You can have good, quick and cheap, but you can’t have all three . . . Toyota tried to have all three
AN UNEXPECTED note of poignancy greets visitors to the museum of the world's largest car company. In the cavernous lobby, a lone trumpet plays the mournful opening bars to Over the Rainbow, a plea for escape from the dreary, difficult realities of the present. The song is performed by Asimov, Toyota's showcase humanoid robot, on a giant screen that hangs over a showroom full of the company's world-beating products, cars that have become household names: Prius, Lexus, Corolla.
It’s unlikely that Asimov’s human minders gave the tune much thought when they chose it in what were far better times. Just as Toyota should have been celebrating ending General Motors’ 76-year reign as the planet’s largest automaker, it has been wracked by a series of scandals and escalating recalls totalling about 8.5 million cars that has wiped €17 billion from the company’s share value.
Amid allegations of Japan-bashing, corporate cover-ups and with dozens of class-action lawsuits looming and the prospect of lasting damage to Toyota’s once-pristine reputation, the song’s lyrics seem sadly, eerily appropriate: “When all the world is a hopeless jumble, there’s a rainbow highway to be found to a place . . . just a step beyond the rain.”
Fortunes in Toyota city, and its population of 420,000 rise and fall on the back of Toyota’s balance sheet. About eight in 10 of the local workforce are said to depend directly or indirectly on the company’s seven local factories and thousands of subsidiaries and suppliers. Toyota is largely responsible for one of the lowest regional unemployment rates in Japan. Nearby, Nagoya Port has for years accounted for about half of the country’s trade surplus. Locals opted in 1959 to permanently change the city’s name from Koromo to Toyota city. Half a century later, many are fretting about what the future holds.
“We rely on Toyota for over half our business,” says Yoshie Tamura, a manager in Aunties, a business hotel near the company’s headquarters. Like many locals, her life is directly tied to the town’s namesake: her husband has worked in one of the factories for 10 years. “Our business was already 30 per cent down because of the recession, then we all began hearing about the recalls, which were such a shock,” she says. “But a lot of us also wonder if there is not too much fuss being made.”
That's not an isolated opinion. Japan's mass-selling weekly magazines have waded into the bitter controversy over Toyota's mounting problems with accusations that the US press is exaggerating, and worse. "America is at war with Toyota," screams Shukan Shincho, which accuses US newspapers and TV of playing up the Japanese car-maker's problems for political effect.
“Behind this story is the collapse of General Motors,” it says, and behind GM is US transport secretary Ray LaHood, the United Auto Workers Union and even president Barack Obama, who has taken “almost no action” to cool down the media feeding frenzy against Toyota – a company that employs 170,000 American workers, it points out.
The US is capitalising on Toyota's problems, which are a distraction from its own, says Yozo Hasegawa, author of Clean Car Wars: How Toyota and Honda are Winning the Battle of the Eco-Friendly Motors. "This is not just a problem caused by Toyota alone. Largely it is a political issue between Japan and the US, an anti-Toyota campaign initially sparked by US broadcasters."
Few at Toyota will openly back those claims but, off the record, sources close to the company agree. “I think there has been a fair dose of bewilderment at the way things have spun out of control,” said one. “A lot of people here think we have done everything by the book. There is that sense that problems are being created where there are none.” As evidence, he cites brake problems in the Prius. “One of our executives said very clearly that the braking in the Prius meets Japanese performance standards – period.”
Independent analysts scoff, however, at Toyota’s claims that it is the victim of a stateside witch-hunt. “Toyota has this massive arrogance and they cloak it with false humility and top it with this halo of quality,” says John Harris, a Japan-based communications consultant to the car industry. “They just don’t get what this is about. They dragged their feet and covered up their problems. They saw the chance to get the world’s top spot and they took it, but there has been a price.”
