Parts suppliers in Japan had near death experiences when they opened their Nikkei [sub] this morning. Parts suppliers in China and the rest of the world suffered heart and respiratory problems when the news of Toyota’s latest plan hit the news-wires.
In search of money to save, Toyota plans to slash its parts procurement expenses by 30 percent over the next three years.
Toyota told parts manufacturers to cut prices for auto parts to be used in cars that will be released in and after 2013. The cuts affect more than 200 power train, body and chassis components.
This is easier said than done. Parts sold to OEMs are typically made at razor-thin margins. There is only one way to come close to the cost reductions planned: Make the parts from less expensive materials, and dispense with the really expensive parts,
In that vein, Toyota spokesman Takanori Yokoi said the automaker had made “various suggestions including cost reductions” to suppliers, says Reuters. Toyota plans to overhaul its car designs to help cut costs.
This can only mean one thing: The previously vaunted Toyota reliability, which already started to suffer a while ago, will go further down the drain. The reliability problems were one of the results of a cost-cutting campaign by Toyota that started in 2006.
The news was received with “Hurrah!” on the top floor of the Volkswagen-Hochhaus in Wolfsburg. VW wants to dethrone Toyota by 2018. The cuts in quality will play right into the hands of Volkswagen. They had to contend with their own quality problems ,and had stomach convulsions whenever a German J.D. Power study came out with Toyota on top, and VW down below mediocre.
Toyota/Lexus swept the 2006 Consumer Reports’ quality ratings. Three years later rampant value engineering and decontenting buried it in TSBs and recalls severely diminishing its image for quality and integrity. CR confirmed its steep decline recently rating the Camry less reliable than the Ford Fusion! Repair shops that a few years ago rarely saw a broken one are loaded with them. Internet owner forums confirm customer care is being sacrificed to preserve bottom lines. Neither of our current cars are Toyota products, though we were pleased with earlier ones.
I’m having a hard time accepting your post. Wouldn’t the overwhelming majority of the “value engineering” vehicles from 2006 on still be serviced at the Toyota dealer? Repair shops, aside from Toyota, still wouldn’t be seeing them.
Your skepticism is understandable. The information is from an independent garage I attend. The mechanic hears and sees evidence of declining quality when Toyota/Lexus owners present their cars for routine oil changes, snow tire installations, etc. His perspective comes from examining underhood and chassis areas car owners generally don’t see.
Recent Toyota quality, he says, has fallen off a cliff. For example, wiring harnesses secured by electrical tape instead of the custom looms used previously. That’s how they make Fords! His personal year-old Tundra pickup has required numerous warranty repairs. Some were jury rigged. He now obtains the parts under warranty and installs them himself. Look at the official Toyota Rube Goldberg repair for sticking accelerator pedals. http://tinyurl.com/ye2umol
He no longer recommends Toyota products suggesting instead his customers buy Hyundai or Kia for their superior quality and warranty at significantly less cost. He still recommends Honda, noting its quality is also decreasing but not to the same degree as Toyota.
There are no sticking accelerator pedals. NONE. When crazy litiguous attorneys wanted to present them, out of 2.2 million vehicles, they managed to manufacture 51 case (of which perhaps 10 were actual mats going over). If the rest of your information about Toyota reliability is the same quality, I’m going to be a very happy Toyota owner for decades.
VW = Junk. Toyota’s got a long fall to be anywhere near the wretched VW/Audi owner experience.
Agreed that VW is still far short of Toy, but they have actually been moving up in the ratings. This year their average was above GM’s in the CR ratings.
Bunter
I prefer to look at it as a positive. As a longtime VW owner, I can still be WOWED by Toyota for a long time to come ;)
I have charted the last 5 years of CR data, if toyota is dropping in quality it is unmeasurable at this point.
Only Honda is currently in the same league.
Gradiner-The Camry is well below Toyota’s average in those ratings. It is just a single data point.
Yes, Toyota has challenges, and has made mistakes. But rumors of the “death of their quality” remain greatly overstated.
Bunter
Please share your work. Hopefully BS will publish it…..
For now, the anecdotal evidence is persuasive, though. But it would be interesting to see if your methods & data are valid; and if so, to try to understand what is behind the tectonic shift in the perception of Toyota quality…..
Hi Mark, Sorry but I don’t have the graphs handy.
Pretty simple though, I use the CR chart splits (20, 45, 80% +/- of average) and add a split they don’t use at the numerical average, easy to locate in their bar charts.
Seeing it graphically is enlightening, the percentage of Toy & Hon vehicles above the numerical average simply blows away anyone else and the bulk of those vehicles are well above average. And I’m not seeing anything that looks like a “down trend” for either.
Toyota has always had an odd “poor performer” here and there, but when you see the curves laid out you realize them for what they are-anomalies.
