Monday, May 10, 2010



Toyota Motor Corporation commonly known simply as Toyota, is a

multinational corporation headquartered in Japan. At its peak, Toyota

employed approximately 320,000 people worldwide. It is the world's

largest automaker by sales.

The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his

father's company Toyota Industries to create automobiles. Three years

earlier, in 1934, while still a department of Toyota Industries, it created its

first product, the Type A engine, and, in 1936, its first passenger car, the

Toyota AA. Toyota also owns and operates Lexus and Scion brands and

has a majority shareholding stake in Daihatsu and Hino Motors, and

minority shareholdings in Fuji Heavy Industries, Isuzu Motors, Yamaha

Motors, and Mitsubishi Aircraft Corporation. The company includes 522


Toyota is headquartered in Toyota City, Aichi and in Tokyo. In addition to

manufacturing automobiles, Toyota provides financial services through its

division Toyota Financial Services and also builds robots. Toyota Motor

Corporation (including Toyota Financial Services) and Toyota Industries

form the bulk of the Toyota Group, one of the largest conglomerates in the


Vehicles were originally sold under the name "Toyoda", from the family

name of the company's founder, Kiichiro Toyoda. In September 1936, the

company ran a public competition to design a new logo. Out of 27,000

entries the winning entry was the three Japanese katakana letters for

"Toyoda" in a circle. But Risaburo Toyoda, who had married into the family

and was not born with that name, preferred "Toyota" because it took eight

brush strokes (a fortuitous number) to write in Japanese, was visually

simpler and with a voiceless consonant instead of a voiced one Since

"Toyoda" literally means "fertile rice paddies", changing the name also

helped to distance the company from associations with oldfashioned

farming. The newly formed word was trademarked and the company was

registered in August 1937 as the "Toyota Motor Company"

Public (TYO: 7203) & (NYSE: TM)

Founded 1937

Founder(s) Kiichiro Toyoda

Headquarters Toyota City, Aichi, Japan; Tokyo, Japan

Key people

Fujio Cho (Chairman and Representative Director)

Katsuaki Watanabe (Vice chairman and Representative Director)

Akio Toyoda (President and Representative Director)

Shoichiro Toyoda (Honorary Chairman)




Financial services




Financial Services

Revenue US$263.42 billion


Operating income US$4.56 billion


Net income US $ 4.33 billion (2009)

Total assets US $324.98 billion (2009)

Total equity US$5.54 billion (2009)

Employees 316,121

Subsidiaries 522


Recent company developments

Financial crisis of 2007–2010

On May 8, 2009, Toyota reported a record annual net loss of US$4.4

billion, making it the latest automobile maker to be severely affected

by the 2007-2010 financial crisis. It had to ask the Japanese

government for loans.

2009–2010 vehicle recalls

In January 2010, Toyota announced recalling up to 1.8 million cars

across Europe, including about 220,000 in the UK, following an

accelerator problem.

The US Transportation Department has opened an investigation into

brake problems in Toyota vehicles. This is after the department

received 124 reports from drivers about the issue, including four

involving crashes.

The company said its recall could cost the company up to US$2

billion in lost output and sales. Toyota later recalled the Prius model

after problems were found in the ABS system.

The models involved were the RAV4 2009 to 2010 (model year),

Corolla (2009-2010),

Matrix (2009-2010),

Avalon (2005-2010),

Camry (2007-2010),

Highlander (2010), Tundra (2007-2010)

Sequoia (2008-2010).


The woes of Toyota, the world's biggest carmaker, are a warning

for rivals

As executives from Toyota squirmed before their tormentors in America's

Congress, there was little public gloating from rival carmakers. Although it

is Toyota that is currently in the dock after a crushing series of safetyrelated

recalls across the world, competitors are only too aware that it

could be their turn next. After all, there is not a single big car company

that has not modeled its manufacturing processes and supplychain

management on Toyota's lean production system. That said, there is a widespread belief within the car industry that Toyota is the author of most of its own misfortunes and that its mistakes hold lessons for others. James Womack, one of the authors of "The Machine that Changed the World", a book about Toyota's innovations in manufacturing, dates the origin of its present woes to 2002, when it set itself the goal of raising its

global market share from 11% to 15%. Mr Womack says that the 15%

target was "totally irrelevant to any customer" and was "just driven by ego". According to Mr Womack, the requirement to expand its supply chain rapidly "meant working with a

lot of unfamiliar suppliers who didn't have a deep understanding of Toyota

culture." By the middle of the decade, recalls of Toyota vehicles were increasing at

a sufficiently alarming rate for Mr Toyoda's predecessor, Katsuaki

Watanabe, to demand a renewed emphasis on quality control. But nothing

was allowed to get in the way of another goal: overtaking General Motors

to become the biggest carmaker in the world. Even as Toyota swept past

GM in 2008, the quality problems and recalls were mounting.

The majority of those problems almost certainly originated not in Toyota's

own factories but in those of its suppliers. The automotive industry

operates as a complex web. The carmakers (known as original equipment

manufacturer or OEMs) sit at its centre. Next come the tierone

suppliers, such as Bosch, Delphi, Denso, Continental, Valeo and Tenneco, who

deliver big integrated systems directly to the OEMs. Fanning out from

these are the tiertwo suppliers who provide individual parts or assembled

components either directly to the OEM or to a tierone

supplier. CTS Corp, the maker of the throttle-pedal assemblies that Toyota has identified as one of the causes of "unintended acceleration" in some of its vehicles, is a

tier two supplier whose automotive business accounts for about a third of its sales.

On the outer ring of the web are the tier three suppliers who often make just a single component for several tier two suppliers. Although there are

thousands of tier-two and tier-three suppliers around the world, their

numbers have been culled over the past decade as the OEMs and the tier-ones

have worked to consolidate their supply chains by concentrating

business with a smaller number of stronger companies.

Toyota revolutionised automotive supplychain management by anointing

certain suppliers as the sole source of particular components, leading to intimate collaboration with longterm partners and a sense of mutual

benefit. By contrast, Western carmakers tended either to source inhouse

or award short contracts to the lowest bidders. The quality Toyota and its

suppliers achieved made possible the "just in time" approach to delivering

components to the assembly plant.

Most big car firms now operate in a similar way. By and large, the

relationships between the OEMs and the tierone

suppliers run smoothly.

When problems crop up, it is usually with the other suppliers. One top

purchasing executive says that consolidation, the need to trim capacity

and the shock to demand that began in mid2008

have put the weaker parts of the supply chain under great strain:

A consequence of Toyota's breakneck expansion was that it became

increasingly dependent on suppliers outside Japan with whom it did not

have decades of working experience. Nor did Toyota have enough senior

engineers to keep an eye on how new suppliers were shaping up. Yet

Toyota not only continued to trust in its solesourcing

approach, it went even further, gaining unprecedented economies of scale by using single suppliers for entire ranges of its cars across multiple markets.

One senior executive at a big tierone supplier argues that although

Toyota's singlesupplier philosophy served it well in the past it had taken it

to potentially risky extremes, especially when combined with highly centralised decisionmaking in Japan. In the aftermath of Toyota's crash,

the question the industry is now asking itself is whether solesourcing

has gone too far. Until very recently, Toyota was the peerless exemplar. For

now, at least, it is seen as an awful warning.

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