Monday, February 15, 2010

Toyota abandons “The Toyota Way”

http://www.dailyfinance.com/story/company-news/how-recall-plagued-toyota-lost-its-way/19357113/ Toyota (TM) has now recalled about 9 million vehicles and counting, including the latest recall involving 8,000 2010 Toyota Tacomas to inspect their front drive-shaft which could contain a cracked part that could get even worse when customers drive the truck. When joined with the sudden acceleration problems and flawed breaking systems of various other Toyota models, it seems likely that Toyota has lost its way. The reason? Toyota abandoned the Toyota Way in its quest for growth.


The Toyota Way was a management method in which newly hired Toyota engineers would work closely for 10 years with experienced masters who taught the newbies how to make the trade-offs between the pressure to lower costs and the need to maintain high quality, according to the Washington Post. The Toyota Way enabled Toyota to produce high quality vehicles less expensively and charge a price premium, about which I wrote, since they lasted longer and cost less to maintain.

That strategy contributed heavily to Toyota's growth over many decades because that reputation for top quality attracted more satisfied customers who recommended Toyota to others. But all that changed in the early 2000s. As I posted, in 2002 Toyota saw a chance to overtake General Motors as the world's largest vehicle manufacturer which set Toyota on a too-rapid growth path -- it produced 60% more vehicles in 2008 than in 2000 -- that stressed the Toyota Way to its breaking point.

While all the details have yet to be unearthed, a general picture of what went wrong is emerging. The biggest problem is that as Toyota grew, it was unable to produce enough engineering mentors to train for 10 years the new engineers that it was hiring to design the new models needed to meet its corporate growth targets. The new engineers made bad design choices which lowered cost and quality -- under the Toyota Way, remember, engineers had been able to cut costs while maintaining or boosting quality.

There were other problems as well -- from Toyota's decision-making style to ignoring customer complaints -- that allowed these bad design decisions to persist. For example, although most of Toyota's sales came from North America, all corporate decisions were made in Japan -- where Toyota executives lacked in-depth insights into the conditions in the U.S. market.

And as the Washington Post reported, Toyota's executives outlined specific process problems that contributed to the nine million vehicle recall:

  • Toyota did not thoroughly test new cars under a variety of road conditions -- instead relying on computer models which missed problems such as Prius brakes not working well on wet road surfaces;
  • Toyota did not gather customer complaint data from U.S. customers to identify problems and redesign its products and processes; and
  • Toyota did not share data about sticking gas pedals in European vehicles with managers in the U.S.

So now that all this information is out, does this mean that Toyota stock -- now trading 43% below its December 2006 all-time high of $134 -- is a screaming buy? At a Price/Earnings to Growth (PEG) ratio of 2.1 -- on a forward P/E of 25.2 and average annual earnings growth of 12% for the next five years -- the stock is not cheap.

And since I believe it will take another year for Toyota to find all the problems and discover the underlying causes of all of them, I am not expecting Toyota to be able to redesign its management methods and fix all the problems it discovers for another three to five years.

Until then, its earnings growth forecasts are suspect and I would not be shocked to see more big recalls which could further sink its stock price.

http://iptoyota.com

http://www.breitbart.com/article.php?id=D9DSNHHG0&show_article=1
WASHINGTON (AP) - The government has received new complaints that bring to 34 the total number of alleged deaths in Toyota vehicles due to sudden acceleration since 2000, according to government data posted Monday.

The government has received complaints during the past three weeks alleging 13 deaths. The deaths allegedly tied to this problem happened in nine crashes between 2005 and 2010.