Here, from memory (yikes), are the above numerical average percentages for the majors:
Toyota 93% (very steady)
Honda 100% (3-4 years running)
Hyundia 80% (seems to have leveled off in their very laudable climb, not near the “high score” percentage of Toy/Hon)
Ford 67% (also seems to be leveling off from their ascent)
GM 21% (showing a down trend)
Chrysler 8% (sinking, 2 years ago they were ahead of GM)
Toyota is, IMO, the “tall poppy”. Any thing that happens with them is “big news”, whether it is or not. Goes with the territory.
Cheerio,
Bunter
Bunter1 +1
Just because Toyota is trying to cut costs doesn’t mean it will do so in the name of reliability. There are TONS of areas to reduce costs in automobiles from elimination of soft touch materials (I know this may matter to reviewers but for the average Camry and Corolla buyer it doesn’t), decontenting (and possible moving to optional instead of stanard), design standards (who really needs a grip instead of a pull pocket, really?), etc. There are lots of areas that do not include quality at all that can help reduce costs.
Toyota, and Honda in the seam breadth, have been quality leaders for over two decades, I would hope they wouldn’t throw that away just for some cost savings. I think they have earned all of our respect enough in the auto-world to wait and see in what direction they take this.
Our family operates a Budget car rental franchise so I have a good understanding of what a reliable car is and across an entire brand line we have yet to find a make more consistent than Toyota. We use Yaris, Corolla, Camry (4-cyl), Sienna, and Tacoma (4-cyl) and they represent ~75% of our entire fleet, 350-500 vehicles depending on the time of the year.
All of them are very impressive in build quality considering they average 40-50k miles a year and not every renter has the best intentions. They simply do not break, let alone how good they still appear after a thorough detail. The only model that has had a few quirks are the `09 Corolla’s that we have sent under warranty for electrical issues. Still it’s a pretty darn small number and considering it’s a first model year, I am not phased.
Another nice thing you notice with Toyota’s is the quality of the drivetrain. Their transmissions stay nice and tight and shift consistently over time even if one has been through the ringer.
Also the axles and connecting parts feel sturdy over the time of usage. Certain cars that come to mind with weak feeling front ends are the Ford Focus, Nissan Versa, and Suzuki Forenza. By weak I mean under heavy throttle you feel pulling or general “looseness” through the steering wheel, it is an unnerving aspect for myself. Also Versa steering racks like to make some unpleasent noises over bumps usually around 50k+ miles. Literally sounds like something loose, maybe a bad bushing(s)?
Off-subject but if you care to know, I was also very impressed with the 2007 4-cyl Escape’s. Unfortunately the `08’s haven’t been as good, maybe first year quirks. The `07 Ford Tauruses (fleet only) were bullet proof, of course seeing it was practically the same car from the 80’s you would expect it to be haha. Pontiac G6’s and Grand Prix’s were pretty good overall, on occasion little issues and the interior materials weren’t up to Toyota quality. Ford Focuses were hit and miss, rough around the edges and less than stellar reliability. Suzuki SX4’s will have sensor failures and such but so far nothing outrageous. The Forenza’s were Daweoo’s so you get what you pay for, not horribly unreliable but just a piece of junk feeling car. Last generation Honda Accord’s were solid but used demand was weak (could be related to selling them when the new model had just come out). I dislike the Nissan Altima 2.5 CVT’s but they were decent reliability wise, I wouldn’t trust that transmission though.
Worst car? Not a second of hesitation to say it was the 2008 Nissan Sentra 2.0 CVT. What an utter piece of crap. We bought 40 of them and it didn’t take long for at least 50% if not more of the CVT’s to crap out. Nissan recently doubled the warranty on it, thank goodness for the consumers. Unfortunately, that hurts us a lot when a car is down for such a long time, especially when it breaks down hundreds of miles away! Can you imagine everytime we had to deal with a dealer trying to give us the run around to pay the bill, taking forever to fix the car…it causes one’s hatred for a vehicle to grow further so. Even their engines were less than stellar (~25% of them failed). This is NOT normal. Even the worst cars engines/transmissions almost never fail under 70k miles. We even had a employee of ours pick up a Sentra with a new CVT 500 miles away from our offices to only have the new one fail 250 miles into their trip back, couldn’t believe it. Are they using rubber bands for the belts??
In the end, when a friend wants to buy a car from us, I always feel comfortable giving them a Toyota. I don’t want to make enemies!
I can go to your location and rent a car with 50 to 70K miles? Not what I would call an advertisement for your business. From what I’ve seen of rentals with 25-40K miles, 60K is ready for the crusher.
Unless somebody drives the wrong way over the tire spikes, I suppose they’re all running on the OE tires too.
Not saying that 55K miles is a lot with good maintenance, even in the roughest urban service. I’ve never seen any sign that a higher mileage rental car has gotten that maintenance. Not even once.
I figure $1500 to get to 50K miles, even wholesale. Two sets of front brakes, one set of rears, 8 to 10 oil changes, a coolant change/flush, a set of tires, two if they’re at all high performance. Add in a couple of detailings.
