As Toyota closes in on GM, Quality concerns grow

[Butta]

As Toyota closes in on GM, quality concerns also grow

By NORIHIKO SHIROUZU
The Associated Press
and SEBASTIAN MOFFETT
The Wall Street Journal



TOYOTA CITY, Japan -- Toyota Motor Corp., one of the most successful companies in the world, is scrambling to overhaul itself.

After nearly doubling its revenue in the past decade and redefining competition in key parts of the auto business, Toyota suddenly finds itself confronting mushrooming quality problems. Torrid growth has spread thin the company's famed Japanese quality gurus. This means that, in places like Toyota's Georgetown, Kentucky, plant, the pressure is on to retrain American workers to take up more of the slack. At the same time, Toyota has launched a world-wide campaign to simplify its production systems.

It is the kind of paradox many highly successful companies face: Getting bigger doesn't always mean getting better. Toyota's net income of 1.16 trillion yen ($10.46 billion) in the year ended March 31 not only exceeded those of rivals General Motors Corp. and Ford Motor Co. combined, but set a record for any Japanese company. Toyota continued the trend Tuesday, reporting a 29 percent rise in net income for the quarter ended June 30, to 286.6 billion yen, up from 222.5 billion yen in the year-earlier period. Group sales rose 10 percent to 4.51 trillion yen.

Toyota's next big goal is to expand its share of the global market to 15 percent over the next decade, from 10 percent now. That would make Toyota roughly the same size No. 1 auto maker GM is today.

But there are signs that the company's ambitious growth agenda is straining human and technical resources and undercutting one of Toyota's most critical strategic advantages: quality.

Toyota still tends to outscore most rivals, including Detroit's three big auto makers and European brands, on industry surveys of quality and reliability. But Toyota's lead has narrowed and in certain key segments disappeared. "Toyota quality isn't improving as fast as it should," Toyota's president, Fujio Cho, admits in an interview.

To stop the quality slide, Mr. Cho says Toyota has launched multiple "special task forces" at trouble spots in places such as North America and China to overhaul shop-floor management. Toyota also has established a Global Production Center in Toyota City to train midlevel factory managers so they can more effectively run plants outside Japan. Toyota now is re-evaluating some of its most fundamental operating strategies.

"We are getting back to basics," says Gary Convis, a Toyota managing officer who is also president of the Georgetown plant.

An important part of that effort focuses not on machines or high-speed information technology, but on replicating a special class of people who were instrumental in making Toyota a manufacturing powerhouse during the past 25 years.

When Toyota first began opening factories in the U.S. in the mid-1980s, kicking off its dramatic global expansion, some of the most important people in the new plants weren't top executives, but midlevel Japanese managers commonly known as coordinators.

These coordinators were experts in Toyota's lean-manufacturing techniques and philosophies, commonly known as the Toyota Production System, or TPS. These coordinators, usually with 20 or more years of experience, generally shunned classrooms, instead training American shop-floor managers and hourly associates by attacking issues directly on the assembly line.

A central concept was that there is an endless possibility for kaizen, or continuous improvement, in every process. The Toyota coordinators tried to make each worker a "thinking machine," capable of constant learning.

The principles behind lean production took shape over five decades, starting with efforts in the 1930s by one of the company's founding fathers, Kiichiro Toyoda. The Toyota system took its current form during the 1950s with the leadership of Taiichi Ohno, a Toyota engineer who drew inspiration from a trip to the U.S. during which he watched how a supermarket stocked its shelves using a just-in-time delivery of goods.

Mr. Ohno preached there are seven forms of muda, or waste, in any process. When Mr. Ohno trained recruits to Toyota's elite Operations Management Consulting Division, he drew a chalk circle in front of a process on the assembly line and told the trainee to watch that job until he could identify how it could be improved. A trainee could stand for nearly a day before he was able to satisfy Mr. Ohno with his answer.

When Mr. Ohno began applying his production approach full-scale, Toyota factories achieved huge gains in productivity and efficiency. The marriage of efficient production to an obsessive concern for quality helped Toyota establish a reputation for bullet-proof reliability that remains a huge competitive advantage.

By the late 1980s, lean production was a deeply entrenched way of life at Toyota, which governed just about every aspect of its corporate activities.

Hajime Oba, a TPS guru, likens the system to a form of religion. Managers at Detroit's Big Three auto makers, he says, use lean techniques simply as a way to slash inventory. "What (they) are doing is creating a Buddha image and forgetting to inject soul in it," Mr. Oba says.

But as years went by, Toyota discovered that its corporate faith was getting watered down as the company spread its operations world-wide, and hired generations of employees ever more distant from Mr. Ohno.

A case in point is Toyota's massive factory in Georgetown, Kentucky, the first plant the auto maker built in the U.S. from the ground up.

