Let’s Not Write Toyota’s Obituary Just Yet

Joseph Lee

The Los Angeles Times had been stalking Toyota for months about the runaway acceleration in some of the automaker’s models. Ordinarily, I  dismiss such articles as over-aggressive reporting or even Japan-bashing. But last week, events proved the LA Times to be correct. In a weekend report, the New York Times noted how Toyota had initially refused to acknowledge the depth and breadth of a serious problem with many of their most popular models. Toyota’s mea culpa came in the form of a massive recall and stop sales impacting over 9 million of the company’s cars around the globe.

Although I point to corporate arrogance as a principal cause in the delayed response, I’d still be the first to tell everyone to stop writing Toyota’s obituary. After all, this company is far from being a GM.

Success Comes from Sacrifice

A decade ago, I had a chance to visit Toyota headquarters in Toyota City, near Nagoya. I was president of a Big 4 consultancy in Tokyo, and we were implementing PeopleSoft, the human resource management enterprise solution. At the time, Toyota was already head and shoulders above its nearest competitors in Japan and within striking distance of Ford and GM. It was quite an honor to do business with Toyota, although we all knew that it wasn’t going to be the most profitable engagement. To work with Toyota meant that we would have to sacrifice.

Toyota’s HQ building was huge but shabby by any standards, Western or Japanese. It looked like it was built right after the war, the hallways were poorly lit, and there weren’t any offices, just a massive workspace where people were working—or sweating. The air-conditioning units were either turned off or non-existent on this hot and humid summer day and all the ceiling fans did was recycle the moist air. Half the lights were off, either to save electricity or to keep the heat down.

My impression was: “Wow, they’ll need PeopleSoft and a lot more!”

But I missed the more important lesson.  These people are relentless in saving money—it is at the core of the Toyota culture. They would find ways to save money that you and I can’t dream of. This isn’t the stuff that shows up on text books on the Toyota Way or kaizen. It goes beyond corporate culture… it’s part of their DNA.

Why Toyota Will Rise Above

Today, the offices of Toyota in the US are bright, well-lit, and modern. The cars Toyota builds are still top notch. Ask any Prius owner.

But what’s sustaining the Toyota name and brand really aren’t the cars at all. It is this DNA of relentlessness that may have been lost (and used just as an advertising jingo) over the last few years, but definitely not forgotten. It is the people, and they are among the brightest in Japan. They have never given up in the midst of numerous crises that make today’s problems seem minor—minor in terms of economic impact, that is. The loss of life stemming from the now-recalled Toyota vehicles is not to be trivialized or dismissed.

Besides, the employees are aware of a very simple fact—all their family members drive Toyotas, and unlike at many US companies, Toyota management is really an extension of the employees. Safety isn’t about a slogan: It is their livelihood.

The New York Times wrote that a combination of events  made it difficult to isolate the cause of the runaway accelerator and the problem did not necessarily manifest itself until there was some wear and tear. What there does not appear to be is a corporate culture of “trading human lives with costs,” which often happens in designing safety features.

It’s easy to generalize, but one mistake shouldn’t erase a track record that spans decades.

Remember: This is a company that sold cheap cars when US$1 was equal to 360 yen almost four decades ago. Today, the dollar is at 90 yen. Toyota cars cost four times more to ship to the US just from the rising yen alone without accounting for inflation.

Do you know of any company that can handle a four times increase in its cost and still be competitive?

(Okay, you’ll talk about all the other Japanese companies, but none was as successful as Toyota has become.)

So, stumble they may, but don’t count out the folks at Toyota. I know a few of them. They can switch from arrogant to humble in a second. They will do the right thing. They all know what it’s like to work in a non air-conditioned open office during the hot summer months.

Joseph Lee is an adjunct professor at the Graziadio School of Business and Management and Peter Drucker & Masatoshi Ito Graduate School of Management, where he teaches a course on management consulting. Read his blog at joe-lee.com/blog.html

Related in the GBR

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The Link Between Price and Profit Margin in a Global Market William R. Smith, Jr., PhD and John K. Paglia, PhD

The Death of Time and Distance by Devendra Mishra and Owen P. Hall, Jr., PhD

Author of the article
Joseph Lee, Adjunct Professor
Joseph Lee, Adjunct Professor
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