The grungy Subaru with 27K miles I got from Dollar, to which I added over a quart of water to the coolant reservoir last year certainly didn’t get that maintenance.
GM and Chrysler took this same path, demanding huge cost reductions from their suppliers. Quality did suffer. Corners were cut and were noticed by the customers.
From my nearly two decades of involvement in the auto industry, this huge cost reduction push always had the same result for any company that tried it – shoddy product, increased warranty costs, and loss of customers.
That’s the one thing I don’t get. There is no way the savings in using crap components makes up for the increase in warranty costs.
So DENSO changes instrument panel cluster (IPC) and heated oxygen sensor (HO2S) production from Japan to China.
Cost cut achieved. Quality not impacted. See how easy that was?
Cutting those jobs in Japan and moving them to China will be about as easy as it was for the D3 to move US jobs to Mexico (not very), the suppliers in Japan have already cut thier temporary workers, all that is left are the “life-time” employee’s (these are basically social contracts, not negotiated ones). So will they take the D3 path and wait for them to retire, not hire replacements and hope they can keep it going? Or do they do the unthinkable and job 10’s of thousands of jobs in Japan, which will cascade into much more as it hits the metals and chemical industries (if your going to manufacture in China, why would you source raw materials in Japan)? Japan has been avoiding these restructurings for 20 years and the end result is 2 “lost decades”. I’m betting that the cost cutting will come from RM and processes (and it’s the type of things that wouldn’t show up in the first year, it’s the 5th and 6th year where Toyota earned it’s quality crown).
@Bertel, At the VW HVG, wouldn’t they technically be saying “Hurra!” when delivering those “firtual high-pfiwes”?
All joking aside, given Toyota’s (probably industry leading) use of a vertically-integrated keiretsu supply network (i.e. suppliers where ToMoCo has significant influence or control via equity cross-sharing or out-right holding of shares) including such blue-chip companies like Aisin Seiki (transmissions and parking systems), ADVICS (foundation brake, boosters, ABS, and ESC systems), JTEKT (steering systems), Toyota Gosei (steering wheels, airbags, LED-lighting), DENSO (Electrics, HVAC, fuel-handling and enginemanagement systems), all the way down to Kyoho kai group (211 auto parts companies), Kyouei kai group (123 logistic/facility companies), ToyoFuji Shipping Co., it will be interesting to see how this plays out… my guess, on the component production side, much internal offshoring from Jpn to Cn (not the same as outsourcing), and on the vehicle side, decontenting via cheaper materials (who needs so much soft-touch or urathane, fewer trim/option combinations, less differentiation overall, and, possibly, and, as an extreme measure, benchmarking review of e-specs for simplification and reduction to something still better than that of the competition (this last one only coming into play if a situation of existential necessity develops – and ToMoCo is still far from this.)
Normally, because 2/3 to 3/4 of a vehicle’s cost can be attributed to purchased components (this was the figure that applied to the Big3, when they were no longer expanding, had decent FCF and were not making the trememdous capital investments in plant and product that seems somewhat opposite of Toyota’s current situation, the Big3’s emphasis on cost cutting resulted in the external supply base being attacked before internal operations, or, egads, UAW contracts, were addressed.
Given Toyota’s situation, and if jobs (internal or in Japan) are a sacred cow, I wonder how much opportunity there is for external savings.
If the larger potential, due to the equity participation outlined above, does point inward, one has to wonder if Toyota has NOT been well managing its inhouse supply network, and, even more problematic, if these divisions have been well-managed to a world-class level of sustainable cost-structure, then where lies the opportunity (apparently then only in the external supply base) for delivering these savings if not for the actions outlined above??
Finally, as I typed this up, I began to wonder, which Toyota subsidiary supplies ToMoCo’s floormats, and why they, apparently, didn’t develop a winter mat system that would have helped identify the accelerator pedal issues…
+1 to highrpm
There’s more to this, I think. As I’ve mentioned before, I’ve been told that Toyota plan to pretty dramatically trim the number of platforms (not that they have large numbers at the moment), and near as damn-it hybrid powertrain everything. Not sure how that turns into 30% reductions in costs unless they’re also planning big volumes to a smaller field of suppliers and lower discrete part counts.
This exercise has been done before by Toyota during the late 1990s – the common example is the overhead roof handle (my employer validated/costed parts of the plan). Toyota determined they were building cars with something like 8 or 9 different overhead handles. After review, they decided only 3 were necessary including Lexus. Each part was evaluated on that basis. Not sure how you do that again unless you plan to go from 3 to 2! BTW, the joke at the time was that Chrysler (or Ford or GM) already had something like 14 handles – which showed how far behind the game they were.
Note to Toyota Brass. You are messing with customer perceptions of quality. With the Koreans closing in, is this wise? I would look to other areas to trim costs.
