Ever since Farago’s fateful appearance on Autoline After Hours, I’ve been hooked on the weekly spectacle of Detroit-think. Talk about a fly on the bunker wall. Anyway, the Vines’s and DeLorenzos of this world never tire of talking about how the recent economic collapse was the sole cause of Detroit’s downfall (not true—see TTAC archives up to last year) and how “everyone is hurting right now.” The first assertion seeks to absolve Detroit of its systemic failures, while the second hopes to show that every automaker has sunk to the depths of, say, GM and Chrysler. Of course the second point is more true (for what it’s worth) than the first, but a few news items show that Toyota is succeeding admirably where GM and Chrysler have abjectly failed.
First, Toyota is successfully raising capital. Without going to the capitol. Bloomberg reports that Toyota sold $1.3 billion worth of corporate bonds last week as the firm seeks to solidify its cash position. At a 20-24 basis point premium over Japanese government bonds, the Toyota offering’s terms “were a bit severe, but the market accepted them because it’s strong now,” says corporate bond analyst Hiroshi Harada. And it’s a huge improvement over February when Toyota paid investors as much as 75 basis points more than government debt to sell about $2 billion in bonds.
Toyota plans on borrowing as much as $7 billion over the next two years, according to its Japanese disclosure statements. “We want to strengthen our financial foundation by securing our liquidity amid this uncertain operating environment,” say Toyota spokesfolks. And despite Toyota’s drop from Moody’s top credit rating, the automaker has been so successful raising capital on the private market that Honda is eying a billion-dollar bond buy.
Second, while Honda contemplates missing its (US) Insight sales goals and GM cancels its Malibu hybrid, Toyota’s Prius plant is paying overtime to keep the lines running at full tilt, reports just-auto [sub]. The Prius has unseated Honda’s Insight as the best selling car in Japan, and it’s ambitious production schedule is pushing Toyota’s suppliers to keep up.
Still, Toyota is exercising caution about overseas production expansion, and its Mississippi plant is still not committed to Prius production yet. But for now, the flexibility of Toyota’s Tsutsumi plant is allowing the Prius to be built alongside other models without a special assembly line. Just-auto notes that, at its recent visit to Tsutsumi,
“Line one was building North America-bound Prius models the day we visited, along with an occasional Scion tC, also for America, and a few Premio and Arion sedans, essentially high-spec domestic market versions of the Corolla.
Line two rolls out domestic-spec and other export market Prius and the odd Japan market Camry while the new EX version of the old Prius for Japan will be squeezed on here soon.”
And it’s not just Tsutsumi. One-third of the 50,000 annual Japanese Prius production is built at other plants alongside more prosaic Toyota offerings. The result: a thorough debunking of another Autoline fave fallacy: hybrids are overly complex and unprofitable to build. Just-auto explains,
Toyota officials were keen to stress that building hybrids requires no special dedicated assembly line or equipment—the Prius battery pack, with attendant cooling ducting, goes in behind the rear seat like any cabin component, the special orange-coated high-voltage wiring as easily as the main loom and the inverter pack, with coolant circuit, in under the bonnet just like any other engine bay part. The main extra helper we saw was a special lifter to help the operator guide the heavy battery pack on to the rear floor.
The quality of Lexus and the incredible durability of the Prius seems to indicate that Toyota has a pretty good grip on quality. If there are any quality issue with the Camry, for example, I would have to think they result from a conscious effort to exchange durability for size and content.
I would have to think that if Toyota sold a Corolla at Camry prices it could make it incredibly durable. However, the public wouldn’t be interested in a 22k Corolla so they reduce quality in order to add features and make the vehicle more “roomy”.
On your Corolla/Camry point, one of the major challenges identified by Takahiro Fujimoto in his book “The Evolution Of A Manufacturing System At Toyota” (anyone interested in a review of this dense, academic work?) is the problem of “fat product design.” He defines the problem as occurring when “the marginal cost of adding one element of product design exceeds the marginal increase in revenue owing to improved customer satisfaction.”
