This morning’s Automotive News [sub] carries a highly critical report on Toyota’s reaction to the worldwide automotive meltdown. The bottom line: the Japanese automaker is too damn slow and overly cautious. “Toyota Motor Corp. is famed for its advance planning, obsessive attention to ‘what if’ scenarios and continuous improvement,” Hans Greimel writes. “Yet with the market collapsing, the world’s top automaker is stunned to a near standstill by an astonishing plunge from record profits to record losses in 12 short months.” That’s quite a statement, especially as it seems to be based on a single analyst’s analysis. Greimel trots out JPMorgan’s Takaki Nakanishi, who complains that there’s “nothing remotely innovative” in ToMoCo’s recent plans to cut $5.11 billion in fixed costs by the end of the year. What, no feng shui?
“The company has not made any attempt to address the core strategic elements of production structure realignment or its product, regional and platform profile,” Nakanishi said.
By comparison, Nissan is dumping 12 new models that had been planned for the next five years. It also plans more production abroad to counter the effects of the soaring yen.
So Toyota’s decision not to cut its investment in new models—or at least publicly announce it—is a weakness? You could see it as a sign of strength. You know, if you were so inclined. Nor does the following assertion strike me as the truth about Toyota.
“Exports are an unaffordable luxury now,” said Christopher Richter, an analyst at CLSA Asia-Pacific Markets. Toyota should close plants at home and move volume overseas, he said.
“The time to fix it is now when you have all of your factories in the world operating under capacity,” Richter said. Toyota could boost profits by slashing its ratio of imported cars in America to 9 percent, from a current level of 45 percent, with minimal investment, he estimated.
Apparently, Toyota is . . . waiting.
[Incoming President] Akio Toyoda has pledged to be “as bold as possible in pushing ahead with reforms.”
The problem is that he’s not president yet. And current President Katsuaki Watanabe is unlikely to announce major overhauls before the changeover, for a couple of reasons.
First, the current boss doesn’t want to saddle the next one with any policies that may backfire. Second, he doesn’t want to steal Toyoda’s thunder as leader of the company’s comeback.
So Toyota’s current boss is playing CYA, and the company lets personal politics interfere with its survival. No sense of urgency? Toyota as the new GM? Anyway, Greimel is no stranger to CYA, as his backpedalling conclusion demonstrates.
As cautious as Toyota’s approach is, there are signs that change is afoot.
In late February, the company said it is bringing back Yoshi Inaba, 62, the former U.S. sales chief who left the automaker to run an airport. He will join Toyoda’s administration in June and oversee North American projects. The company hasn’t given details.
A few days later, Toyoda pushed aside three executive vice presidents who had led the company through its rapid expansion—including Kinoshita, who will retire in June.
If only GM had been been bold enough to replace their top management years ago when they first started losing money
When you have done almost everything right for thirty years, you can play defense and hold the lead. Toyota has: saleable models, cash, strong dealers, efficient factories, little legacy costs, no UAW to offset their current weakness. Yes, they are bland in most styling, some of their quality is suspect and they no longer roll the dice. Unless the resale on used toyotas plummets, I am not willing to say they are were GM was 20 years ago. The fact that toyota is willing to change management way before they are in a death spiral in itself speaks volumes. Do you think A Shusomi Wagonersan would still be CEO of toyota in Japan? We laugh at the Japanese “who will apologize to the emporer?”, but the top guy in their culture falls on his sword, and the underlings know things are going to change much sooner than here in the good old USA.
Is this a case of “nothing new to report on the Bailout Boys, so let’s go pick on someone else” going on here? Granted, no one’s had a perfect reaction to the plunging sales levels, but at the same time, isn’t it a little too early in the game to be armchair-quarterbacking Toyota?
I think Toyota’s reaction underscores their fundamental understanding of the crisis – the collapse since September has been 100% economic. They have confidence that they have the right product mix and a stellar reputation. They do not need wild, panicked cost cutting that will cripple their future products, or swing-for-the-fences catch-up products like the Volt.
