The End of Detroit

by Micheline Maynard

  Toyota’s emergence as a world automotive power is the result of a journey that began 70 years ago, outside Nagoya, Japan, three hours west of Tokyo. Toyota was founded there in 1933 as an offshoot of the Toyoda Automatic Loom works, a company that made machinery for weaving vast bolts of industrial fabric. Unlike the United States or Europe, where automobile manufacturing had been under way since the turn of the century, the automobile craze was late to reach Japan. While it boasted major cities, like Tokyo and Yokohama to the east, Osaka in the center of the country and Hiroshima far to the west, Japan was still a largely rural nation in the years before the Second World War. Its automotive needs were being met by American automobile companies, through exports from the United States and the factories that they built in Japan in the 1920s. Only the firm that would later become Nissan had begun building vehicles when Kiichiro Toyoda appealed to his father, Sakichi Toyoda, to let him investigate the automobile industry. The Toyoda family by then was already well-known and prosperous, thanks to its enormously successful loom business. “By the time I had started going to school, Toyoda looms were as famous as Mikimoto pearls and Suzuki violins,” wrote Eiji Toyoda, Sakichi’s nephew and Kiichiro’s cousin, who joined the auto company at its infancy and would later become one of its most influential chairmen.

  But success in the automobile industry did not come quickly or easily. Kiichiro Toyoda, an engineer, had been fascinated by cars during his travels, including the trips he took to New York in 1921 and 1929 with his sister, Akia, and her new husband, Risaboro (who, in a fashion then common in Japan, forsook his more-modest family name to become a Toyoda). The testiness between Kiichiro and Risaboro, which would continue throughout their lives, began early. A well-known photo of the three Toyodas, taken on their first trip abroad, shows Akia and Risaboro sitting cozily together on one armchair, with Kiichiro across the room in another, turned away from them in a stiff pose. Kiichiro, always excited by new ideas, was convinced that the family’s vast expertise in manufacturing could be leveraged in the car business. Shortly before his death in 1930, Sakichi gave his son permission to explore the new venture. It was not a popular decision among other members of the family and managers at the loom company, so as a result Kiichiro decided to keep his work clandestine.

  Working at night in the corner of a factory on the loom works’ grounds, Kiichiro and a group of loom company engineers began developing an automobile engine, feeling that the car had to be developed from the inside out. Kiichiro had set up a small casting forge in order to melt steel and pour it into molds to form the cylinders and blocks for the car’s engine. Time and again, the engine blocks would crack, foiling the engineers on the most critical component of their vehicle. It took months to find a solution, but by 1933 Kiichiro and his team had built 10 prototype engines. He wanted to move the company forward into automobiles themselves, but for this he needed permission from Risaboro, who had become chairman of Toyoda upon his father-in-law’s death, and from other company board members.

  At a heated meeting in December 1933, Kiichiro pleaded his case, finally winning the board’s approval to set up an automotive group. Kiichiro’s engineers first tore apart a Chevrolet that they had shipped to Japan from the United States. They noted how many parts the vehicle had and how each piece fit together, lessons they would apply to their own design. Eventually, the team set up their own version of an automotive assembly line, finding sources for each of the parts and practicing how they would produce a car. Finally, in 1936, Toyoda was ready—and his timing was fortuitous. As the company was getting ready to show its first car, Japan’s parliament, the Diet, passed legislation to encourage domestic automobile production and in effect curb production by Ford and GM by requiring that the companies be owned by Japanese citizens. “Looking back on it now, it was a very low blow by the government against foreign automakers,” said Eiji Toyoda. Nonetheless, the measure gave Toyoda a much-needed boost.

  At a motor show in Tokyo, the company unveiled a concept car it called the AA. It was essentially a copy of a Chrysler sedan, with a long hood and the kind of sculpted body that was so prevalent on vehicles from before World War II. There was nothing original about it that signaled the design direction that the company might ultimately take. But it was a start for the fledgling Toyota Motor Company, which had chosen a name that was slightly different from that of the loom manufacturer. (There are several different explanations for this: One is that the syllable “ta” was considered easier to pronounce in Japanese than “da.” Another is that the name Toyota takes only eight brush strokes in Japanese writing, as against 11 for the name Toyoda. A third is that the family, concerned about the risks of the automotive project, didn’t want it to share the same name as the loom works for fear that if it failed, the parent company’s reputation might be harmed.)

