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| Tuesday, 17 August 2004 |
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Toyota Triumphant It's the world's best car maker, nearly twice as profitable as its Big Three competitors - combined. Now it embarks on audacious new plans, investing billions to rev up sales around the world. by Tom Holland Toyota City AT TOYOTA MOTOR CORP'S Motomachi factory in Japan, workers scurry to fit the right parts in the correct sequence before a swiftly-moving conveyor can bear the half-assembled cars away to the next stage of production. Although practised, the workers' movements are hurried and their faces set in concentration. There is none of the constant banter that sustains factory employees elsewhere in the world; none of the practical jokes. Suddenly, a worker fumbles and upends a component tray, scattering small black plastic grommets across the factory floor. Reacting swiftly, he yanks on a white communications cord looping above the conveyor. A klaxon blares and an orange light appears on an overhead signboard indicating the location of the upset. Instantly three colleagues converge on the spot, scrambling to pick up the spilt parts and replace the tray. The worker manages to fit his component before the car is carried out of reach and the alarm is cancelled. The line continues, unimpeded. This is the Toyota production system at work: a set of industrial principles that has allowed the car maker to power past its rivals and the reason why Totota is a company at the top of its game. Its cars regularly top quality surveys and are a phenomenal hit with drivers everywhere. Last year Toyota sold nearly 6.8 million vehicles globally, overtaking Ford to become the world's No. 2 manufacturer by volume. Toyota is also uniquely profitable. In the year ended in March, it brushed aside a static home market and a rapidly appreciating yen to post Y1.16 trillion in net profits ($10.28 billion at the average exchange rate for the period) - the first Japanese company ever to top Y1 trillion in profits. That was almost double the profits of its three principal competitors - General Motors, Ford and Daimler-Chrysler - combined. And it kept accelerating in the April-June quarter with a 29% jump in net profits to Y287 billion. Having passed these landmarks, Toyota is now embarking on an ambitious international expansion to secure the company global dominance of the automotive industry. Last month company President Fujio Cho announced that Toyota is raising its production target for this year to more than 7.5 million vehicles, an increase of more than 10% over last year's total citing fast-growing demand overseas. At the same time, Toyota is ramping up its research efforts to develop new materials, engines and car designs intended to conquer new markets and new territories. From Latin America to China, Toyota is investing billions of dollars to build new factories in a bid to capture a 15% global market share within the next decade - ahead of the 14% currently held by GM. Managing these ambitions will be an enormous challenge. Some critics say Toyota is already struggling to maintain quality across the 46 factories it operates in 26 countries outside Japan. Others question the profitability of some of those factories and charge that Toyota's investments are aimed at grabbing market share rather than generating value for the company's shareholders. Detractors are in the minority, however. Toyota is flush with cash to invest and despite the global economic slowdown of recent years, it remains free of the excess production capacity which has cursed its United States rivals, forcing them to cut prices and offer generous incentives. Toyota executives are confident they can realise their ambitions and for the most part independent analysts agree. "It's extremely difficult to say anything negative about Toyota," says Graeme Maxton, Asian Managing Director at independent motor-industry consultancy Autopolis and co-author of a forthcoming book on the global car business. "There may be a lot of structural flaws in the industry, but within that, Toyota runs its business model to perfection. By almost any measure you can think of, Toyota is the best car company in the world." One thing that sets Toyota apart from its competitors is how it make its money. Although the company emcompasses a range of businesses from robotics research to biodegradable plastics, it made almost all its profits last year in a field where its main rivals have found it singularly tough to prosper actually manufacturing and selling cars. In contrast, GM the most profitable of the so-called "Big Three" car companies, earned more than two-thirds of its income last year from financial services. The automotive division lagged a poor second. The foundation of Toyota's success as its production system, imitated by companies all over the world, but seldom matched. At the heart of that system lies a handful of basic, common-sense ideas. For example, each employee is responsible for quality control. If there is a defect during the production process, the individual worker must ensure it is corrected immediately. If the worker who upset the tray of parts had failed to fit his grommet in time, he would have halted the entire production line rather than allow a faulty car to reach the next stage of the manufacturing process. As a result, vehicles leave Toyota factories with remarkably few defects - 101 per 100 vehicles, compared with an industry average of 119, according to a 2004 survey of cars sold in the US market by analytical company J. D. Power. Cars of Toyota's luxury Lexus marque are even more reliable, suffering just 87 problems per 100 vehicles, the fewest among all makes. The cost of such vigilance is remarkably low. On this particular day for example the Motormachi production line is running at 91% efficiency. That is, 126 cars have been completed out of the 138 that should have rolled off the line if the shift target of 303 is to be hit. During an average eight-hour shift, the production line is halted for between just five and 15 minutes, a factory spokesperson claims. (Courtesy Far Eastern Economic Review) |
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