Ouch. Toyota will be walking a thin rope. It is interesting that even though CR ratings for Toyota have been very good for years, Lemon Aid downgraded Toyota due to reliability issues. WindnseaOO, thanks for that info – quite interesting. My mom’s 2006 Corolla had to have the computer replaced. My (previously leased) 2008 Corolla had noisy front brakes – after reversing direction and braking, loud clanking noises could be heard – apparently the brake pads could somehow move in the calipers. According to the service department that was a know issue they could do nothing about. I looked it up on the Internet, and other Toyota owners experienced the same issues. I’d rather have a simple, bare-bones car that is built well than a complex car loaded with gizmos and cheaply built.
It will be very interesting to see what Toyota’s results are after these vehicles have been in use for awhile. I don’t think Toyota will follow GM’s decontenting and parts cost reduction model by specifying major driveline parts to have 75k mile life cycles. As noted, probably a lot of cost reduction can be had by building the parts in China vs. Japan.
It seems Toyota is making another move from the GM playbook which is titled “How to Ruin a Perfectly Good Car Company”
I have been saying for years Toyota is the new GM. At one time GM sought to make the best cars in the world, so did Toyota, then the bean counters took over…
The world is slowly starting to notice… hell even Toyota is starting to notice.
http://www.economist.com/displaystory.cfm?story_id=15064411
Now is NOT the time to cut anything. Because perceptions are a hard thing to shake… just ask Bob Lutz.
CR can’t be trusted to fairly evaluate Toyota. They have even rated new Toyotaa high, purely on reputation.
This does sound like a slide, certainly perceptible…
"Toyota fell from first place to fifth in Consumer Reports’ annual reliability survey last year…"
http://usnews.rankingsandreviews.com/cars-trucks/Toyota_Camry/Reliability/
The true question becomes; “If Toyota quality slips, and Toyota is the seller of boring appliance like vehicles, who will want to buy their products?” Now I realize I am enthusiast and represent a minority of the population but if I’ve got to choose between a boring Toyota and a more driver oriented VW, if their quality levels have reached parity, I’m going to pick the VW every time. BUT then again I am an ethusiast.
You make a valid point sir. It goes a long way into explaining VWs success. The enthusiast’s view is always going to be subjective. I call myself an enthusiast,and drive a boring,though comfortable and IMHO , esthetically pleasing Impala. Sleeping in my garage right now is a 6 cylinder sqeeeky, rattling ,rough riding Firebird rag top. I love every moment behind the wheel of it, and spring can’t come soon enough.
In the imortal words of Robert Farago “whatever floats your boat” eh.
Exactly, my father has a 1967 Mustang convertible sleeping in his garage right now, awaiting spring in Ohio. Why? Not because it’s a rock solid reliable paragon of squeak/rattle free motoring, hell it wasn’t even that when it was new! He has it because it’s a f*&^%$# blast to drive, makes beautiful music from the dual cherry bomb equipped pipes, and he gets to experience the wind in his thinning hair. He drives it for fun and to his weekly golf league game and the occasional car show. It’s stranded him a couple of times and during my teenage years I helped him do everything from pull a radiator to diagnosing a few minor electrical system glitches. He keeps it cause it reminds him of his adolescence in the late 60s and early 70s, his first car being a 1963 Impala convertible and his last daily driver that was a coupe was a 1978 Monte Carlo, it was sedans and SUVs from there. I currently don’t own any “exciting” vehicles but my plan is to one day have something like that 1967 Mustang for my son or sons and I to play with.
This makes me (and those of us reading this) different. Most of our neighbors just consider a car to be transportation, point A to point B. I alternate between thinking, “how sad” for them and thinking “how nice it must be to be sane.” LOL
General Motors used this tactic on their suppliers for years and it lead to lower quality vehicles sold to unsuspecting consumers. Many of those consumers got smart and quit buying GM cars. GM will never recover from their reputation and Toyota is on the fast-track to be the next GM, there’s no doubt about it.
windnsea00 Thanks for the information that comes from real world experience.
Rumors of Toyota’s demise have been greatly exaggerated; I wouldn’t write them off just yet. However…………..all they need to do is look at what happened to Chrysler when they employed a few knee-breaking threats on their suppliers; whatever happened to keiretsu?
And if anyone in the big 2.5 had a clue they’d be doing everything they could to take advantage of this percieved quality decline and pick up a piece of Toyota’s North American market share.
To make hay when the sun is shining, one must first let the grass grow.
I’m also curious about the “bandwagon quality perception” that Toyota has had for years. This is just a personal theory based on anecdotes and observations.
I have a couple of VWs. I can afford them only because I DIY as much as I can. They have fantastic initial quality that rivals cars at twice the price. But their longevity and durability is lacking, especially in electronics and trim. Everyone knows VW’s US reputation and everyone jokes about, even when the data doesn’t always support it.
