Management Fundamentals 5th Edition by Robert Lussier

Exercise 14

Toyota Motor Corporation, commonly known simply as Toyota, is a Japanese multinational corporation headquartered in Toyota, Aichi, Japan. It is the world's largest automobile manufacturer by sales and production, overtaking GM in 2008. Toyota designs and manufactures a diverse product line of over 70 models that includes sedans, coupes, vans, trucks, hybrids, and crossovers. Popular models include the Camry, Corolla, Avalon, Tundra, and Prius. Its vehicles, specifically the Lexus and Scion brands, consistently rank near the top in quality and reliability surveys. Toyota has long been recognized as an industry leader in manufacturing and production. Its production system, more than any other aspect of the company, is responsible for having made Toyota the company it is today. Toyota received its inspiration for the system not from the American automobile industry, but from visiting a Piggly Wiggly supermarket, where it was inspired by how the supermarket only reordered and restocked goods once they had been bought by customers. Toyota applied the lesson from Piggly Wiggly by reducing the amount of inventory it would hold only to a level that its employees would need for a small period of time, and then subsequently reorder. This would become the precursor of the now-famous just-in-time (JIT) inventory system.
The embodiment of character at Toyota, as any new engineering hire there learns, is a man named Taiichi Ohno, the innovator widely credited as the genius behind the Toyota Production System. Ohno's ideas not only changed the auto industry, they changed late-twentieth century manufacturing. At its core was an attention to detail and a noble frugality that shunned waste of every kind. As Ohno's concepts were handed down to successive generations of Toyota executives, however, the purity of the message appears to have been slowly lost.
In the late 1990s, Toyota began pushing a program dubbed CCC21 ("Construction of Cost Competitiveness for the 21st Century"). In implementing CCC21, no detail was too small. For instance, Toyota designers took a close look at the grip handles mounted above the door inside most cars. By working with suppliers they managed to cut the number of parts in the handles from 34 to five, which helped cut procurement costs by 40 percent. The change slashed the time needed for installation by 75 percent-to three seconds. By mid-decade, Toyota had incredible numbers to share with Wall Street analysts-CCC21 had wrung out more than $10 billion in savings over six years. However, the company's top U.S. executive, Jim Press, warned his bosses in Japan that vehicle quality was slipping. But his warning had no apparent effect.
In 2005, the company introduced an "aggressive version of CCC21," dubbed Value Innovation, which promised more savings by making the entire development process cheaper and faster, further trimming parts, production costs, and time to market. With Value Innovation, Toyota managed to slash the time it took to bring models into production once a design was final to about 12 months, compared with an industry average of between 24 and 36 months. Toyota also began to design parts for many of its cars that were cheaper and lighter, further cutting costs for the company.
However, Toyota's fortunes began to change and its focus on cost cutting rather than quality caught up with it. Three separate but related recalls of automobiles occurred at the end of 2009 and start of 2010 after reports that several vehicles experienced unintended acceleration. The first recall, in November 2009, was to correct a possible incursion of an incorrect or out-of-place front driver's side floor mat into the foot pedal well, which can cause pedal entrapment. The second recall, in January 2010, was begun after some crashes were shown not to have been caused by floor mat incursion. This latter defect was identified as a possible mechanical sticking of the accelerator pedal causing unintended acceleration. Following the floor mat and accelerator pedal recalls, Toyota also issued a separate recall for hybrid anti-lock brake software. When all was said and done, Toyota had announced recalls of more than 11 million vehicles for the problems. Sales of multiple recalled models were suspended for several weeks as a result of the recalls, with the vehicles awaiting replacement parts. Toyota's troubles didn't stop there. Some owners that had their recalled vehicles repaired still reported accelerator pedal issues, leading to investigations and the finding of improper repairs. The recalls further led to additional investigations, along with multiple lawsuits against Toyota. As a result from the recalls, Toyota had to pay a record $48.8 million in fines and, as of December 2010, there were still close to 150 pending lawsuits against the company.
As grave as Toyota's current troubles are, they are symptomatic of a larger problem: It got carried away chasing high-speed growth, market share, and productivity gains year in and year out. All that slowly dulled the commitment to quality embedded in Toyota's corporate culture. In a bid to win back customers, Toyota is offering incentives such as no-interest loans and discounted leases, which it is hoping will reignite sales. Still, the company will be spending many months, perhaps years, trying to absorb a painful lesson about what happens to a great company when ambition gets too far ahead of tradition.
Discuss the importance of motivation and leadership at Toyota