February 9, 2001
Toyota executive says growth of global auto industry can be bonanza or burden
Although today’s global auto industry contains fewer major players, it faces unprecedented growth that can be either a bonanza or a burden, said a Toyota executive here at the the 100th annual Chicago Auto Show.
“The auto industry has been shrinking steadily ever since hitting a peak of 208 companies here in the U.S. during the early part of the 20th century,” said Toshiaki (Tag) Taguchi, president and CEO of Toyota Motor North America. “Today there are only 10 major players around the world when you count buyouts, alliances and controlling interests,” he added.
Taguchi noted that the tremendous growth of the global automotive fleet in the years ahead could generate a grave social backlash if the industry does not handle it properly.
“In 1950, there were about 69 million cars and trucks worldwide,” he said. “Today there are more than 10 times as many and each year another 55 million are added by new production.” Taguchi predicted that the global vehicle population will swell to more than 1.1 billion by 2050.
“This phenomenal growth…can be either a bonanza or a burden,” he added. “If we let it become a burden, the auto industry will face a social backlash like never before.”
He called on the industry to “pay attention to two important E’s – the environment and e-business” to avoid disaster by reducing the industry’s environmental footprint and removing waste from the supply chain that flows from raw materials, through manufacturing, to the final customer.
Taguchi said that the need to accomplish these tasks quickly and the great cost involved are driving the consolidation of the auto industry, but that “only large companies or partnerships with international reach will have the clout” to help create the international standards and regulations necessary to deal with challenges such as global warming.
“If we help create practical international standards,” he added, “they may provide vital economies of scale that will enable us to drive down product-development costs while still taking care of our customers and the planet.”
Taguchi warned that “automakers, suppliers, energy providers and government” must join hands to fund the massive investments necessary to quickly develop even greener drivetrains, fuels and fueling networks.
He noted that more “calculated risks” like Toyota’s popular hybrid Prius – which achieves 80 percent better fuel economy while putting out 90 percent fewer emissions – will be necessary in the future. “Six billion people share this planet and the days when the auto industry could just crank out cars without concern for their impact on the environment are over,” he added.
He also said that e-business can help to give the auto industry additional financial leverage to attack its problems by reducing waste and driving out cost, but that automakers must use it cleverly to “increase product value and lower costs faster than our customers can lower our prices.”
“The distinction between dot-com companies and ‘old-economy’ companies is beginning to fade,” Taguchi added. “The convergence of old-economy know-how and new-economy speed is fully underway as smart companies borrow from both worlds to forge a new, more efficient business model.”
As an example of what Toyota is doing, Taguchi presented the “Monarch” project being pursued by the automaker’s U.S. sales arm.
“Right now we have 85 acres…of parts warehouse space around the U.S.,” he said. “This huge space contains 19 million parts and every day we ship $6.6 million worth to our Toyota and Lexus dealers. All those parts mean nothing to our customers unless we can get the right part to the right place at the right time for their vehicle.”
He explained that Toyota’s Monarch project will use high-speed web-based networks to slash the current day’s supply of total parts inventory by 50 percent, cut average days of backorders by 30 percent and reduce transportation costs by 25 percent.
“Through better forecasting, inventory deployment and improved procedures, we will decrease costs and provide better value and service to our customers,” he added.
Taguchi summarized his remarks by saying, “I firmly believe that, by working together, approaching environmental challenges as opportunities and fully developing our e-commerce abilities, (automakers) will not only drive the future, but thrive in it.”