Toyota’s had a longer reputation for “high quality” than VW has had for “poor quality.” But what exactly does that mean when we’re relying on consumers to self-report? If I had a dime for every 200k-mile Camry owner with blown shocks and 10 other components within an inch of death, I’d be a wealthy man. In other words, I feel that a lot of the Honda-Toyota quality thing is based on a willful ignorance or “hands-off” attitude of owners who will ignore just about anything excep the most obvious failures, then proceed to tout the amazing reliability of their marque.
I can’t fault that m.o., since I’ll be there soon–my free time for DIY diagnosis and repair is getting shorter all the time.
Nope. The “Toyota-Honda quality thing” is real and objective. It comes from continuously monitoring quality, debating the issues to death and having the money to throw at them to correct them. It comes from closely working with suppliers; make sure they are profitable, are not cutting corners and they will be in business next year. It is -or at least it used to be- a matter of attitude and resources.
That being said, I increasingly have the feeling, Morizo is another scion- pun intended- who’s about to drive the family business into the ground. He already made a few big mistakes and this latest one is huge. Worse yet, the Japanese “cultural factor” will prevent his removal before it will be too late.
Currently, Toyota’s suppliers are barely making the next month’s (reduced) payroll. There’s no more to cut. In many cases their debt is a few times higher than the enterprise value. If not for the cheap money and easy credit in Japan, many of them would have been bankrupt already.
The un-intended consequence of Morizo’s blunder will be consolidation. And with that will come pricing power.
30% off…? Not going to happen!
“200k-mile Camry owner with blown shocks”
Our Oldsmobile minivan needed new rear shocks at 5k miles (leaked, replaced under warranty) and new shocks/struts all around by 40k miles (normal they said!).
Some interesting facts have come to light here. Windnsea makes some valid points. Couple of things I noticed in his/her comments. Not a whole lot of GM bashing. Yes and the truth came out about Nissan. Odd that VW is claiming Toyota reliability. I guess the Budget people arn’t buying into that claim. Billy Bobb 2 certainly summed it up in his comment.
@ bunter 1….Of the five years of C.R data you charted,did you include the years that Toyota was given a high rating,just because they are Toyota?
I know VW of NA has been doing fleet deals for the past few years but it’s not as risky for a rental company when you are doing a turnback program compared to buying risk (as we do for our small franchise). I have had corporate (Avis/Budget) Beetles, Rabbits, and Jetta’s check into our stores. I must admit, a Jetta feels like a premium vehicle in the realm of many other brands…good reliability or not.
I don’t actually know how their track record has been with corporate. I’ve also seen Routan rentals running around the streets, not sure who is using them. VW probably needed to unload them somehow due to sluggish sales and of course the car rental fleet program is always a way to push cars through, of course not always at an ideal price for the manufacturer.
While we have not personally run a lot of GM products I don’t really have any qualms about them other than poor resale. Of course this is not including Daewoo based products. Since corporate is Avis (whom owns Budget) they have a long standing history with GM so we get a lot of their cars checking into our stores, they typically seem to be holding up well. The HHR and Cobalt’s obviously feel pretty cheap but durability is ok as far as I know.
As I mentioned in my earlier post, downtime is very important so no one wants some piles of junk always breaking down, upsetting customers, and eating into your costs. That’s why we don’t touch Chrysler’s with a 10 ft. pole lol. Thus to the contrary of what people may believe, consistent maintenance is taken seriously as is having the job done right the first time. We may be doing a fleet program with Kia due to the fact it’s very lenient with their rules:
6-12 month holding period; 25,000 free miles; 25,000 max miles; $400 damage allowance.
Since we run only local suburban stores in our family owned franchise (airport locations average much less miles) our miles are off the chart and doesn’t allow us to do turnback programs except for what Kia is offering for instance. I think the setup sounds great, a bit weary of reliability but geez you would hope 25k miles could be passed with few issues! At least I will have some grounded information for truthaboutcars if we go ahead with it :)
It seems Toyota is making another move from the GM playbook which is titled “How to Ruin a Perfectly Good Car Company”
I’m 52, and this GM you speak of has never operated in my lifetime….
+1, haha
Toyota is smarter than to fall into the trap of reducing quality to save a buck (or yen).
You may remember the key to Toyota’s initial success in the US was the combination of affordability and quality. Quality doesn’t have to be gold-plated.
And, the truth about cars is that Toyota’s request is not different from what other manufacturers are requesting.
Windnsea00, that was a great post. I look forward to more. You could be the voice of the car rental industry like Stephen Lang is for the auctions!
I’ve always wondered what a rental insider would say about buying an ex-rental car. So many vehicles on the lots came from that source. It was interesting to hear the Pontiac G6 gave good service. If your company has had sufficient experience to assess the reliability of Impalas, Fusions, Mazdas, and the newer Chrysler-made products, I’d like to hear it.
Thanks for the nice comment. I wish we had an even bigger and varied fleet for the sake of knowledge but on the other hand we know what works so we stick with it.