From 2000 to 2009, complaints alleging 21 deaths in Toyota vehicles had been filed with the government.

http://www.guardian.co.uk/commentisfree/2010/feb/13/toyota-innocent-age-motoring


RIP: the innocent age of motoring


 

http://www.printthis.clickability.com/pt/cpt?action=cpt&title=Toyota+Faces+Tough+Job+Rebuilding+Reputation+|+Economy+|+English&expire=&urlID=420788557&fb=Y&url=http%3A%2F%2Fwww1.voanews.com%2Fenglish%2Fnews%2Feconomy-and-business%2FToyota-Faces-Tough-Job-Rebuilding-Reputation-84388992.html&partnerID=571322&cid=84388992 A still image from Toyota's commercial addressing Recalls in the US

Japanese automaker Toyota has announced yet another recall. This time it is Tacoma pickup trucks sold in the United Sates. The announcement is the latest in a string of recalls that have hurt the company's image, and prompted concern among many in Japan.

The Toyota brand is an icon in Japan. Its global success is a source of national pride. So when the automaker announced plans to stop selling millions of its cars in the United States and Europe last month because of gas pedal defects, the Japanese were concerned. When the company expanded its recalls to Japan, the public reacted with disbelief.

Toyota was founded in the early 1930s but the its real success came after World War II when it developed something called "The Toyota Production System." The system focused on "kaizen" or continuous improvements. It called for flexibility on assembly lines, and mandated that problems be fixed as soon as they were discovered so mistakes would not be repeated.

Quality and reliability became Toyota's selling point. But with defective brakes, sticky gas pedals, and loose floor mats prompting recalls of Toyota cars worldwide, that reputation is falling fast.

Jeff Kingston teaches modern Japanese history at the Temple University branch in Tokyo. He says the company has lost its way.

 "I think they've grown complacent, resting on their laurels," he noted.  "I think their management system is antiquated. We've seen how slow decision making can be."

Kingston says the company waited too long to respond to the problems. It took weeks for Toyota President Akio Toyoda to speak publicly about the recalls. When he did hold a news conference, he apologized for "inconveniencing the customers." He also has vowed to "redouble the company's commitment to quality."

Kingston says that apology was not enough.

"Toyota has failed to measure up to international standards; it's also failed to measure up to Japanese expectations," he added.

Toyota's problems come amid a growing number of complaints, accidents, recalls and financial problems for several leading Japanese companies. The spike in complaints is partly the result of a new law that requires Japanese companies to report serious product-related accidents.

Government reports also say the number of domestic car recalls doubled between 2004 and 2008, compared with the previous five years. Last week, Honda recalled more than 400,000 cars worldwide because of defective air bags.

Waseda University Finance Professor Yukio Noguchi says Toyota's problems are a sign of arrogance, after years of global success. But he says it is unfair to compare its problems with those of other Japanese companies.

"This problem is a very special problem and you cannot draw general conclusions from this about Japanese manufacturers as a whole," he explained.

Toyota is trying to restore its image with a massive public relations campaign. The company has placed full-page ads in newspapers and is airing TV commercials in the U.S., vowing to put quality and customers first.

But Kingston says Toyota must go further than that. He says the company must become more transparent and accountable, and reconnect with customers.

"Look at [South] 5-Korean companies," added Kingston.  "Look at how they're charging ahead. Look at how they've got that competitive edge. Japan needs to regain that."

With increasing competition from South Korea, Kingston says Toyota and other Japanese companies must change fast.

http://www.sfgate.com/cgi-bin/blogs/gsindell/detail??blogid=182&entry_id=57101

Toyota Brings Perfection To Corporate Meltdown


 

Guess Who's The Test Dummy Now?

Edwards Deming would be so proud. The man who endowed the Japanese with a passion for quality after the Second World War might appreciate the level of perfection his protege Toyota now brings to the fine art of corporate self-destruction. At every step of the way Toyota has outperformed all competitors. They have made the Ford Firestone tire recall catastrophe look like a mere firecracker in the plumbing. Even Enron, in the rearview mirror, looks like a mild case of the flu.


Read more:
http://www.sfgate.com/cgi-bin/blogs/gsindell/detail??blogid=182&entry_id=57101#ixzz0fdTaPROn