Like many analysts – and backed up by the Toyota president’s statement to the US Congressional hearing last month – Harris believes Toyota grew too big too fast, and lost control over its key selling point: quality. The museum trumpets the company’s phenomenal two-decade expansion, pointing out that it now makes autos in “26 countries and regions around the world”, including 688,000 a year in Europe. Cars are just part of a growing multinational portfolio that includes homes, boats, industrial robots, biotechnology and financial services. “Severe economic difficulties” forced the company to pull out of Formula One racing last November. “In manufacturing, you can have good, quick and cheap, but you can’t have all three,” says Harris. “Toyota tried to have all three. They were cutting costs faster and harder than other car companies, while bringing in new plant and people. Expansion and cost-cutting puts a strain on any organisation. Something was bound to give.”
Employees say Toyota’s enthusiasm for cutting costs grew after the shockwaves from the Lehman Brothers collapse hit the town over a year ago. Lines were shut down and contract workers, including many from abroad, were sacked, leaving a pared-down workforce of full-time employees. “They’ve closed shop,” said one company insider, who requested anonymity. “They got rid of all the little people and told everyone to tighten their belts. You can’t even make a colour [photo]copy in the offices now because it wastes ink.”
Like many large Japanese corporations, Toyota can still call on extraordinary levels of loyalty and sacrifice from its staff in times of crisis. Existing plant workers have been asked to return for second shifts to make up for staff shortages and managers work up to 120 hours unpaid overtime a month, while shouldering a 20 per cent cut to their all-important yearly bonuses. “There’s a lot of unhappiness,” said the source. “They work so hard, then this story breaks in America. They get up in the morning and see CNN killing them on TV.”
Toyota has moved quickly to head off those damaging media claims, promising on-site US inspections within 24 hours of any reported car problems, appointing a hit squad of quality officers to each production region, and installing new technology to cut engine power when the brake and accelerator are simultaneously applied – a response to claims that sticking accelerator problems led to several deaths in the US.
But, almost as soon as they put out one fire, another breaks out; in February came new revelations that inspectors from the US National Highway Traffic Safety Administration visited Toyota late last year to warn the company of stateside safety rules – and were ignored. Toyota bosses "were dragging things out, and we'd had it", a senior American transportation official told the New York Times. Says Harris: "It was very unusual for NHTSA officials to come to Japan. The charitable view of that episode was that Toyota was not proactive, and slow to react; the uncharitable view is that it was covering things up."
But suspicion lingers in Japan that the controversy is as much political as technological. With US by-elections looming, politicians there “are rushing to get in their two cents worth about the recalls”, laments the liberal-left Asahi newspaper, which adds that the battle to save the company’s reputation has recruited some unusual allies. Governors of four states that host Toyota plants have sent letters to Congress defending the automaker.
Around Toyota city, there is resentment at the recent coverage of its namesake. Many are quick to point out that US rival Ford, which posted a 24 per cent US sales increase in January, has a far worse safety record – over 20 million vehicle recalls, including 7.6 million in 1996 alone. But there is fear now that the best may be gone, and that Toyota’s quality issues are emblematic of the entire country’s declining fortunes. “We started with nothing after the war and fought hard to get to the top,” said the owner of a cake shop near the company’s factories. “People seem to be forgetting that struggle today and are letting things slip.”
Pride in the achievements of the company is still strong. Crime is low, the streets are pristine and though the recession has hit many local businesses, few shops have visibly shuttered. Unlike the hucksterism of its Detroit rivals, the atmosphere is low-key: Toyota Motors’ headquarters squats in the centre of a sprawling complex of nondescript factories and office blocks, its tiny logo barely visible in the orderly urban landscape.
The only sign of corporate paranoia are the security guards outside the company’s plants who wave away photographers and even attempt to confiscate pictures. Inside the HQ, Toyota’s spokespeople have been instructed to batten down the hatches and ignore media requests for comment. “Executives are doing most of the talking now,” said one source. That leaves analysts to speculate if the company will ever bounce back from the worst crisis in its history.