  Even as production of the first Toyota vehicles was under way, the culture that would permeate the company was taking shape. A year before the first Toyota car was introduced, Kiichiro and Risaboro sat down to draw up the principles under which they wanted all of the Toyoda group companies to operate. These would apply not only to the loom business but to the emerging automobile company as well. Known formally as the Toyota Precepts, they would eventually evolve into a cultural outlook that would become known as the Toyota Way. The first of the precepts was teamwork, followed by the determination to be at the forefront of technological and market developments. Employees were to be practical and avoid frivolity, be kind and generous and strive to create a comfortable atmosphere. Finally, Toyoda employees would be reverent and show gratitude to those around them.

  Decades later, the Toyota Way has been refined into two main principles: continuous improvement and respect for people. It is deceptively simple, and incredibly difficult for many people to grasp, but it is cited around the company as the secret to what makes Toyota so successful. Its emphasis on always making things better leads to an unavoidable transparency, while its emphasis on teamwork and inclusion means no single executive can create a kingdom in which he is the sole ruler. “I don’t think there’s truly any way to hide in Toyota,” said Dave Illingworth, senior vice president of planning and administration for Toyota Motor Sales USA, the company’s American sales arm. “If you have a problem, you’d better tell somebody, because eventually you will be found out.” The primary tool that Toyota would need to truly inculcate the auto company into its way of thinking would be created later, but the philosophical building blocks were put in place from the very beginning.

  However, it took more than a decade for the auto company to build up a head of steam. Given the complexity and slow growth of the Japanese car market, Toyota decided not to produce cars in its early years, choosing to build simpler small trucks instead. Then World War II intervened, and the government stepped in to regulate production, although, unlike in the United States, automobile manufacturing never stopped in Japan. However, the bulk of orders for new vehicles during the war years came from the government, providing little incentive for companies to continue their investments beyond a minimum level or come up with new designs. Even so, Toyota came within a hairsbreadth of being completely destroyed in its infancy. American military documents, discovered by Eiji Toyoda after the war, showed that Toyota City was scheduled to be bombed on August 21, six days after Japan’s surrender. The day of Japan’s defeat was miserable and memorable for the workers who remained at the Toyota complex. The announcement of Japan’s surrender, broadcast on radio, was the first time many of the workers at the Toyota complex had ever heard Emperor Hirohito’s voice. The news of defeat stunned them. A number simply packed up their things and went home for the day. On August 16, a company executive, Hisayoshi Akai, called everyone in the complex together. “We lost the war,” he said, “but mark my words, in five years we’ll be on our feet again.”

  Rebuilding the company, like rebuilding the country, wasn’t quite so simple. Immediately after the war, Toyota had no market for its small trucks. Instead, it pr
oduced dinnerware and fish paste, based on Kiichiro Toyoda’s theory that even if they couldn’t afford vehicles, people still had to eat. Then, as its trucks began to sell, boosted by liberal financing terms, the company was hit by two crises: a cash crunch and a series of labor strikes. Kiichiro and Risaboro Toyoda sparred on how to get the company out of danger. Risaboro, a better businessman than his brother-in-law, argued that the company had to cut more deeply. Kiichiro resisted, arguing that Toyota needed to be loyal to the workers who had seen it through its darkest days. But Toyota’s fortunes worsened dramatically and the situation came to a head in 1950, when Kiichiro Toyoda tearfully stood before his workers and told them that he had to cut 1,600 jobs. One of them would be his own. Kiichiro stepped down from the company he had founded, heartbroken. But it was the right move. Under new management, Toyota quickly regained its footing, becoming solvent in less than a year. The board invited Kiichiro to return. Sadly, it was a short comeback. In 1952, he suffered a fatal heart attack, never to see the vast global growth and accomplishment that Toyota would achieve.

