 24.5hours.
"The big challenge if you're trying to match Toyota is that they've developed a culture over decades," says Jeff Liker, a University of Michigan engineering professor and author of The Toyota Way, published in 2004.
GM "has to change an existing culture into a new one", he says.