“The worst-case scenario is that Toyota is looking at a lost generation of foreign buyers,” warns Ashvin Chotai, director of the consultancy firm Intelligence Automotive Asia. “Already we’re seeing the resale values of their cars dropping. If these revelations keep coming and the Toyota PR machinery continues to be sluggish, almost amateurish, it risks becoming an ordinary company.” But he adds that Toyota is still a technological frontrunner, and the only carmaker with an AA credit rating. “They still have the ability to recover.”
Hasegawa says that recovery depends on “whether American opinion calms down – perhaps if the media finds another target”. In the meantime, he believes the company will go back to basics: shifting from expansion back to maintaining quality. “It will wait for things to settle down, and then it will be back. Definitely.” But some visitors to the museum had their doubts. “Maybe if they stick to making cars instead of violin-playing robots,” said one.
Life in the corporation
KAZUO AKATSUKA, 55, lives a life that is dominated, for better or worse, by his employer, Toyota.
Since graduating from school at 18, Akatsuka has lived in Toyota city, working for Toyota first as a line worker, and now driving a motorised cart delivering parts to other workers assembling Prius at the Tsutsumi plant. For now the recall crisis has not affected him directly – the Prius cars manufactured at his plant already have the latest braking-system fix installed and the factory continues to run as usual.
Akatsuka follows the news of his company on TV and in the newspaper. “When I first heard the report on Toyota’s recall, I was frankly surprised that this could actually happen at Toyota because Toyota is so strict on quality.”
He thinks that in its quest to become the world’s number one car company, the company cut corners; the use of contract workers who don’t share the Toyota work ethic and the mounting pressure to use time efficiently to produce more cars has led to greater risks. He says he is worried that the new crop of temporary workers might not have bought into the “Toyota Way”, the company’s much-vaunted and much-copied management philosophy.
After 37 years with the company, Akatsuka lives what could be called the “Toyota dream”, with a house in the city paid for with his Toyota paychecks, and four cars – all Toyotas. He lives with wife Hiromi, a former employee of the company, who washes his shirts and jackets with the company logo, and their two daughters and one son. Every day he drives or walks to work, as there are no trains that run near the factory.
Even his religion has been influenced by his work at the auto giant. Akatsuka became a devout Buddhist to help him handle the stress from his repetitive labour as a factory line worker. This week Akatsuka is on the late shift. He wakes up in the late morning and begins work with exercises at 4.05pm followed by a safety meeting. Then he and his colleagues recite the Toyota mantra that constitutes the automaker’s basic philosophy, as expressed by Eiji Toyoda, who himself was the general safety and health supervisor back in 1957: “Safe work, reliable work, skilled work. Safe work is the door to all work. Let us always pass through this door first.”
Akatsuka’s father worked mostly
on construction sites on Japan’s southern island of Kyushu. He thinks a feeling of inferiority of being a day worker’s son had made him crave a job as a formal employee of a company such as Toyota.
Akatsuka finishes work around 2am and, while his family sleeps, he reheats his dinner left for him by his wife: noodles simmered in miso, soysauce-flavoured fried chicken, fried potato, and a salad.
Despite the current problems, Akatsuka believes that Toyota will weather the storm. “I still love my company and am proud. It’s also my bread and butter. It is great that our company became the world’s No 1, but this has meant that there are more risks. Our company should sincerely reflect and shouldn’t be afraid. We should learn our lessons and become more mature. Then we can become number one again.”
His wife agrees and wants the company to get back its prestige.
“I hope Toyota does its best to do whatever it can to recover its reputation. Our life is completely dependent on the company in that we have house loans, children that need to go to school, and our day-to-day living,” Hiromi says.
But their son Kazuhiro, a 21-year-old who likes the heavy metal band Slipknot and has grown up surrounded by Toyota, has a different take on things.
“Everyone here works for Toyota or something related to Toyota or automobiles. That has made me hate or become indifferent to cars.”
