Japan Inc. falls on its face

[Bill Glasheen]

Watching the slow motion train wreck that is Toyota, Inc. is one very fascinating study of business and culture. I'm sure one day there will be a Harvard Case History on what is transpiring today.

When I was a younger lad (shortly after the invention of the wheel and indoor plumbing), the first ever vehicle I bought was a BSA Royal Star.



If you've never owned a British vehicle from the past, then you've never truly understood why the Irish are so fluent at cursing. I spent as much time repairing this used bike as I did riding it. I rewired the entire bike when I had a wire harness meltdown. (Thank you, Lucas!) The piston chambers had to be re-bored. A gasket in the carburetor constantly leaked. Working Smith's gauges? You've GOT to be kidding! If the gauges on your motorcycle worked, you hadn't ridden it long enough.

I'm not old enough to know if British vehicles were ever any better in the past or if their entire auto and motorcycle industry was in decline. But names like Austin Healey, Triumph, BSA, Norton and the like are gone. Jaguar isn't really a British company any more. (More recent Jags had Ford engines in them.)

The situation was ripe for a quality-obsessed competitor to come in and clean house. And that's just what the Rising Sun economy did. "Made in Japan" was a pejorative when I was a child. Then they learned from our own W Edwards Deming, and the rest was history. Out went the British motorcycles. In came Honda, Suzuki (owned one), Yamaha, and Kawasaki. Out went the British cars. In came Honda, Toyota, Datsun (now Nissan), and then others (Mitsubishi, Mazda, Isuzu, Subaru, etc.).

Japan went from being an industrial laughing stock to being the home of the largest auto company in the world. GM bowed to the mighty Toyota, and the rest of the Japanese auto companies took much of the rest.

Most Japanese vehicles were missing on the "sex appeal" part. But they were smart enough to farm out some of this, and learned to make vehicles that looked as good as they ran. The old Civic was fugly. The Civic SI my son drives is a really nice ride.

What made them win? They beat the world on quality. Toyota/Lexus regularly appeared at the top of all auto companies in quality rankings. That was their special niche. Nobody made quality vehicles like Toyota.

And then Toyota decided to be bold. No longer were they going to make better versions of what the British (the Mini), the Germans (BMW), and the Americans (GM) innovated. With the writing on the wall with petroleum reserves declining and the best sources being in the most God-awful armpit hellholes of God's earth (With apologies to my Muslim friends, but... you know what I'm talking about.) it was time to innovate our way to the next version of the horseless carriage.

A decade ago on this forum, I screamed about the importance of hybrid technology. My friend Rich (who used to post here a lot) worked at GE and was very anti Japanese anything in the way of products. Or anti German for that matter. GM obviously made the best vehicles, he said. And the Prius? What a joke, he told me. If it's so damned good, why haven't YOU bought one? (Never mind I drive my vehicles until they die, and all my well-cared-for-vehicles are long past the century mark and counting...)

And then... GM collapsed and became Government Motors (joke...). All Toyota's patents on hybrids were coveted by the also-rans (Ford in particular). And AS I PREDICTED... the hybrid established itself and began to be the major stepping stone for the ultimate goal - a fully electric vehicle.

Electric cars, you say? Fuking golf carts, right?

WRONG!!!

From Tesla...





From some guy's garage in Oregon. This street-legal vehicle - built from the shell of an old Datsun - owns many drag strip track records.



Here's the thing. Toyota saw the writing on the wall, and wanted to push the envelope. They went from being copycat to innovator. They went from the Camry as the signature vehicle to the Prius as the same. Regen (turning braking energy to electricity) became commonplace. Toyota took over the unfamiliar role of being innovator.

And then things went wrong.

Watching the company fall all over itself as reports of uncontrolled acceleration and bad brakes begin to mushroom was painful to watch. At first it was denial. No, no, it's not the accelerator mechanism. It's slipping floor mats. Put the mats back in right! (Dummy!!!) No, no, it's not bad brakes. You see... when the battery is fully charged, the generator shuts off. You only have conventional brakes, and you must get used to the feel! (Dummy!!!)

Toyota became everything we hate about bad British and American companies.

What the hell just happened?