Their response seems perfectly in line with the strategy that got them to the top to begin with…
I’ve read this is characteristic of the Japanese psyche, that the mode is to plan everything to obsessive detail….and then be dumbfounded when reality departs from the model. A signal example was Pearl Harbor: they thought that, if the achieved total surprise, they’d be able to grind PH into scrap, and they were astounded and without much of a Plan B when we began effectively fighting back and repelling them after the initial clobbering.
Of course, in this case the Tiny 3 are doing *such* a powerful job of responding……….
Stewart Dean-The big oops at Pearl (for the Japanese) was that the carriers were not at home.
It turned out that battlewagons were history and airpower was everything. Adm. Yamaoto did note that “I am afraid we have awakened a sleeping giant”.
Agree that Toyota’s continuing with new model development is a clear sign of srength.
Top companies do this in down times and when the tide turns they have new design vs the competitions old stuff. Duh.
Bunter
Bunter1:
That is why a lot of people are putting stock in Ford, because they will have a completely refreshed product line when the tide turns, while GM and Chrysler don’t really appear to be going forward on product development. So when the economy picks back up, Ford will be ready, while GM and Chrysler will be caught with their pants down. Again.
I’ve alluded to this before. We see Wagoner’s epic incompetency up close because of all the coverage of GM. Most of us (I’m presuming) don’t follow Japanese business news on a regular basis. Toyota (and Honda) may seem like the smartest guys in the business in North America, if only because they kept building small cars when gas hit $4, but didn’t Toyota just burn $2 billion on the Tundra? (And $400-plus million on F1?) How’s that working out?
So I’m not surprised to see them brooming some of the guys responsible. The only difference is that they are smart enough to broom them out at the first signs of failure. What’s GM’s excuse?
It’s my understanding that the change at the top of Toyota is a scheduled change. The fact that Akio Toyoda got the top job instead of the more experienced alternative might well be due to recent performance, and Toyoda’s shaking up things since being named indicates that he is not happy with recent developments. It’s too early to know how this will turn out. If events permit and he makes the right decisions, this will look like a wise choice. If events or his actions lead to more downward trends, putting the founder’s kin in the top job might be seen as a failed example of nepotism.
You can bet they will be trying real hard, while our executives are still coming to terms with the fact that something is amiss.
Toyota is a company that seemed to lose nearly all of its charisma along the way. I fear this financial crisis will only make them create more cars for old ladies and nothing of interest for anybody who’s ever done anything cool in their life :)
Bunter1 :
March 2nd, 2009 at 12:35 pm
Stewart Dean-The big oops at Pearl (for the Japanese) was that the carriers were not at home.
It turned out that battlewagons were history and airpower was everything. Adm. Yamaoto did note that “I am afraid we have awakened a sleeping giant”.
Also, a third Japanese attack wave that was scheduled at Pearl Harbor was called off. Had that third wave gone down as planned, it would have allowed the Japanese to bomb and destroy the rows of large land based oil tanks at PH (thus crippling ALL US Navy ships in the Pacific). The Japanese also could have conducted submarine attacks of US oil tankers from Long Beach to Pearl Harbor, thus crippling our Navy for far longer than the 6 months or so that it took us to bounce back and go on the offensive.
Now back to cars.
but didn’t Toyota just burn $2 billion on the Tundra? (And $400-plus million on F1?) How’s that working out?
Both the Tundra and Formula 1 (and NASCAR, too) are part of a long term Toyota strategy to open up new markets and appeal to customers different than the ones they have now.
Formula 1 is seen as a playground for elite, top notch automotive companies. With Toyota planning on expanding the Lexus line world-wide, they need the prestige that comes from F1 in the many markets where they compete with Mercedes and BMW.
NASCAR and the Tundra are part of a long term plan to develop customers in the US midwest and south that have been somewhat resistant to Toyota products and imports in general.
The thing with Toyota is that they are willing to take a short term loss for greater long term gains and mark my words, the endeavors Toyota is a part of now, will pay big dividends for them down the road.