Running A Business Like Americans: The End of the Toyota Legend

Auto Giant Stumbles: The End of the Toyota Legend – SPIEGEL ONLINE – News – International.

Toyota used to be the star of the auto world. Now its reputation is in tatters after quality problems led to a series of fatal accidents and massive vehicle recalls. But the problems at the company started a long time ago, when the Japanese carmaker decided to emulate its American rivals.

Toyota cars were once indeed impressive, because of their quality and technical sophistication. The Japanese made gasoline engines more fuel efficient. Toyota was the world’s first car company to develop the hybrid engine for use in mass production, and it invested billions in developing electric cars.

Most of all, however, the Japanese managed to outpace archrival GM. In the 1980s, angry US autoworkers were still smashing Japanese imports with sledgehammers. Two years ago, Toyota became the world’s top-selling car company.

By contrast, Detroit’s Big Three — GM, Ford and Chrysler — came to epitomize the decline of the United States as an industrial nation, a place where once-profitable companies are suddenly reporting losses, and where pride has turned into shame. Without constant financial injections from government coffers, GM and Chrysler would no longer exist.

Toyota’s winning reputation has taken a severe beating. Toyota faces dozens of lawsuits for technical defects that led to the deaths of drivers and passengers, and 8.5 million cars have been recalled. Experts estimate that Toyota will sell at least 1 million fewer cars this year, and the company’s market value has plunged by $33 billion (€24.4 billion) in the last six weeks.

The main culprit behind the demise of the Toyota legend is the Americanization of the company.

The company, once known for quality, shifted its focus to volume, just as the Americans had done. Between 2000 and 2008, production grew by 78 percent, to 9.2 million cars a year. Of the total increase in worldwide production of 12 million cars in those eight years, almost half was attributable to Toyota.

Toyota, it seemed, no longer wanted to be the best on the market — its cars were often merely the cheapest. As was the case at Ford and GM in the past, unbridled growth was the company’s new mantra. Toyota became a giant, and lost its greatness in the process.

The Japanese and the Americans are already similar when it comes to management culture. Both corporate cultures view the production and selling of cars less as a contribution to human mobility than as a continuation of war by economic means. And in this battle, quality was never the decisive argument. Long before the Japanese, the Americans were world champions in the production of poor-quality automobiles.

Toyota came under growing pressure as a result of the American carmakers’ low-cost strategy. Dealer discounts rose while profit margins declined. Today, Toyota management subsidizes the sale of its vehicles in the United States to the tune of up to $4,000 apiece.

The company also tried to force its suppliers to make more and more price and quality concessions. The adage that it is possible to squeeze another drop of water from a dry shirt was always part of Toyota’s philosophy. The once quality-conscious company and its archrivals, General Motors and Ford, became more and more alike.


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