by Jeremy Cato

“The enemy of Toyota is Toyota,” said Ken Tomikawa, the Toyota Canada president who has driven Japan’s number one automaker to over 10 per cent of the Canadian new vehicle market. The goal for the rest of the decade is much grander. In 2004, it was revealed that Toyota was working away at a new strategy called Global 15: Toyota intends to achieve a 15 per cent global share between 2006 and 2010 and thus become the number one automaker in the world (General Motors has about 14.7 per cent of global share). That would represent a big jump from Toyota’s current 11.3 per cent share of global sales.

Ken Tomikawa, President Toyota Canada, with FTX Hybrid V8 pickup, Toronto Auto Show, February 2005
Ken Tomikawa, President Toyota Canada, with FTX Hybrid V8 pickup, Toronto Auto Show, February 2005. Click image to enlarge

Tomikawa’s point, made during a dinner to discuss the company’s aggressive truck strategy, is that as Toyota goes down this path towards becoming the world’s biggest car company, it will run into trouble only if arrogance and complacency set in and grip the company.

Don’t think it isn’t possible. As recently as the end of the last decade, Ford Motor Co. had a corporate strut perfectly reflected in since-ousted CEO Jacques Nasser. Then the bottom fell out of Ford’s plans and US$6.45 billion in losses ensued, from which Ford has not yet recovered.

Go back a little further, and recall the hip condescension of Chrysler Corp. during the heart of the Bob Lutz/Bob Eaton years. And GM? What was good for GM was good for the country, right?

Look at those three now. Ford and GM don’t make money selling cars at all; if not for their finance arms, both would be in big trouble. Since being taken over by Daimler-Benz, Chrysler has fallen to the depths and is only now showing a few signs of returning to consistent profitability. But we can’t be sure Chrysler’s is a lasting recovery yet.

Tomikawa, like all the other senior bosses at Toyota, is concerned about arrogance. He says he worries about the new, young, swaggering employees who have never experienced bad times and who seem to be comfortable with the idea that Toyota is just naturally superior to all the other automakers.

“This is a problem we must address in Toyota,” says the hard-driving Tomikawa, a short, intense sales and marketing executive who loves his golf and, alas, his cigarettes.

Toyota, of course, is on a global roll. It is increasing its market share steadily, it enjoys a remarkable degree of environmental cachet, its Lexus luxury car division has been a leader in quality for more than a decade, and the corporate coffers are full with some US$30 billion in cash and equivalent reserves, driven by profits such as the nearly US$11 billion Toyota earned in fiscal 2003. Toyota is the world’s most profitable per-vehicle volume car company, period.

The arrogance of success is a real worry, though. Detroit’s automakers have suffered from it and so have Europe’s.

Consider Volkswagen. Through the 1990s, Europe’s largest automaker was a shining example of smart platform engineering to produce a multitude of good products. This year VW is on track to lose as much as US$1 billion in North America alone. Analysts suggest that VW wasted resources on a bold but ultimately unwise attempt to get into the luxury car business with models like the Phaeton.

Mercedes, meanwhile, is battling with well-documented quality issues. Some suggest they are a byproduct of aggressive global expansion plans – the takeover of Chrysler, the purchase of a controlling interest in Mitsubishi — that have led to senior management diverting attention from the core Mercedes brand. Apparently, Mercedes cannot simply run itself after all.

Tomikawa says Toyota CEO Fujio Cho warns constantly about what he calls “big company disease.” They both recognize it, but preventing it from infecting the organization is a different matter.

To inoculate the company from complacency, Toyota is moving ahead aggressively with radical improvements to what are already the world’s best product development and manufacturing systems. Officials say that when a massive wave of new models begins arriving this year, the company will have found ways to save a staggering 30 per cent in development and manufacturing costs over the current generation of models.

Ken Tomikawa, President Toyota Canada, with FTX Hybrid V8 pickup, Toronto Auto Show, February 2005
Ken Tomikawa, President Toyota Canada, with FTX Hybrid V8 pickup, Toronto Auto Show, February 2005. Click image to enlarge

Insiders say Toyota’s manufacturing engineers believe they have devised a new system to enable products to be built on assembly lines half the length of today’s. This will be the system Toyota uses when it opens a new truck plant in Texas in 2006.

Then there is the matter of styling. It is a significant weakness. The truth is that for the most part, Toyotas are considered bland, uninspired designs – in other words, transportation appliances.

That will change under a new styling mandate. Design now has a higher status within Toyota; no longer does it fall under engineering. Moreover, Toyota is hiring new designers from around the world.

Tomikawa, however, insists that in all this, Toyota is not focusing on surpassing other car companies; that is not the idea. Toyota will worry about itself – focus on its own worst enemy, the one within.

It may work. Don’t forget that about two decades ago, Toyota quietly set out to gain 10 per cent of global market share. It has long since passed that target and Global 15 is next.

For the rest of the world’s automakers, this is not good news.

As John Wormald, a partner with auto-researcher Autopolis in London said is a recent Barron’s article, Toyota “the powerhouse is about to erupt. Toyota is going to put Detroit and the world’s other large car companies through the meat grinder.”

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