The Toyota Way

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http://www.yeald.com/Yeald/a/34021/toyo ... tails.html

Toyota vs. GM: The Devil in the Details

INDEPENDENT ANALYSTS Toyota's productivity and profitability reflects the commitment not only of management but of the entire organization; something U.S. and European automakers must understand to survive
Betrifft: Automotive Corporate Governance DAIMLER AG Executive Management GENERAL MOTORS Industrial Investor Relations Machinery TOYOTA INDUSTRI

by LEONARD M. KARPEN, JR.

A former Senior Credit Officer and Commercial Loan Officer experienced in working with a diverse range of industries and companies of all sizes. more...


With productivity growth that is 2x that of Detroit, a profit margin of close to 7% in a 2-3% world, and market capitalization exceeding that of GM, it is no wonder analysts have taken notice of Toyota's success. To the man in the street, especially in the U.S., however, these statistics come as not surprise -- just look at how many cars next to you, ahead of you, and in your rear-view mirror has the Toyota ensignia on them. And that's the point really, isn't it? Cars on the road rather than on the lot, customer retention, and new sales of product that moves upscale as customers earn more. Innovation is in there too of course -- who would not want a Prius in an environmentally conscious world. So what of this incredible success in an industry wracked with pain?

Like other analysts, I agree that Toyota management deserves a round of applause, even if we don't like everything about how the company operates from a "transparency" standpoint. More than this though it seems the true glory of this company -- and the true meaning of its success -- lies in the way it operates internally. It's the culture of the organization and of the country from which it comes. Honda had it in the 1980's (and still does given it's 5.7% profit margin) and Toyota has it today. It's a more long-term way of looking at things while still paying attention to the every day details of producing cars. It's a continuous desire to work together to create something better. It's a way of dealing with people that is straightforward and respectful. Most of all, it's something the European and U.S. automakers lack: a unified, deep-seated, desire to "be on the same page".

In Europe and the U.S. management is constantly at odds with its workforce. The Europeans try to appease, Detroit tries to cajole but the end result is a sense of division. Maybe the Japanese culture allows for a more unified approach to making things -- better philosophers than I have written volumes on this -- but the results are clear -- just look at Toyota. In the U.S. everyone has become jaded; Detroit tried kaitzen and couldn't sustain it. Hollywood made funny movies about Japanese management (remember "Gung Ho") and to talk about it again would just be blase'. This type of scoffing is deep seated in U.S. business today -- partly because U.S. companies don't really care about their workers; they've shown it over the course of the last 15 years in the downsizing, rightsizing, outsourcing, etc. And workers know it and thus are reluctant to be loyal and embrace any new ideas that management tries on them. The whole system is berift of the spirit of cooperation that makes Toyota so exemplary.

Clearly Detroit is at a competitive disadvantage in terms of the costly burden of "legacy" pension plans and retirement obligations of the UAW members but to try to rid themselves of these burdens in anything but an "honest" way (i.e. don't send more manufacturing offshore -- workers aren't stupid, they listen to the news too) is doomed to fail. More importantly, however, the U.S. companies have to continue to fight each day to come up with new ideas rather than execute on a single good idea -- make cars. Look at the ludicrous fight between GM and Fiat -- buy me out I'm a loser! This in microcosm sums up my whole point. The devil is in the details when it comes to manufacturing a product that people want and need and come back for to the same provider over and over again. The U.S. and European automakers have to take this to heart. As the Economist so eloquently put it recently, at Toyota: "They focus on paitent execution of sensible, but ambitious plans, to expand their sales... no miracle cures, just relentless grinding professionalism... (and) every employee knows the 'Toyota way' of doing things". Here endeth the lesson.