First... I don't think Japan does innovation very well. As a senior research scientist, I know what it's like to be on the bleeding edge. It's very lonely out there. None of the potholes have been discovered, and it's up to YOU to anticipate them (and design for them) before the customer finds them. Or worse yet... before your slower competition sees them and builds a product better than what you innovated.

Second... I have to wonder about Japanese culture. Gone is the old sense of honor where a poorly performing CEO would refuse salary or - more dramatically - commit seppuku. And now? Mr. Toyoda sounds like a confused teenager making excuses in press conferences.

My guess? I think they've lost the best of their old culture (honor) and kept the worst (top-down management). The guy on the front lines who KNOWS what's going on can't communicate it to the top. Someone like me can't just walk into the CEO's office and say "You know... we have a BIG problem."

FWIW... I can tell George what I think about some Uechi subject. Any time. He may tell me I'm full of schit, but he'll listen. And I ALWAYS have a voice. And he supports that voice. That's very... un-Japanese! A proper Japanese never tells you what he REALLY thinks - except after hours in the Geisha house under the influence of a few cups of sake.

Or so that's how I see it.

I'm interested in your thoughts and comments. Meanwhile... I'm so disgusted by what I see both in Detroit and Tokyo that I'm one step away from walking into the Tesla plant (in southern California) and asking them if I can be a part of history. I just might...



- Bill

[Glenn]

My initial thoughts reading through this is that you have hit much of it on the head. I am curious though as to what the culture is like at Toyota plants outside of Japan, the one in Georgetown Kentucky for example. How successful have they been with transplanting the Japanese work culture to employees elsewhere?

Remember the 1986 comedy movie "Gung Ho" with Michael Keaton?
http://en.wikipedia.org/wiki/Gung_Ho_(film)

Toyota's executives used this film as an example of how not to manage Americans

[gmattson]

I'd love to see you in a Tesla!

A very beautiful machine (I saw one on the street while visiting friends in Miami.)

And we used to joke about British machines. . . I've owned a number of them. . . but when you have to carry a fairly large tool box in order to do major repairs on your car in the middle of a trip, it isn't fun any longer. (My TR3s had a small trunk, just large enough for a large toolbox!

Susan did a lot of research before purchasing her new car yesterday. . . a 2010 Kia "Soul" with a sports' kit. What a great car.

Watch out Japan. . . the Koreans are coming!

[Glenn]

Toyota became everything we hate about bad British and American companies.

From a 2007 Businessweek article on Japan's efforts to win over not just the American market share but also the American people Why Toyota Is Afraid Of Being Number One

It's overtaking Detroit—with trepidation. Now, the carmaker is relying on ever-savvier PR to avoid the U.S. backlash it dread.

Ask consumers why Toyota may soon be the largest automaker in the world, and they will point to the Camry. Or the Prius. Or the rav4. (It's the cars, stupid.) Ask manufacturing geeks, and they'll tell you it's about just-in-time production and a maniacal focus on constant improvement. (It's the engineering, dummy.)

But there's another drama behind the carmaker's tire-squealing momentum. It's a story that might be called: How Toyota is winning the hearts and minds of America.

With a deft combination of marketing, public relations, and lobbying, Toyota has done a remarkable job over the past 20 years of selling itself as an American company. That drives the Big Three to distraction. Here's Chrysler communications chief Jason Vines: "The thing I resent is Toyota wrapping themselves in the American flag," he says. "We still employ more people and contribute more to the economy."

Who cares what Detroit thinks? Well, strange as it sounds, Toyota does. Its executives may privately relish victory at the expense of General Motors, Ford, and Chrysler, but here's the truth: Toyota is afraid to be No. 1—or at least what that implies. And not just because one of its slogans is "Run scared." It's because the extra scrutiny could undo much of the hard work of the past 20 years. "We constantly need to think about the potential backlash against us," Toyota CEO Katsuaki Watanabe tells BusinessWeek in an exclusive interview. "It's very important for our company and products to earn citizenship in the U.S. We need to make sure we are accepted."

A 17.4% retail market share should signal acceptance. But Toyota is not admired from sea to shining sea. Yes, the company has won the coasts. But one-third of car buyers are biased against imports, says Harris Interactive. And most of those Ford- and Chevy-loving holdouts live in the Midwest and Texas. In those precincts, Toyota still has a lot of persuading to do. Which explains why it launched the full-size Tundra pickup—a red state vehicle from its aggressive hood to its brawny haunches—and is building it in San Antonio.