Georgetown began production in 1986, and throughout the 1990s the plant routinely claimed the top spots in J.D. Power and Associates' widely watched Initial Quality survey for cars sold in the U.S.

But after being named North America's second-best plant in 2001 behind Toyota's Canadian plant in Cambridge, Ontario, Georgetown has slumped. This year, it ranked No. 14, after placing No. 15 in 2003 and No. 26 in 2002. Two GM plants in Michigan, the Lansing Grand River Cadillac factory and a large car plant in Hamtramck, and Ford's luxury-car factory in Wixom, Michigan, were North America's top three plants this year.

One big problem at Georgetown has been language. Most of the Toyota production-system masters speak fluently only in Japanese. Most of their American employees speak only English. The linguistic and cultural barriers make deep discussions on lean production almost impossible, and can cause other problems.

At Georgetown, one glaring symptom of trouble, its top executives say, is that some hourly assemblers began ignoring standardized work processes -- considered one of the biggest sins inside Toyota plants because of the impact on the consistency and accuracy of manufacturing.

Georgetown also lost some lean-production masters to age and competitors. Kazumi Nakada, a TPS master who worked in tandem with Mr. Cho, the then-Georgetown president, to launch Georgetown in the mid-1980s. But Mr. Nakada left Toyota in 1995 to join GM, which was intensifying its efforts to catch up with Toyota in vehicle quality by copying its manufacturing methods. Mr. Nakata worked at GM overhauling its manufacturing system in Europe, and now works for the big auto parts maker, Delphi Corp., a former GM unit whose leaders are vigorous Toyota Production System converts.

By the time Mr. Convis arrived at Georgetown in mid-2000 from the GM-Toyota plant in California, Georgetown was showing signs of trouble. Yet, the plant's management was in charge of leading Toyota's effort to set up a pickup-truck plant in Tijuana, Mexico. Mr. Convis asked his superiors in Japan for help, in the form of TPS masters who could work on the Mexico project. The reply was a "flat no," Mr. Convis says.

That was "a real wakeup call," Mr. Convis says.

To shore up Georgetown's mastery of lean production to a level where it could function without relying so much on Japanese TPS coordinators, the plant's top management circle launched an emergency 18-month project in 2000 in order to gradually build back up the core of its front-line managers. The effort has since continued as a more formalized Organization Development Group.

Among the first things Mr. Convis and other managers did was drag about 70 midlevel managers through projects at various parts producers for "real life" kaizen. The goal was in part to "embarrass the hell out of them" in front of suppliers whom they had been used to bossing around, says Mr. Oba, the then-president of the nearby Toyota Supplier Support Center. Mr. Oba agreed to help out Mr. Convis in implementing the project.

Still, in 2002, Georgetown suffered one of the biggest blows to its track record for quality. The plant began pumping out the new Camry sedan in the fall of 2001, and soon buyers began griping about the car's spongy brakes and cup holders that interfered with the shift lever when a tall travel mug was placed in them. Long skinny plastic strips, call "Mohican molding," that covered up weld marks on the car's roof also sometimes peeled off, in part because of lack of testing.

Those problems helped to send the number of customer complaints about the quality of the new Camry soaring in the annual initial quality survey by J.D. Power. In 2002, the car had 117 problems per 100 vehicles and was the sixth-best vehicle in the survey's "premium midsize car" category. Just two years earlier, in 2000, the Camry was America's best vehicle in that segment.

Since then, the Camry's initial quality ranking has declined to No. 7 in 2003 and No. 8 in 2004 despite the fact that the number of customer complaints declined. Rivals are improving their cars faster than Toyota is.

Full Article Here

[Nocturn_Bird]

Good read, seems as Toyota grows to GM size its going to need to go where GM has been going in terms of making so many cars good quality. Where in toyota may hit the 15% mark, I tink it will have a good ways to go in order to catch GM on even ground as GM is getting Quality down to a T, or should I say Q.

[akumaknight]

*voice of Nelson* Haha!

Maybe people will realize bigger isnt always better (cept when it comes to american sedans and engines)

[mbukukanyau]

Originally posted by Butta@Aug 4 2004, 09:32 PM
As Toyota closes in on GM, quality concerns also grow

By NORIHIKO SHIROUZU
The Associated Press
and SEBASTIAN MOFFETT
The Wall Street Journal


TOYOTA CITY, Japan -- Toyota Motor Corp., one of the most successful companies in the world, is scrambling to overhaul itself.

Gm is learning, and learning fast! Another problem for Toyota is GM has many global products. Its taking more and more of them Global, Cadillac Europe, Japan, China, Opel Mexico, Brazil, Chevy has also been going global in a big way. If GM closes the gap with Toyota in Quality, then Toyota will never catch GM.

[New_Mexico_Sunset_on_Rt66]

hmm, dosen't surprise me. You can only squeeze so much blood out of a turnip.