I see corporate Impala’s checked in consistently, they visually seem to hold up well. I believe they are another case of the last generation Taurus, keep the same product long enough and you will get reliability pretty well nailed down. They are one of the last of the few big american FWD sedans. I know they dropped the 3.8 which was dead reliable but I haven’t heard any negative aspects of the 3.5 or 3.9. They still are using that ancient but reliable 4-spd auto too.
We ourselves ran a small allotment of 2.3 4 cyl last generation Mazda 6’s, they held up fine overall. A few sensor and/or switch issues but nothing horrible, their cars have individuality which is nice in a sea of boring cars. Don’t have any input on the Fusion but I’ve driven some of the corporate models, the V6 ones hustle! As far as I know they shared a lot with the Mazda6 so I would be willing to say they are probably decent. Chrysler, sigh…we don’t like playing russian roulette haha. There is just no reason for us to take them on with so many better brands out there. One of our local franchise owners runs a lot of them due to his history with their fleet programs, we’ve had aplenty of Caliber’s check into our stores with issues like ignition lock or transmission. They really feel like crap too.
Funny you shuld mention the Versa and Caliber as cars to avoid. The Caliber (basedoff a Mitsu platform) uses the same JATCO sourced CVT transmission (JATCO is a Nissan subsidiary). Another stupid decision by Daimler.
To Bertel Schmitt:
I’ve found your previous reports & opinion enlightening & am therefore astonished by the over simplification in this one. To assume that a call by Toyota for its parts suppliers to cut costs by 30% is to be accomplished by simply using cheaper materials could reflect a an incomplete grasp of the process by which “The Machine That Changed the World” gets the job done.
Note that the 30% cost reduction is to apply to cars to be released by 2013 & that Toyota has made “various suggestions including cost reductions.” This says says that the targeted 30% cost-cut is not to be done willy nilly.
In 1983, when the yen went from Y260/$ to Y130/$ in less than twelve months, there was a similar (if not more urgent & severe) call on suppliers to reduce cost. Keep in mind that Toyota at that time had not even touched toe to water in producing cars in the U.S. Virtually all assembly & parts sourcing was Japan-based. And it was the time when Toyota was rapidly increasing its share of the U.S. market.
The effort was a concerted one — Toyota worked closely with its suppliers in finding ways to cut costs. . . including making design & engineering changes in its cars so components could be made more cheaply without compromising reliability or performance. It also included other measures, such as suppliers’ relocating production to countries with lower labor cost.
I hope that this isn’t a case of TTAC writers getting infected with the tendency of some U.S. media latching on to a statement & sensationally blowing it out of context.
In response to PatrickJ who wrote: “I can go to your location and rent a car with 50 to 70K miles? Not what I would call an advertisement for your business. From what I’ve seen of rentals with 25-40K miles, 60K is ready for the crusher.
Unless somebody drives the wrong way over the tire spikes, I suppose they’re all running on the OE tires too.”
I am not on here to advertise (as I haven’t even shared where we operate) but only to share knowledge based on experience. Since we are not a big corporate store with huge operating capital we do run our cars a bit longer but the whole industry is doing so now anyway. Ideally we like to unload ours around 40-55k miles.
For instance I was driving a corporate Camry rental yesterday with 34k miles, that use to be high as of two years ago. This isn’t the 80’s anymore, most brands wear well into the higher miles. When I look at the auctions for used rentals, the typical selling point is 30-40k and even 40-50k miles from some businesses. If Toyota’s are ready for the crusher at 60k miles then they really have slipped now haven’t they ;) We almost never get complaints of our miles (if ever), people are more interested in cleanliness and fast service.
And since when do original tires last usually over 40k+ miles? Please think before your write next time :p
Our 2003 Durango went 55,000 miles on the original Goodyears. Now it runs on Continentals. I was happy to get 55k out of them, but I would have been disapointed if they needed replacing in the low 40’s.
When I worked in the supplier world, we were under intense pressure to reduce costs, every year, as well. After a while, the only thing left to cut is quality (durability). I recall a radio commercial on years ago now in Detroit, where the engineer is trying to cut costs, and does, his boss says good job, what did you cut? He said that he made the brake lines a foot shorter (cue car crash in the background)! I loved that ad, summed up life in the cubicle trenches nicely. I used to tell people to avoid first year cars, but as the car ages, it is de-contented (less std equip) and teams of people are studying how to shave .01 cent out of everything. By end of life cycle, it is bled dry, and quality suffers, I think.
I recall my 82 Honda Civic had an extra stop light bulb inside one of the taillights, in a special place designed for it. A spare??? For free?? Unheard of these days. I am beginning to think that Toyota is the next GM, even the press is piling on. Of course, once you’re on top, there is only one way to go.
Thats funny that you mention the bulbs. Its clear in some Chrysler products where they decontended the small stuff. Its rampant that all US spec cars have been using red turn signals more and more, its pissed me off to no end that my Jetta and smart use Red when they already have amber lenses for the rest of the world.