Here's the thing: The Tundra amounts to an assault on the last redoubt of Big Three profits. But Toyota doesn't want to be seen as the one that pushes Detroit over the edge. So to prevent a backlash, the company is amping up the charm—launching literacy programs in San Antonio, vowing to share technology with Ford, and pouring money into lobbying, more than doubling since 2002 the amount it spends each year, to $5.1 million. Says Jim San Fillippo, an analyst with Automotive Marketing Consultants Inc.: "Toyota is the best at going native."

The article goes on for quite a bit further, and is an interesting read. At any rate, maybe as Bill implies they went too far "native" in the U.S.

It's going to take a lot of PR to overcome the current backlash Toyota is getting over the acceleration and brake issues, never mind all the recalls the U.S. companies have had to do over the years.

[Glenn]

Some related stories out today:

Toyota Recalls Become ‘Reinforcing Cycle’ of Scrutiny

Feb. 10 (Bloomberg) -- Toyota Motor Corp.’s perceived delays in fixing vehicles prone to unintended acceleration are intensifying scrutiny of the company’s products and leading to more reviews and recalls, automotive analysts said.

Toyota President Asked to Come Before House Oversight Panel

Feb. 10 (Bloomberg) -- Toyota Motor Corp. President Akio Toyoda was urged by a Republican lawmaker to testify before a U.S. congressional committee.

Representative Darrell Issa of California, the senior Republican on the House Oversight and Government Reform panel, said in an e-mailed statement today that he invited Toyoda to appear before the panel’s hearing into the automaker’s handling of recalls on Feb. 24.

Not to say Toyoda will accept the offer, but how often do the presidents of foreign companies appear before congress? On the other hand, U.S. employees are already meeting with lawmakers:

Toyota Employees Hit Washington to Help Automaker

Feb. 10 (Bloomberg) -- Alesia Murdoch has spent 11 years building transmissions at the Toyota Motor Corp. plant in Buffalo, West Virginia. Yesterday, she got a new job: Lobbyist.

Murdoch was one of 23 U.S. employees of the Toyota City, Japan-based carmaker to visit lawmakers’ offices in advance of congressional hearings into millions of vehicles recalled for sudden acceleration.

She said she and her fellow employees wanted to remind lawmakers that while Toyota is Japanese-owned, many of the workers affected by the recalls and probes are American.

“We stand behind our products,” she said between stops. “We may have had a little setback, but we’re going to come out stronger.”

Toyota, the world’s largest automaker, has recalled almost 8 million vehicles on five continents to repair defects linked to unintended acceleration. At least three U.S. congressional committees plan hearings into whether the recalls were handled properly by Toyota and the National Highway Traffic Safety Administration.

‘Japan Bashing’

Failing to address the problems more swiftly has led to global criticism, a member of Prime Minister Yukio Hatoyama’s cabinet said today. “This might not have resulted in Japan- bashing and Toyota-bashing” with quicker action, Mizuho Fukushima, the minister in charge of consumer affairs, said in an interview in Tokyo.

The automaker sent people from eight states with company plants to Washington and covered their expenses, said Martha Voss, a company spokeswoman. The visits were timed to be a day ahead of the first hearing, which was scheduled for today and then postponed to Feb. 24 because of a snowstorm.

The crisis-spawned calls on lawmakers follow a surge in spending that has made Toyota one of the auto industry’s biggest lobbyists in Washington.

In 1999, the company spent $685,684 on Washington lobbying, Senate disclosure documents show. Last year, the world’s largest automaker spent $5.2 million, more than seven times the 1999 amount, and passed one of the big three U.S. automakers, Chrysler Group LLC, for the first time.

‘Lobbying Game’

“Toyota learned the lobbying game swiftly and ahead of most other non-U.S. carmakers,” said Rogan Kersh, associate dean of New York University’s Wagner School of Public Service. “They’ve spent resources strategically, hired the right kinds of people and have been able at least to gain a hearing when they have questions or concerns about legislation or proposed regulations.”