:lol:

[ByTheLake]

Interesting article, thanks for the post.

You can bet that Toyota won't take a decade to get its act together.

The cycle of improvement can never end. Hopefully this translates into some adjustment in Toyota's perception.

[tgagneguam]

What a thoughtful article and a great find.

If any company is up to the challenge of fixing these problems, it's Toyota. Of course, I hope they fail miserably in the attempt! I'm happy with GM sitting at the top of the heap.

[akumaknight]

WOW... laserwind actually said something I agree with.

[awalbert88]

While I believe Toyota is up to the task of fixing their problems, I would like to point out that without the perception of superior quality, Toyota has nothing else to get buyers into showrooms. They have no cars that people feel passionate about. They have no cars that scream "drive me!". Once the public realizes that brands like Buick, Lincoln, Pontiac, Cadillac, Mercury, etc are all ahead of Toyota in most quality categories, what will keep people coming to Toyota dealers? Certainly not the service they get!

[hudson32]

Originally posted by laserwizard@Aug 5 2004, 03:29 AM
I feel vindicated. I have long held that the success of the Japanese on quality was not because they build or design superior vehicles, it was because they had limited product lines, limited platforms, limited distribution from limited production facilities. Once they were forced to compete over a broader spectrum of markets with a wider variety of permutations of models, their success in quality would equalize to Detroit's. Screw the Rice makers....over-rated, over-hyped products on the planet.

Unbiased?? Hard to say that that he is with such intemperate comments. Some of what he states is factually inaccurate. I do recognize that Detriot has improved their quality. But as one who has owned both Toyotas and GM products, I can see why more and more people buy Toyota. Quality of assembly and materials is one reason. But even if most people have the wrong perception that Toyota is head and shoulders above everybody in having "bulletproof" reliability, most buy the car for the quality of performance. GM has some decent cars right now, but I think they can't compete half-heartedly if they want to dethrone the Japanese. And Toyota buyers are very picky and astute. Some of the complaints that are registered to Toyota are far more minor and mundane than for the other makes of cars. Because of Toyota's high standards, a lot of us hold it to an unrealistic 100% perfection. I do own a 2002 and just bought a 2005 Camry. The 2002 was the first year of the current body style. There were a few glitches, like Spongy brakes and the roof rail rubber was coming loose. Also, I had a few rattles from the vent bezels. All those were rectified by the dealer, and I hadn't had a problem since. I'm impressed with some of GM's products, notably the Malibu and the CTS. But I think GM needs to go all out to win over Toyota buyers. I am not one of those who buys Toyotas for the sake they are Toyotas. I wouldn't say that Toyota is in the dumps, but that GM is closing the gap in reliability. You don't really see much of a spread in the JD power ratings as you once did.

[mpologuy79]

What GM needs is a break on Healthcare spending "over $3,000 per car sold??" This will always put American Automakers at a disadvantage compared to Europeans with Universal healthcare... IF GM could cut healthcare by half that would add 1.5 billion for every million cars sold... Great amount of Cash to fuel the "American-Revolution" with GREAT NEW cars/trucks

[New_Mexico_Sunset_on_Rt66]

mpologuy79 - I agree. GM has real pension problems. They typically have higher costs associated with each vehicle sold. That is one area that Toyota has a MAJOR advantage in, they make more money on each product sold. Once GM gets back on it's feet, they will need to address the need to make more money on each product they sell.

[paul8488]

Originally posted by laserwizard@Aug 5 2004, 03:29 AM
I have long held that the success of the Japanese on quality was not because they build or design superior vehicles, it was because they had limited product lines, limited platforms, limited distribution from limited production facilities.

but they managed to convince so many people to fit into these few models, instead of having to accomodate picky consumers. that in itself is a feat. we argue and complain here that we won't drive a new avalanche if it does/doesn't have cladding. GM needs different grilles on its full size pickups to attract the same number of buyers as ford. you're right... toyota has had fewer lines and models and facilities... but good on them if they can cover so much ground with so few resources. at least from a business standpoint. choice is best for consumers, but toyota has somehow convinced an incredible amount of people that they don't need as much choice as a company like GM offers.

very good article. it's refreshing to read something that makes the intended points, but doesn't get off track and start leaning one way or the other.

[vanshmack]

Originally posted by laserwizard@Aug 4 2004, 10:29 PM
I feel vindicated. I have long held that the success of the Japanese on quality was not because they build or design superior vehicles, it was because they had limited product lines, limited platforms, limited distribution from limited production facilities. Once they were forced to compete over a broader spectrum of markets with a wider variety of permutations of models, their success in quality would equalize to Detroit's. Screw the Rice makers....over-rated, over-hyped products on the planet.

My Gosh..Hell just froze over.

[IMPALAon20s]

www.thecarconnection.com has similiar story..
http://www.thecarconnection.com/index.asp?article=7401