Fly Air India, Air Sahara, Jet Airways; drink tetley; drive a maruti, eat at HSB or Brar; watch KKKG or KHNH; go for Bollywood Star Nite and live in Canada. Desh away from home.

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Toyota's troubles

http://www.thestar.com/Business/article/182948

Feb 18, 2007 04:30 AM
David Olive Toyota Motor Corp.'s list of growing pains just got longer. With its fabled attention to detail, Toyota Motor Corp. recruited two of America's most respected stock-car drivers for its debut in NASCAR last weekend. As the first non-U.S. competitor in America's most popular sport – commanding a fan base of about 90 million people – Toyota is hoping to project itself as a U.S. company that employs thousands of Americans at its seven U.S. plants, and to counter a potential backlash as it gains market share at the expense of Detroit automakers.

Toyota could hardly have done better, one would have thought, than in its selection of veteran NASCAR fan favourites Dale Jarrett and Michael Waltrip, drivers known for their integrity and sportsmanship. But last Thursday, two-time Daytona 500 winner Waltrip was caught trying to super-charge his Toyota Camry with a suspected jet-fuel additive ahead of last weekend's Nextel Cup Series in Dayton Beach, Fla.

NASCAR decided to let Waltrip compete in the race using a backup car. But it impounded his doctored Camry, docked him points, and banished his crew chief and manager from the contest. A Toyota official called it \"Toyota's worst nightmare.\"

Obviously, there's much to admire about Toyota Motor Corp., poised this year or next to eclipse General Motors Corp. as the world's biggest automaker. While competitors GM, Ford Motor Co. and DaimlerChrysler AG are in retreat, Toyota is racing to achieve its goal of 15 per cent of global market share, up from 12 per cent.
In recent years, the Toyota juggernaut has been adding an average of two new factories annually to its network, including a $1.1 billion Woodstock, Ont. assembly plant scheduled to open next year that will turn out the RAV4 sport-utility vehicle. At its two plants in Woodstock and Cambridge, where it makes the Corolla, Matrix and Lexus RX350 vehicles, Toyota by next year will be building 455,000 vehicles in Ontario – an eight-fold increase since the company began manufacturing operations in Canada in 1988.

And Toyota's annual volume growth of 500,000 vehicles accounts for about a quarter of the worldwide industry's increase in production – roughly equal to the entire annual output of Ford's Volvo brand. Toyota posted record profits in its latest quarter, and its 6 per cent operating margins are the industry gold standard. The shareholder value of Toyota Motor exceeds the combined market cap of Detroit's Big Three automakers.

Trouble is, with only slight alteration, the same plaudits applied to GM in the 1950s, when it commanded about half of the North American market and was a force to be reckoned with in Western Europe and Australia, as well.

No one's accusing Toyota of harbouring the same complacency and institutional arrogance that has been gradually killing GM in the past three decades. But the world's most successful automaker is beginning to show signs of big-company disease.

As its manufacturing network has grown to 45 plants worldwide, and its managerial cadre stretched thin, Toyota now finds its vaunted efficiency gains are more difficult to achieve. In the late 1990s, Toyota was dazzling competitors with its ability to build a car in just 21.6 hours – more than 10 hours faster than GM. A decade later, Toyota's performance had barely improved, to 21.3 hours, while GM had almost caught up.

Contrary to public perception, Toyota is not a low-wage producer. A confidential company strategic plan that surfaced earlier this month warned that Toyota's heady growth – and accompanying hiring frenzy – is pushing up labour costs in North America faster than profit margins. \"This condition is not sustainable in the long term,\" said the document, which Toyota acknowledges is authentic, and which calls on Toyota to curb a forecast $900 million (U.S.) increase in labour costs by 2011 by paying the going rate in each U.S. state in which it has a plant, and no longer tie its pay and benefits to the North American industry average.
The breakneck speed of Toyota's expansion has hobbled it with a severe skills shortage, in everything from design and R&D to quality inspection. This is a special problem for Toyota, with its hallowed culture of continuous improvement that relies heavily on a workforce tutored in the so-called \"Toyota Way.\" As a company insider told the U.K. Financial Times, \"It takes 15 years to absorb the Toyota Way. We don't have a fast-track system.\"

Now that some 200,000 employees, or two-thirds of Toyota's workforce, are located outside Japan, the company can no longer rely on word of mouth to convey the tenets of its widely envied manufacturing and managerial methods. Yet Toyota didn't get around to putting the Toyota Way on paper until 2002. The following year it set up a managerial training college, the Toyota Institute, an hour's drive from world headquarters in Toyota City, and is now scrambling to build similar facilities in Kentucky and Thailand.

A troublesome by-product of Toyota's growth surge has been a decline in quality – the bedrock on which Toyota built its remarkable success in North America, where it derives the largest share of its profits. Since 2004, Toyota has recalled 9.3 million vehicles, up from 2.5 million in the previous three years. Last summer, the Japanese government censured Toyota and arrested three of its top executives for allegedly failing for eight years to disclose and act upon reports of a design flaw implicated in loss-of-control incidents.

