Founder: Sakichi Toyoda.
Distinction: Revolutionized automobile production for the global age.
Primary Products: Cars, pickups, minivans and SUVs.
Annual Sales: $105.832 billion.
Number of Employees: 183,879.
Major Competitors: DaimlerChrysler, Ford, General Motors.
Honorary chairman: Shoichiro Toyoda; Chairman: Hiroshi Okuda;
President: Fujio Cho.
Headquarters: Toyota City, Japan
Year founded: 1937.
Website : www.toyota.com
When Eiji Toyoda first came to Detroit as a brash young engineer in
1950, Ford was producing 8,000 vehicles a day and his own family-run
auto business in Japan was turning out just 40. A half century later, his
business—which actually started as a textile mill—has grown into an
international conglomerate that manufacturers cars in 24 countries and
markets them in 160. Like others in its home nations, however, the
company has experienced significant setbacks of late. But much as Eiji
Toyoda saw only opportunities when he examined the competition during
that first trip to the United States, his predecessors see innumerable
opportunities remaining today.
Toyota Motors, as the company was subtly renamed just before that
Motown visit, is now Japan's biggest carmaker and the fourth largest in the
world. A multi-dimensional behemoth, it sells more than $100 billion worth
of automobiles, automotive parts, industrial equipment and prefabricated
housing every year. Its gas-powered cars, pickups, minivans and SUVs
carry some of the top nameplates in the industry, such as Camry, Land
Cruiser, and various ritzy monikers in the upscale Lexus line. It is now also
producing the closely watched Prius, a five-seater sedan powered by a
much heralded new hybrid gas-and-electric engine.
Yet times are tougher at Toyota than they have been in decades. Eiji
Toyoda saw what large-scale production could accomplish when he
stepped into that Ford plant some 50 years ago. In partnership with his
cousin Kiichiro (and Kiichiro's son, Shoichiro, currently the company's
honorary chairman), he helped adapt it for a new era. The moves
identified Toyota as one of the most innovative companies in the world,
and helped make it one of the most successful. But in recent years it has
been losing market share. Capital is drying up. Younger buyers find its
offerings old-fashioned. And the company that wrote the book on auto
manufacturing in the global era may be in danger of suffering the same
fate as other once-pioneering operations. Insiders can be excused if they
aren't unduly worried, however; they've seen similar negatives turn
Cousins Eiji and Kiichiro Toyoda spent much of their youth in the
family's textile mill in western Japan. Established as the Toyoda Spinning &
Weaving Company in 1918, its fate relied largely on the ingenuity of
Sakichi Toyoda—Kiichiro's father and Eiji's uncle—who for decades had
been tinkering with looms to improve their efficiency. When a British
textile concern offered an impressive sum in 1929 for the rights to his
latest, the Toyoda family saw an opportunity to shift gears entirely and
convert to automobile production.
Ford and General Motors were already assembling some vehicles in
Japan, but Sakichi Toyoda had visions of a true Japanese car. Kiichiro
helped set up the family's new manufacturing operation, while Eiji was
sent off to Tokyo Imperial University to study mechanical engineering. In
1934, the Toyodas produced an engine so identical to a Chevrolet model it
accepted Chevrolet parts. Under Kiichiro's leadership it also found
revolutionary ways to boost efficiency. Improved factory design was one. A
new system of material supply—in which parts were delivered to the
assembly line only as they were needed, or "just in time" as the widely
copied practice is called today—was another.
After receiving his degree in 1936, Eiji returned to the business. The
family's first passenger car, the Model AA, was to go into production that
same year. But the Japanese government needed trucks for its nascent
war effort, so the Toyodas switched modes again and were soon producing
1,000 a month. Supplies dwindled as the military campaign faltered,
however, and truck production dwindled as well. Then, on the day
immediately before the War ended, a bomb destroyed a large portion of
the family plant in what is now Toyota City.
As the Toyodas were wondering what business ideas they should
next pursue (fish paste and chinaware were among those considered) U.S.
occupational forces asked them to manufacture buses and trucks to aid
the post-war recovery. Kiichiro, Eiji, and Shoichiro rebuilt their plant and
resumed production, but promised payments failed to materialize. To win
support from nervous creditors, Eiji created a separate company to
coordinate orders, deliveries, and payments. He visited Detroit to study
the competition, and came away with inspiration and ideas. He also
developed his first yearning for international expansion, which led to
exports to a half-dozen countries including the United States by the end of
Innovations up and down the line—usually aiming for efficiencies
similar to those achieved by Sakichi Toyoda's original looms—culminated
on New Year's Day 1955 when Toyota's first passenger auto, the Crown,
was driven from the plant by a tuxedo-clad Eiji Toyoda. It quickly proved
popular in Japan, but not in America where it was introduced two years
later. The Toyodas once again retooled though, and came back in 1960
with the Corona. This model became a huge seller in the United States,
and put Toyota on the automating map.