  It was the United States that saved Toyota in the 1950s and provided the stepping-stone to its future. Eiji Toyoda, who had joined his uncle’s business after graduating from school in the 1930s, set off for Dearborn, Michigan, to visit Ford’s sprawling operations. The company, which was producing just 40 trucks a day, decided to establish ties with an American company. There had always been symbiotic, if unofficial, relationships between Toyota and Ford. Kiichiro Toyoda was a deep admirer of Henry Ford’s business practices and a great fan of Ford’s book My Life and Work, which he made required reading for his staff. The pair had talked about a joint venture before World War II, only to see the idea scrapped by the outbreak of fighting. With Toyota on its feet again, Toyoda sent a letter to Ford to gauge the company’s interest in reviving discussions. Ford didn’t commit to a business deal, but its executives invited Toyoda to visit anything he wanted to see.

  He combed its factories, studying how the massive Rouge complex turned out 800 vehicles a day, examining how Ford produced engines, learning about its international operations, which had then revved into action in Argentina, Israel, France and Spain. He talked his way into Chrysler’s factories, too, looking for a point of comparison. As he was preparing to head back to Japan, Toyoda said to himself, “Detroit isn’t doing anything that we don’t already know.” The joint venture didn’t prove necessary, because as Toyoda returned home, he found that Toyota’s plants were slowly increasing production, thanks to a slew of orders from both the United Nations and the American military. The U.S. Army decided to buy trucks from Japanese manufacturers in order to transport troops in Korea, where conflict had broken out. Ordering trucks from American companies would cost too much, and it would take too long to ship them overseas. Even after the Korean War ended, the military’s orders from Toyota continued for years. But they didn’t last beyond 1962, when American officials belatedly realized they were subsidizing a Japanese industry to the detriment of their own companies.

  Shortly after Eiji Toyoda returned to Japan, one of the greatest figures in Toyota’s history, Taiichi Ohno, who would become as famous as its founder, came forward to implement ideas that he, too, had learned in Dearborn. His concepts proved to be far more of a breakthrough for Toyota, and far more influential to the company’s future, than any joint venture with an American company might have been. Ohno was an engineer who had joined Toyota in 1946, attracted by the company’s long emphasis on mistake-free engineering. In an attempt to produce the best-quality textiles, the Toyoda loom company had invented a safeguard called jidoka, in which machinery would stop working in the event of any kind of manufacturing error. It kept the company from shipping flawed material, ensuring the company’s reputation for quality, and it alerted the company instantly when its tools were broken and needed maintenance. Ohno thought that similar processes might be applied to the automotive assembly line. He decided to travel to the United States, where automobile factories had roared back to life after World War II, to learn more about production. Like Toyoda, Ohno explored Ford’s Rouge operations, but with a slightly different motivation, which was to study the production process from start to finish.

  He saw how Ford took in vast carloads of copper, iron ore and coal on its own freighters, which arrived at its own docks from its own mines in northern Michigan, and transformed the raw materials into steel, glass and auto parts that were fed to its assembly plants. He studied the manufacturing lines that had been Henry Ford’s contribution to automotive greatness. And then he went to a supermarket. Here he made the real discovery that would lead to the Toyota Production System (TPS), which is the company’s functional foundation and the secret that sets Toyota apart.

  Back home in Japan, consumers relied on tiny “mom-and-pop” stores that stocked only a few kinds of goods. One might specialize in something as simple as plum buns, called anpan. Another might sell dried snacks, a third fresh fruit. Shopping trips were quick: One asked the merchant for the quantity required, and it was provided. In America, however, customers chose from a vast array of products, in precisely the quantities they wanted, and shopped according to the pace they desired. As supermarket shelves emptied, they were restocked, often from the front, allowing merchandise like cartons of milk or containers of eggs to be constantly pushed forward within consumers’ reach. Ohno saw that markets didn’t keep huge stocks of cornflakes or boxes of paper towels piled up in back. They received constant deliveries, so money wasn’t tied up in unneeded merchandise.