By 2005, in tandem with the acceleration of Toyota's production rates, its rate of recalls as a percentage of vehicles in operation hit 10.1 per cent, compared with 6.8 per cent for GM and 2.5 per cent at Chrysler Group. The trend continued last year, as Toyota's recall rate remained among the highest in North America, affecting Prius, Echo, Lexus RX and Highlander models.

In the latest J.D. Power survey, the Toyota brand now scores below that of Hyundai Motor Co., a brand better known for low price than quality . The Insurance Institute for Highway Safety, a risk-assessment arm of the U.S. insurance industry, withheld its \"top pick\" rating from Toyota's redesigned Camry and RAV4 sport-utility vehicle after they performed poorly in whiplash tests. And in January, Toyota's U.S. division agreed to settle a class-action lawsuit brought by motorists who claimed that oil-sludge build-up had destroyed their engines despite compliance with the manufacturer's maintenance guidelines.

In its pursuit of efficiency, Toyota has long been an industry leader in using common parts across a wide range of models. The downside is that when a component turns out to be faulty, the resulting recall can be massive. For instance, the two suspect engines in the oil-sludge case – which auto mechanics complain were designed with oil passages that are too narrow – affects the Camry, Solara, Sienna, Avalon, Celica, Highlander, Lexus ES and Lexus RX models. This one settlement could end up covering 3.5 million vehicles.

CEO Katsuaki Watanabe, 64, describes the quality issue as \"an emergency.\" He admitted to reporters: \"We have received critical inquires from customers who are concerned whether our vehicles are safe. The world-class quality that we've built is our lifeline. Without improvements in quality, Toyota cannot grow.\"

Each of Toyota's North American plants is \"paired\" with a sister plant in Japan that tutors it in the \"Toyota Way\" of zero defects and continuous improvement (kaizen) of manufacturing methods. Watanabe has recently set up three quality-control centres, in North America and Europe, patterned on a venerable facility in Japan.

The challenges don't end there, however. Toyota is an also-ran in the most promising high-growth markets of the 21st century, including China, India, Russia and Brazil. And Watanabe lacks experience outside of Japan.

In the same way that the Volkswagen snuck into North America with the Beetle, followed by under-powered \"econoboxes\" from the Japanese and then Hyundai's debut with the Pony, Chinese and Indian automakers are expected to peddle their wares on these shores by decade's end with bare-bones models easily dismissed by the industry's entrenched players.

India's best-selling small car, the Maruti Alto, retails for $4,500, and Maruti and other leading Indian automakers, including Mahindra and Mahindra (M&M) Hindustan Motors and Tata Motors, are engineering cars designed to sell at half that price. Chinese firms like Chery are also intent on sneaking into industrial markets under the radar of established rivals .

\"GM was on top for three-quarters of a century, and that's impressive,\" writes veteran auto columnist Jerry Flint in Forbes. \"Toyota won't do that. The world moves faster now. In 15 years maybe the Koreans (Hyundai) or the Chinese (Shanghai Auto) will overtake it.\"
If history serves as a guide, the new interlopers will gradually move up the \"value chain,\" just as Toyota cracked the luxury market (Lexus) and Hyundai now makes full-size luxury sedans.

The twofold difference this time is that the Chinese and Indian automakers benefit from huge, government-protected home markets (a combined population of 2.3 billion) as a springboard in their offshore forays. With annual production now topping 1 million vehicles, the Indian automakers have barely tapped their domestic market. Automakers in the two quickly growing nations also boast exceedingly low labour costs (between $3 and $6 an hour U.S. in China, and as low as $1.50 U.S. in India) .

Which means Toyota risks being priced out of the emerging markets where it must gain a substantial foothold in order to keep its plants running full-out. That explains Watanabe's urgency in trying to wring no less than $9 billion out of his cost structure over the next three or four years.

The trick is for Toyota to conceive new methods of cutting vehicle-manufacturing costs without continuing to jeopardize its high card of quality. And to recruit designers who can engineer a new generation of ultra-low-cost vehicles for emerging markets. And to pray that Beijing and Delhi don't impose suffocating quotas on Japanese imports – a tactic that Japan itself employed against Motown in the post-World War II era to nurture its homegrown automakers .

Watanabe is not to be counted out in the coming contest with ultra-low-cost producers. A confessed micromanager, he began his Toyota career 43 years ago as supervisor of the firm's cafeterias. He became obsessed with rice leftovers. Common practice in Japan at the time was to serve large portions of rice in a big bowl to everyone. Watanabe hit on the solution of letting employees serve themselves, and the wastage disappeared immediately.

\"I am obsessed with details,\" Watanabe told The Wall Street Journal. \"I will be an irritant, and I am persistent.\"

Toyota's persistence ultimately humbled the once-mighty GM. The question is whether persistence alone will enable Toyota to hold on to its long-coveted \"No. 1\" crown for more than a few years.

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Speech by Thomas Friedman of The New York Times....

"When we were young kids growing up in America, we were told to eat our
vegetables at dinner and not leave them. Mothers said, 'think of the
starving children in India and finish the dinner.' And now I tell my
children: 'Finish your maths homework. Think of the children in India
who would make you starve, if you don't.'"

Reva - the cool indian built electric car is now being exported to Europe and soon will be exported to North America

http://en.wikipedia.org/wiki/REVA