By deploying assorted labor-conserving strategies, the company
smoothly increased production to meet demand. By implementing various
unconventional management practices—such as encouraging assembly line
personnel to catch and correct all defects on the spot—it continually
improved its reputation along with its operation. For these and other
forward-thinking practices, Toyota was awarded the prestigious Deming
Prize in 1965. It was rewarded in a more tangible way in 1966 when its
second mass-produced model, the Corolla, became an instant hit upon
release in the United States. The following year, Eiji Toyoda was named to
head the company.
Toyota now had solid products to go with experienced leadership and
trailblazing ideas. And in the 1970s it got something new: Huge gasoline
prices hikes. This suddenly made its tradition-laden Detroit competition
look a log less attractive. Americans turned in droves to the smaller fuelefficient
cars offered by Toyota and a smattering of others such as Datsun
(later renamed Nissan) and Honda. Car buyers in Japan also were
increasingly choosing Toyota, which remained under the day-to-day
leadership of Eiji Toyoda until 1982. (By tradition he then moved over to
the company's Board of Directors, where he sat until 1994. That year, at
age 81, he was enshrined in the U.S. Automotive Hall of Fame near his
long-time idol Henry Ford.)
U.S. automakers, stung by the insurgents, hit back with a page or
two from Toyoda's own book. They introduced Japanese-style inventory
control, for example, and started programs to increase workermanagement
unity. And then the giant, General Motors, stepped
completely out of the box by building a subcompact in cooperation with
Toyota. It was modeled on the Corolla, and assembled at a shuttered GM
plant in California with half of all parts—including the engine and drive
train—made by Toyota in Japan. Many observers initially doubted the
partnership would work, and newspaper accounts called it "improbable."
Nonetheless, when the resultant $7195 Chevrolet Nova debuted in 1985, it
found instant support among both value-conscious "buy American"
consumers and those who by now staunchly preferred imports.
Toyota's remarkable ascendance continued throughout the decade.
GM—which once dismissed it, along with fellow Japanese automakers, as
merely a purveyor of flimsy little cars who got lucky during the oil crisis—
saw its U.S. market share drop from nearly one-half to one-third despite
repeated remedial efforts. Toyota, on the other hand, boosted its slice of
the pie considerably by introducing the pricey Lexus line in 1989. It also
kept turning out appealing new models and smart updates for its long-time
audience. The combination helped it sell more than 1 million vehicles in
the United States, and capture 43 percent of all car sales in Japan. In
1990, Fortune magazine acknowledged that Toyota was "the best
carmaker in the world."
It couldn't last, of course. By the mid-1990s car buyers in Japan
were increasingly turning to imports, just as those in America had done
two decades earlier. In the United States, Toyota was caught unprepared
as consumer tastes shifted toward minivans and sport utility vehicles. In
Europe and China, it still lagged badly behind other manufacturers. And
the Asian economy itself was about to tank, sending sales of everything—
especially cars—into a tailspin.
With that backdrop, Hiroshi Okuda was named president in 1995.
The 63-year-old Okuda, who had been with Toyota for 41 years, felt
substantial changes were immediately needed. He launched a major
advertising campaign at home, vigorously attacked the company's onerous
cost structure, and got even busier updating and redesigning. Okuda,
considered a "new generation" business leader in Japan, also speculated
that the telecommunications or housing industries would one day integrate
with the auto industry. Accordingly, he pushed for further diversification
into those areas.
Autos remained the focus, however, and efforts on their behalf were
publicly on display at the 5,400 dealers that comprised Toyota's worldwide
network as the new millennium dawned. They were evident as well from
the leadership of new president Fujio Cho, who took over when Okuda was
elevated to the role of board chairman. Now, he oversees Toyota's latest
reinvention. To flight the company's "mid-life crisis," as Newsweek called
it, he is targeting younger drivers with hotter cares. To grab a piece of the
e-commerce potential, he is beefing up the company Web site. And to
attract the multi-age "green" crowd, he is offering the gas-and-electric
It may have once been a simple family-run textile mill. But he
Toyota of today remains a very modern company, always ready to try
some very fresh ideas.