The company bolstered its Washington team last week by hiring the Glover Park Group, a public relations, crisis management and lobbying firm headed by several former officials in Democratic President Bill Clinton’s administration.

The $5.2 million spent last year by Toyota City, Japan- based Toyota to influence Congress and federal agencies exceeded the $3.8 million spent by Auburn Hills, Michigan-based Chrysler. Toyota also outspent Japan-based automakers Nissan Motor Co. of Yokohama and Honda Motor Co. of Tokyo.

Given the reaction in Japan quoted in that last article, I wonder if Toyoda will still be president when the congressional hearing on Toyota's recalls starts on February 24.

[Glenn]

Toyota is not the only Japanese automaker having troubles
Honda to Recall 437,763 Vehicles to Repair Air Bags

Feb. 10 (Bloomberg) -- Honda Motor Co., Japan’s second- largest automaker, will recall 437,763 vehicles globally to repair air bags that can deploy with too much pressure, adding to previous U.S. recalls for the same defect.

The expansion covers 378,758 vehicles in the U.S., Honda said in a statement late yesterday. The Tokyo-based carmaker will recall about 4,000 cars and minivans in Japan, it said in a filing to the nation’s Transport Ministry today.

The recall expansion heightens safety scrutiny of Japan’s largest automakers. Honda’s biggest competitor, Toyota Motor Corp., is working to reassure customers after recalling more than 8 million vehicles worldwide to fix problems linked to unintended acceleration and brake failures.

“Because of the Toyota recalls, Honda’s action is getting a lot of attention, but it’s not fundamentally a big deal,” said Mamoru Kato, an analyst at Tokai Tokyo Research Center in Nagoya, Japan. “Recalls are kind of an everyday thing.”

[mhosea]

Since I know a little something about "The Toyota Way" (though just parts of it that my company emphasizes), I have to say I'm somewhat surprised at how inept Toyota's top management appears. It is supposedly not a place where the low-man can't be heard, but I can't reconcile the behavior of top management with what I understand their core principles to be. For example, they are supposed to eschew personal blame and focus on root causes and countermeasures that prevent problems from coming up again. Stepping up and "owning" a problem is respected. That's why I was surprised to hear them come out and essentially blame a North American factory for their gas pedal issue in an apparently vain attempt to save face with their Japanese market, with the side-effect of trashing probably a couple of decades of work building a reputation of quality regardless of where the point of manufacture is. Then the Prius problem arises, and it's all for naught because Priuses are made in Japan.

Before I go on, I have to point out that I don't think I've ever owned a vehicle that wasn't involved in some recall or other, usually more than one. Yes, of course most things are minor, but once in awhile there is something very serious that might happen rarely, for example in my Nissan Quest there was a hose replacement (where the gas take is filled) because under some conditions, with a completely full tank and a hot car, it could crack, spill gasoline, which then could ignite, causing whatever mayhem. Recalls are common enough, but when your claim to fame is quality, they're just bigger deals than they otherwise would be.

Bill might be on to something with respect to doing tried-and-true better versus innovation. The processes in "The Toyota Way" do seem to me especially effective for the former, not so much the latter. With innovation you don't always know what to check, and failures of this nature are probably inevitable, in which case you're ultimately judged by how well you respond to them <sigh>.

For my part I junked that Nissan Quest last year and bought a Subaru Forester (which I really like), not a Toyota. It has a very "tried-and-true" feel to it, although some of it extremely so, like the 4-speed automatic transmission (the most maligned feature of the vehicle). Subaru is offering CVT on the new Outback models, so we'll have to see how that goes in the long run. BTW, I've already had the first recall on the Subaru--an ECM reprogram to correct a problem that can lead to higher emissions in some conditions, so I was told.

[f.Channell]

My 2001 Toyota Corolla is the most problem free dependable car I've ever owned. I would not have given a second thought to buying another one.
Boy they have screwed that up.
Why not just go back to the technology they used then and modernize the body a bit.
Do they need to keep the engineers busy or something?

F.

[Bill Glasheen]

Why not just go back to the technology they used then and modernize the body a bit.
Do they need to keep the engineers busy or something?

1) The days of the classic Otto engine are numbered. To start with, Japan produces none of its oil, so is at the mercy of oil producing states.