This phenomenon is caused by anything from parts/product variety to model changes and “overspecification and overquality.” He notes that, particularly in the factor of “overquality,” “fat product design” can be extremely difficult to identify, and rationally limit. However, his analysis (circa 1999) does indicate that Toyota took this problem very seriously in the 1990s, and has taken steps to “lean” its products. This goes a long way in explaining the perceptible decline in Toyota’s interior quality.
“the marginal cost of adding one element of product design exceeds the marginal increase in revenue owing to improved customer satisfaction.”
One would imagine this is the calculation that the big three got totally wrong. They incorrectly calculated the marginal cost of high quality parts and sophisticated engineering as higher than the ” marginal increase in revenue owing to improved customer satisfaction.”
Now, the big question. Is an Alfa 166 less reliable than a Lexus IS because Fiat doesn’t know how to make a higher quality car – or is it less reliable because Fiat actively chose to decrease the quality.
jmo asked: “Now, the big question. Is an Alfa 166 less reliable than a Lexus IS because Fiat doesn’t know how to make a higher quality car – or is it less reliable because Fiat actively chose to decrease the quality.”
The first answer is the right answer, jmo.
Fiat simply don’t know HOW to make reliable cars because they refused to learn from those who can (i.e. Honda, Toyota, Hyundai of late, Subaru, Mazda).
How can I make this statement?
Each major manufacturer have halo-brands.
Toyota’s is Lexus, Honda’s is Acura, FIAT’s is FERRARI.
Ferrari’s are renown for UN-reliability, but this is put up with by Euro-trash rich and folks on the coasts of the US wealthy enough to buy them because they’re so beautiful….
Kind of analagous to keeping the trophy wife (for awhile anyway) despite her being very high-maintenance and costly (and possibly nagging and nasty) due to how you’re perceived by your rich peers… instead of marrying or staying married to a plain woman from a church of your well spent youth, who’s also a good mother to your children.
If FIAT actually KNEW how to build a reliable low-production number Ferrari costing hundreds of thousands of dollars don’t you think they would?
They cannot.
Therefore, any mass production vehicles they build will be (and are) going to be an epic failure compared to the reliable cars offered by companies which have gone out of their way to learn HOW to build good cars.
Therefore, any mass production vehicles they build will be (and are) going to be an epic failure compared to the reliable cars offered by companies which have gone out of their way to learn HOW to build good cars.
Good point indeed. Can you provide any sort of technical explanation from an engineer’s perspective though?
That article fails to leave me impressed. So Toyota is successful at borrowing money. Big whoop. I suspect GM probably did this decades ago….used their reputation to get people to give them tons of money thinking it was “safe”. Not saying they are in the same situation, but perhaps this is the start of Toyota following the GM path?? Ford raised gazillions of dollars just a few years ago. I think we can all agree their money raising was impressive, but they’re still in a world of hurt, as is Toyota. You can’t borrow your way into the black…. (the US government should keep this in mind too).
The Prius was just released. Big deal they are running at full tilt. I’m sure the media will have a field day with this, showing how super awesome hybrids (even though it is ONLY the prius) are selling and how if Detroit only built a Prius, all its woes would disappear. It isn’t uncommon for newly launched cars to be fairly popular, and keep plants running full capacity. Again, unless they are still doing it in another year or longer, big deal.
Same with flex lines. With rare exception, everyone can do this now.
Toyota is still in a massive amount of trouble, especially if the US market doesn’t pick up. They’ve got several extra plants they don’t need right now, including a brand new one in Canada that builds only RAV4s at the moment, a finished building in Mississippi just sitting there taking up space, and the TMMTX plant for the Tundras should never have been built either…should have stayed in Princeton. Overcapacity is a KILLER to a business like this. Toyota made the mistake of thinking they would keep growing and growing and now they’re in a big pile of crap for it.
Menno,
If FIAT actually KNEW how to build a reliable low-production number Ferrari costing hundreds of thousands of dollars don’t you think they would?
