The past week has seen a flurry of articles on the problems Toyota has been facing as it surpasses GM for the number one spot… in sales. As a side note, several months ago we commented on how sales is meaningless; the real number is the bottom line where Toyota has been king for a long time. But the reality is the same in that Toyota has experienced some quality, people, and operational issues lately.
Two of the better articles were the USA Today’s piece by Chris Woodyard and the LA Times piece by Ken Bensinger. I’ve mulled both of them over for several days, and had an email chat with good friend Norman Bodek on Bensinger’s article, which coincidentally quoted Mr. Bodek. My conclusion is that the problems, the visibility of which can be attributed to Toyota’s new elevated status, is rooted in people.
Let’s start with a comment on that visibility factor.
"It’s not very fun being No. 1, is it?" asks Rebecca Lindland, an automotive consultant for Global Insight. "They are just proving in the end they are a company run by human beings and not a machine." "The nail that stands highest gets hammered," says spokesman Xavier Dominicis. But he adds that Toyota is taking its situation seriously and is starting an initiative to get back to basics.
True, but irrelevant as I’ll note after a surprising statement in Woodyard’s article.
Toyota downplays the trouble, saying that growth makes it a bigger target and that the issues aren’t that big a deal.
That’s what a GM or Ford would say, but not what someone truly rooted in TPS would dare think. A problem is still a problem, and needs to be fixed. No issue is "not a big deal." Which is what a quote from Bensinger’s article reinforces.
Toyota President Katsuaki Watanabe recently appointed two executives to oversee quality control, announced plans to hire 8,000 more engineers to work on that issue and decided to make more prototypes of cars prior to release. "We’re very concerned about quality," [Toyota spokesman] Kwong said.
Now on to the quality problems that are getting a lot of press.
Consumers Union, the non-profit that rates products, said in October that Toyota showed "cracks in its armor" in its 2007 Car Reliability Survey. Three models were rated below average in reliability. Consumers Union also gave it the top recommendations for reliability in 17 of 39 picks. A study from the business school of the University of Michigan in August said that Toyota had slipped in the American Customer Satisfaction Index, even though its Lexus division moved up slightly. "We did see a drop in product quality," says Claes Fornell, a business professor.
As the article points out, reliability and other quality comparisons are just that: comparisons. If you dive deep enough you’ll find the underlying "defects per unit" and such data, but that usually isn’t reported. The lowest quality Chevy today is still better than the best Toyota of a decade or so ago. Ok, maybe two decades. But the comparison number is definitely important, as that describes one of the competitive advantages, or disadvantages, that sells cars. So what’s going on?
J.D. Power and Associates, another quality-ranking group, found that Toyota’s rivals are gaining. "It’s not that Toyota is getting worse" says David Sargent, Power’s vice president for auto research. "It’s that others are catching up."
And why are others catching up? In my opinion, it comes down to people. Yes there are other components, such as Toyota’s rapid ramp-up that has severely strained its supply chain. But the people aspect works in both directions.
The speed of Toyota’s growth has meant that it can no longer draw from deep experienced talent at existing facilities. Assemblers, supervisors, and even senior management needed to be sourced from outside of the company. Instead of the assurance that the leadership was steeped in years of TPS, relatively quick (although still far longer than most companies) training programs have been used. Culture cannot be effectively learned, or transferred, in a training program.
At the same time Toyota has been losing some key people.
Jim Press, then-president of Toyota North America, the New York-based holding company that oversees all of Toyota’s U.S. operations, and the first American to serve on Toyota’s board in Japan, left in September to join Chrysler. His resignation was bracketed by goodbyes from Lexus marketing vice president Deborah Wahl Meyer, who also went to Chrysler, and Lexus general manager Jim Farley, who went to Ford.
Those are people that truly understood TPS and were instrumental in Toyota’s success. The impact isn’t so much a hit against Toyota as it is an opportunity for Toyota’s rivals. If those executives are given the power and authority to make significant changes, they could truly improve the operations of Chrysler and Ford. However if they are stymied by bureaucracy and NIH as they attempt changes that are often counterintuitive, then those companies will have missed a golden opportunity.
It’s going to be an interesting few years. If Toyota does what it has done best in the past, it will improve and maintain its lead in delivering customer value in terms of quality and innovation. If its competitors try to implement real lean instead of the superficial projects of the past, it will be a battle. Norman Bodek said it best to me the other day:
It is good to be periodically disturbed to shake up any complacency. Toyota will just work harder to get it absolutely right in America.
That’s good advice for all of us, in any industry. Never stop being worried. Never stop improving.