2) Japan took the lead on cameras and consumer electronics. Why not automobiles?

3) Detroit's biggest failure was doing the very thing you suggested, Fred. They ignored the future and instead followed what consumers were buying at that point in time (e.g. big SUVs and trucks). Problem is... that trend was largely an artifact of trucks being exempt from CAFE restrictions. An SUV by fluke is considered a "truck." Great... so now mommy is driving that big, honking POS. Thankfully the engineers in Japan knew not to go there. They already spanked us during the 1970s OPEC oil embargo. Which would you rather buy - a Pinto or a Civic? A Vega or a Corolla? Time to take the lead.

4) Between now and the final electric vehicle lies myriad potential patents. He who owns the patents wins.

- Bill

[dmaestas]

I dont think Toyota has anything to worry about. It won't be long before we all forget the great recall of 2010.

So Toyota made a mistake. I'm not discounting the fact that people were killed, but we are a people of short memory spans. The Ford Exploder didn't get that label because its witty and who can forget the bombshell Pinto (probably lots of people). The Focus was recalled and later became the number 1 selling car. Go figure. And to top it off, Ford was second in sales for 2009. If this is Toyotas future, Ford should be scared.

In time people will forget, some other company will make the next huge mistake and Toyota will win back some customers who were on the brand fence and arent really loyal to anyone. The diehards will remain loyal and the competition for market shares will march on.

Toyota may never win the American Label lovers. Those disillusioned few who don't realize GM and Ford employ more foreigners than Americans (reminds me of Tommy Boy). Japanese cars we buy in the US are made in the US by Americans. I can with a good conscience buy a Japanes car, knowing it was made in the USA. In my driveway is a Nissan Quest and a GMC sierra, one made in Tenessee and one made in Mexico. The only true foreign car I own is my 92 Jetta GLI, which was made in Germany and drips more oil than the Valdez. Nobody lost their job when I bought it, in fact my mechanic has a new house now because of it.

If Toyota decides to salvage their reputation by offering a killer deal, I will definitely consider them next time I need a new car. Otherwise I will do what I always to, shop around and see who is offering the best price for the features I want.

PS - If I want sex appeal, Ill buy a corvette, but Im not that old yet.

[f.Channell]

I must say Bill that's a good looking bike in the first post.
Even if it doesn't run!
F.

[mikemurphy]

Bill,

No comment on the Toyota. Never bought one, never will! However, I understand completely about the British Bike. My first was a 72 Norton Commando. I wish I had a picture of it, but when I was done with it, there wasn't much left. The thing was so top-heavy, I dumped it more times than I can remember. Nothing ever worked right anyway.

mike

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[Bill Glasheen]

Bill,

My first was a 72 Norton Commando.

Norton 750 Commando??

The guy who sold me the BSA bought a brand new Norton Commando.

My best (childhood) friend bought one. It had sat in the showroom too long, and the seals had shrunk. The bike dumped its oil and the engine seized. Oy!

But nice bike!

This was my 2nd bike. No complaints.



Broke 100 mph more times than I want to admit. One night when speeding north on Rt 29 from Lynchburg to Charlottesville, some poor bat thought I was a fly. Bat coming in at 40 mph against 100 mph bike = shattered face shield. I thought someone threw a rock at me. Didn't know what happened until I got home and saw the bat fur.

Only modification was to put in an electronic ignition - something that was "aftermarket" at the time. Also threw away the Bridgestones and got high performance Dunlops. They never lasted long, but they were worth every penny.

- Bill

[Van Canna]

This was my Yamaha 750 special shaft drive...a great bike...




Once I had it going at 105 MPH...pretty stupid days...

[Bill Glasheen]

Shaft drive was a wonderful evolution for motorcycles. Was it Honda or Yamaha that came out with it first? (I believe the Gold Wing had it.) I remember what a pain it was constantly adjusting the tension on the chain and lubricating it. Now all the high-end bikes are either shaft or belt drive. First time I saw a Harley with belt drive, I thought they'd sold their souls to the devil. But hey... they work and they're low maintenance.



A friend had one of those Yamahas and let me take it for a spin. I almost dumped it on a U-turn at slow speed. I hadn't quite gotten used to the feel of it. Very different from my Suzuki.

- Bill