On Calibers and Patriots they both have and used amber sockets, more noticeable in the Caliber. Now they just have an entire empty part of the lamp closed off and just use the break light.
Seriously, how much is one damn bulb and a little more wire for increased saftey, especially when the lamp design already included it.
Regarding the extra taillight bulb and the reply to your comment, a manufacturer can actually save quite a bit of money by cutting down the number of bulbs.
Say for a Civic has 6 bulbs that cost 12 cents a piece, for a total of $0.72 per car. If the supplier reduces cost to 8 cents and you remove the unused bulbs, you’ve reduced your bulb cost to $0.32 (6*0.32). While this doesn’t sound like much per unit, assuming Honda sells 300,000 civics a year for 5 years, this adds up to about $480,000. Assuming similar savings and sales numbers for the Accord, Honda would save nearly $1 million in the same 5 years.
Now imagine how much you’d save shaving $5 off the cost of a $160 turn signal switch in 9 different cars sold globally…
of course these savings will eventually bottom out as the supplier strains to meet the demands and the manufacturer keeps looking for ways to cut costs. A company can either do it work with suppliers (Honda, Toyota) or lower quality tolerances, use the lowest bid and/or develop adversarial relationships with suppliers (VW, GM)
Whatever Toyota’s quality issues are or may be, they’ve consistently outperformed Detroit when it comes borderline warranty work. Toyota has a much better rep for picking up the tab for customers’ & dealers’ borderline warranty claims. Toyota has the cash flow and market cap to scratch out check$. Others auto companies <cough> GM/Fiatsler <cough> don’t.
Although, Toyota should worry about Hyundai.
What’s the “real” reason for the need to cut costs?
To increase profits.
Why is this necessary when the company has been the most profitable car company in the world until recently?
Because Toyota can’t make money in the United States.
Why not?
Cars cost significantly more in other countries on a retail basis, allowing better profit margins; and the U.S. Dollar has collapsed in value against other currencies.
So by cutting costs worldwide, the hope is to reduce losses in the USA and increase profits elsewhere?
Seems that way.
Wouldn’t it be more logical to retain the quality and profits as they are and cut bait in the USA?
Uh…..
Why bother staying in a country which is collapsing? Come back if and when the country “comes back” from the greatest depression since the great depression.
Er…..
BTW for those who remember me, I’ve traded off my Prius and got a nice AWD Subaru instead. My home state is essentially bankrupt and so the Prius could not cope on uncleared roads (3 days of NO road clearing on a relatively major road in front of my house, after the last bad storm). Plus the E10 fuels now unavoidable had caused a 15% to 25% reduction in MPG’s.
Toyota is too highly invested in the U.S. to leave right now. Margins will go up soon enough once Chrysler collapses and the core of the market becomes Corolla/Focus and Escape/Rav-4 sized, obsoleting a lot of U.S. capacity.
Collapsing is probably an overstatement, but it’s clear that U.S. drivers are either unwilling or unable to pay for standards of vehicle refinement taken for granted in other rich countries. See VW’s need to make inexpensive, big cars specific to the US market.
Something has to give to finance large vehicle size and high annual mileage. Interior and design quality is more easily forgiven than reliability in the U.S. market, home of “You can live in your car, but you can’t drive your house.”
What is your home state? MI, NY, CA, or other? I think I remember you being from SE MI.
NW Michigan. We aren’t “officially” bankrupt – yet, as are New York and California, as I understand things. But of course, the powers that be don’t want to admit that the USA is bankrupt either, but it very clearly is.
Put another way; if you took a synopsis of the USA’s “books”, deleted multiple zeroes, handed it to any accounting 101 class and asked if the “company” were viable, every single person would declare the “company” only suitable for Chapter 7 bankruptcy.
Sadly, it’s a fact.
For much of Toyota’s history they have been guided by two principles, continuous quality improvement and total quality management. Using them they have managed to make automobiles more reliable, more efficient and less costly to manufacture and own. In this regard, if you look at the raw data, rather than the league rankings, it is not so much that other vehicles makers started pumping out cars that were less reliable or efficient, as much as Toyota kept moving the goal posts, year after year after year.
Perhaps they have reached a point, given the available technology, where they have to begin sacrificing some performance on reliability to advance performance on either efficiency or costs? Given their lead over others, it might have been a pragmatic choice, until they find new technology that allows them to once again make advances on all three benchmarks.
Still deciding to accept lower scores on quality to boost performance on other objectives is a risky game. It is sort of like that first toot on the crack pipe, it makes all the subsequent ones easier.
Season’s greetings to all.
Toyota’s is success can be attibuted to the fact that they “manufacture” better than anyone else. Lot size, inventory& vendor reduction are a few of the many ways any manufacturing company can take cost out of their finished product. As a company Toyota understands these tools/concepts and how to implement them better than anyone. Teaching this to their suppliers doesn’t mean quality will suffer anymore than it may improve.