I could imagine a meeting at Fiat where some Manager says – “You know what? We should spend less time and money on the exhaust note, throttle tip in, brake feel, suspension tuning, etc. and concentrate on improving the reliablity of the AC compressor.” It’s possible that the rest of the Fiat team would laugh derisively and say – “What, and just build another “appliance”?”
As for the Ferrari I would have to think that often: suspension feel, unspring wieght, curb weight, engine output, come at the expense of reliablity.
The 5.0L V-12 in a Toyota Century makes 276bhp. The 6.0L V-12 in an Enzo makes 660. I’d have to think that part of that extra power comes at the expense of long term duarabilty.
Power/L doesn’t have to come at the cost of reliability.
The S2000 (first gen) makes 120 HP/L with rock solid reliability.
If you told the honda engineers to the S2000 engine concept to a V12 configuration, it would be a 6.0L V12 at that ferrari-level horsepower.
But you know as a honda, it would be as reliable as a box of hammers.
And yet…I’ll still take my chances on Toyota…my family has owned (or currently owns) 5 (two Corollas, one Tercel, one Camry and one Highlander). The 1997 Tercel still is running like a top with nearly 200k. The 2003 Highlander just went by 143k. The “baby” of the family, is my mother’s 2003 Corolla. It only has 60k, and it replaced a 1992 Camry that was sold off with well over 100k. Of all the Toyotas we’ve owned, the only one that deteriorated to any degree was the 1981 Corolla we bought new. It was replaced by the 1992 Camry only due to the fact that my father wanted a new car and it’s biggest fault was some rust along the seams. Mechanically, these cars all served us well (or continue to do so). Even with the economic downturn, I’d still put my money on Toyota before GM or Chrysler.
I’m always fascinated by “Toyota is stupid” and “Toyota is failing” comments. Despite being called the next GM, they’ve somehow managed to make the Camry the best selling car in America for the umpteenth year (436,617 units last year); not only that, the Corolla is #3 with 351,007 units sold. If GM and Chrysler had been as stupid as Toyota, they wouldn’t be in bankruptcy.
Here’s a thought – maybe Toyota isn’t totally stupid. Maybe they’re aware of political sensitivities and think it’d be bad form to kick Ford in the ass and introduce a Camry hybrid right now with better mileage than the Fusion Hybrid. Maybe Toyota thinks it’s best to accept reduced sales in the short term and not dump thousands of dollars on incentives across the board. Maybe they think it’s best to keep a low profile, keep quietly plugging away at what they do best, and let everyone else think they’re stupid.
If Toyota is intentionally lowering the fuel economy of their Camry Hybrid out of some misguided sympathy for Detroit or to score political brownie points, then they deserve to be called stupid.
If Toyota is intentionally (or even unintentionally) leading people to believe they are stupid, then they deserve to be called stupid.
Personally, I think this idea that Toyota could build more efficient cars or hybridize their entire fleet at the drop of a hat is ridiculous. If they could, they would’ve done so by now, especially in anticipation of gas rising above $3/gal.
“The Prius was just released. … It isn’t uncommon for newly launched cars to be fairly popular….”
I must be missing something, because I was pretty sure the Prius has been around for something like a decade.
Yeah, but their cars are still ugly.
@LoserBoy :
a mostly new Prius (probably “all new” in marketing speak) has just been introduced for sale. it is indeed very common for new cars in Japan to jump to the top of the sales charts, as the Honda Insight did when it went on sale.
Jerome10: “The Prius was just released.”
And it sells pretty big. What new GM car is selling 50K units this month?
Jerome10: “Same with flex lines. With rare exception, everyone can do this now.”
They can? Take a look at the “Tour of the New Camaro” thread on Fastlane.GMBlogs.com. GM can’t build the Camaros that people ordered and put down cash deposits. Or chooses not to. Either way, something stinks.
Thanks, faygo.
“So Toyota is successful at borrowing money. Big whoop.”
OMG. If GM and Chrysler still has willing lenders lending them a few billion at a time when season adjusted selling rate barely reach 10m a year, I doubt they would become Government Motor and Fix It(Chrysler) Again.