  From his observations, Ohno created three basic principles that required the involvement of everyone in the company. First, management had to make a strong commitment to the system, participate in implementing it and reinforce its philosophy constantly with middle management. Second, all employees, from the shop floor to the executive offices, had to participate. Third, everyone involved in making an automobile, from hourly workers, to suppliers, to dealers, had to accept that this was the way Toyota was run, and to be constantly trained and updated on the system.

  Under TPS, every Toyota factory, whether in Tahara, Japan; Cambridge, Ontario; or Huntsville, Alabama, is run on the same key principles. A fundamental element is the concept of just-in-time delivery, which has been widely applied in all manner of factories around the world, including those of Detroit companies. As with the replenishment of goods in a supermarket, every component that Toyota uses, whether engines on the assembly line floor or SUVs shipped to dealers, arrives as it is needed. This is called a “pull system,” meaning that the required goods are pulled out of inventory according to demand. It’s vastly different from, and more difficult than, Detroit companies’ traditional practice of stockpiling supplies of parts and automobiles and selling down the supply, which is called a “push system.”

  The pull system requires a daisy chain of communication. As Toyota engineers set out to develop new vehicles, they spend months talking to consumers and dealers to find out what kind of features they want. Likewise, once those vehicles reach the showroom, dealers must keep track of what consumers are requesting and stock their lots with vehicles that will move quickly. They relay these sales trends back to the company, which then orders parts and builds vehicles according to customer demand. As those vehicles are being produced, Toyota’s workers follow a preestablished series of steps called standardized work, another important TPS concept that applies all through the company. Near every workstation in a Toyota plant hangs a laminated card that shows how a task is to be performed, and workers are expected to do so to the letter, in the amount of time and with the number of steps that are prescribed. That is not to say that such tasks are set in stone; in fact, Toyota employees at all levels of the company are drilled in another key TPS concept, called continuous improvement, or kaizen. If there is a better way to do the work, from handling customer service telephone calls to installing headlights, Toyota wants to hear its employees’ suggestions, and it implements them on a regular
basis.

  Nobody buys a car just because of the Toyota Production System, and probably most of the people who own Toyota vehicles have never even heard of it. But it’s what makes Toyota cars and the company itself so sound. TPS isn’t just the way Toyota cars are built; it’s the foundation that the company is built upon. TPS is the reason that Toyota can bring out cars and trucks that fit together and run perfectly. TPS refines the concept of continuous improvement, using every kind of resource as efficiently as possible, and giving employees a real say in their jobs. It is both a set of guidelines for the factory floor, and a philosophy that guides the company. Because Toyota has TPS, it doesn’t have to reinvent the wheel every time it wants to try something new. It doesn’t have to communicate new slogans or rely on the personality of a new chief executive to motivate the troops. TPS basically puts everyone at Toyota on the same page and gives them the same frame of reference, which is the customer. The customers’ needs and desires are the starting and ending point of TPS. The most humbling and frustrating aspect of TPS is that it is impossible to become completely proficient. Even now, when Toyota is the biggest, most profitable and most powerful company that it has ever been, Toyota executives say they have mastered only 50 to 60 percent of what Ohno hoped Toyota could achieve through the production system. That kind of thinking all but guarantees that Toyota will not become complacent.

  One of the executives who best understand TPS today sits right at the top of the company: Fujio Cho, Toyota’s chief executive, whose own career mirrors Toyota’s most important steps during the past 35 years. Cho, along with Toyota’s chairman, Hiroshi Okuda, is the architect of the plan that Toyota hopes will result in its becoming the world’s largest automobile company by the end of the decade. Unlike the founders of the company, Cho did not have an engineering degree or any background in manufacturing. He studied law at Tokyo University, joining Toyota in 1960 and serving in a variety of staff jobs across the company. Were it not for an unusual assignment, Cho might have simply ended up in the ranks of Toyota’s salarymen, with a modicum of responsibilities and no substantial authority.