Menno,
Slowly the US dollar is appreciating in value. It is currently 91.6 yen to a dollar, £0.625 to a dollar and €0.701 to a dollar. I think there is still life in the US economy and Toyota need the US economy, at least for the meanwhile. Because Toyota make so much revenue from the US, they can’t cut and run that easily. It will lead to a violent contraction in Toyota’s size. Better they tread water until either 1: They have a big enough presence in emerging markets like India and China. And/or 2: The US economy recovers. Either way, Toyota need to make the US work for now. The fact that companies like VW and General Motors are slowly putting less and less of a premium on North America, means there will be more for Toyota to grab.
Incidentally, I think we should give Toyota more credit. I think they’ll make these cuts without compromising quality. Lest we forget that this is a company who shifted their CEO to make way for a new one who wants to take Toyota back to their roots of “quality and reliability”.
VW and GM putting less emphasis on USA? Both the VW dealer body and the boys in the WOB Hochhaus would be surprised to hear that their billion dollar investment is seen as a sign of not putting emphasis on the importance of the US market. As for GM, by shutting down foreign subsidiaries and selling their majority equity positions in two of the three major potential growth markets for the future, it can be argued that GM is putting an extreme amount of emphasis on the US, and the DAT/Opel sideshows are only happening because these are the source of many of the platforms GM’s USmarket platforms depend on.
W.r.t. ToMoCo sacking Watanabe-san, and the supposed return to quality and reliability, it might be said, that given the extreme emphasis on growth and market share prior to the change, that quality, reliability, and profit were the only natural goals that could be picked given that there was so much investment and capacity already made in the direction of production and turnover growth.
Oh, and w.r.t the future of the USD … with the amazing debt, increasing defecits, printing presses running on overtime, the Chinese publically saying that the world is running out of excess cash to buy T-bills and thus finance the operations of the USgov’t, I would tend to think that the Dollar is approaching another precipice and further collapse … if this is the case, the hyperinflation that would come would put a total damper of car sales and profit for ToMoCo and everyone else playing in the US market … Toyota, unusually dependent on US-derived sales and profits, may just be trying to hedge its bets and position itself for such a disaster scenario…
50 merc Good suggestion. I enjoy Steve Langes articles and if windnsea has the desire, he also could have much to share. Individuals have one bad or good experiance with one paticular brand and then they try to convince the world to their way of thinking,unlike these two dealing with thousands of examples.
I think any company that has pushed its’ reliability for decades is headed down a slippery slope when they do anything that reduces quality, and therefore, reliability.
John
This reminds me of Mercedes, the artist formerly known for its overengineered, indestructible cars. Once their quality took a leap in the 90s, many customers defected to Lexus and never looked back. Toyota’s perceived quality is their core asset. Even if the cuts don’t reduce quality drastically, the damage to customers’ perceptions can be exponential.
Well said, Robert Walker.
Small point, but when we shopped Hyundai vs. Toyota (and a few others) a couple of years ago, I was shocked at how poorly-finished the Toyota’s undercarriage was. Bare metal and exposed seams were everywhere, whereas the Korean was thoroughly-caulked and undercoated.
How can Toyota cut costs any further? Replace sheetmetal with cardboard?
Bertel,
If VW’s going to be relying on North America to overtake Toyota, you can probably forget about it. Few here will switch from Toyota to VW, at least not before 2018. I’m still kicking myself for the EuroVan purchase.
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As regards Toyota “value engineering,” if I recall correctly, a few years ago they were attempting to engineeer a lighter automatic transmission with 20-25% fewer parts. Did they manage this? I don’t know. I think they’re also looking at cutting the part count in engines by 20%. If they can make an engine or a transmission that’s just as good but with fewer parts, this is a big advantage in cost, isn’t it? And it doesn’t seem like it’s their culture to cheap out on the long-term reliability and durability. I’m having a hard time envisioning a sudden decline in the value in their cars.
Why build a vehicle that someone will buy and keep 10+ years when you can build a POS that people will lease every 2 years?
The solution is obvious for “cutting the part count in engines by 20%.” Air-cooled two-cycle motors like Lawn Boy mowers used to have! They’ll have to bring ’em in while the EPA is on coffee break, of course.
Menno, nice to hear from you again. Hope the Subaru serves you well in this new era of DIY highway maintenance.
“If they can make an engine or a transmission that’s just as good but with fewer parts, this is a big advantage in cost, isn’t it?”
That’s pretty much the whole point of it. Certain components may become more expensive but the net effect is lowered cost through fewer parts and/or reduced assemlby time. If done right, the quality of the finished product improves. Fasteners are usually the first thing they look at eliminating. This “part reduction” concept is nothing new and I doubt they will limit it to engines and transmissions.
Jeez…
Reduction in cost..
Whatever happened to working the pricing out in the standard build / design procedure of the average vehicle?
Are they taking notes from GM?
I feel like they / we are on the top of a roller coaster.. looking up.. and slowly click click click click clicking the way over the top.. before the loong ride down.