Toyota poised to overtake GM as the world's number one automaker

[Marc]

Toyota poised to overtake GM as the world's number one automaker - Imagine that. From the Asia Times Online

Toyota racing ahead
By Matthew Rusling

OSAKA - Japanese and American car manufacturers for decades have competed vigorously, sometimes to the point of animosity. Now, with its recent purchase of 8.7% of Fuji Heavy Industries Ltd - for about US$315 million - Toyota is poised within the next few years to overtake GM as the world's number one automaker.

"It is perhaps one of the last stepping stones for Toyota ... In terms of sales, the way it looks, they [Toyota] are going to surpass GM," said economist Noriko Hama of Doshisha University School of Management.

According to data from the Power Information Network, Toyota overtook General Motors (GM) in US retail market share in early October. Amid high gas prices and an end to employee discounts, early October sales at GM were down 57% compared with the same period last year.

Experts predict Toyota's sales soon will permanently exceed those of GM. "Toyota will overtake GM in the near future," said Nakagawa Ryu, an economist at Kansai University. "It has already surpassed GM in terms of profits. Toyota's sales are still behind GM, but growing quickly." Reflecting an upward trend, Toyota's overall sales for 2004 were 6.7 million, up 9.9% from 6.1 million the previous year. In 2002, the company sold 5.5 million vehicles. While GM's sales were up to 8.2 million this year over last year's 8.09 million, its sales have declined since 2002, when its total was 8.4 million.

Toyota's North American sales passed the 2 million mark for the first time last year at 2.1 million vehicles, whereas GM sales dropped to 5.46 million from 5.6 million in 2003. Toyota, which also has stakes in Japanese carmaker Daihatsu and truckmaker Hino, reported profits for 2004 of more than $10 billion, dwarfing GM's, which stood at $3.7 billion.

Meanwhile, Toyota's Fuji Heavy Industries deal also had an impact on GM, which is currently cash-strapped and has had a stake in Fuji Heavy since 1999. GM's North American operations have lost $2.5 billion in the first two quarters. As part of the Toyota deal, GM will sell its entire 20.1% stake in Fuji Heavy Industries, valued at about $740 million. Toyota, which is Japan's top car producer, limited its purchase to 8.7% to avoid running into difficulties with Japan's anti-monopoly regulators.

Still, purchasing the GM stake will make Toyota the number one shareholder in Fuji Heavy, owner of Subaru vehicles, and will give the firm much-needed access to Fuji's underused US plants, helping Toyota keep up with swelling demand. Fuji Heavy's 2004 net income was $365.9 million.

The move could also have less obvious advantages. "Toyota could be killing two birds with one stone," Hama said. "Now GM owes Toyota one, and GM would not be likely to grumble about Toyota's share in the international market."

Hobbled by three consecutive quarters of losses, GM will only be getting back about half the amount it paid five years ago when it purchased its Fuji stake. But the sale should generate cash at a time when the troubled Detroit auto giant is pondering a multi-billion-dollar bailout of Delphi, its biggest parts supplier.

This month, Delphi chief executive officer Robert S Miller said GM was in danger of eventually falling into bankruptcy if it did not lower its enormous labor costs. Meanwhile, rating agencies are taking an increasingly pessimistic view of its prospects, with Standard & Poor's rating its debt at high-yield or "junk" status.

Experts say GM's earlier success has been a factor in its decline. Resting contentedly at the top, it has been slow to adjust to changes in world demography, and "has been slow to recognize the impact of globalization", Hama said.

Japanese media have speculated that the Fuji sale was in part undertaken to help GM, but Toyota denied this.

"The aim of the business alliance between Toyota Motor Corporation and Fuji Heavy Industries is not to support GM," Hidehiko Fujii of the Japan Research Institute said

Friction between US and Japanese automakers became an issue at the end of the 1970s, reaching boiling point in the 1980s when Japanese cars started flooding US markets in a cut-throat business environment of what US media termed "torrential exports".

Reluctant to re-ignite past conflicts, Toyota has in recent years taken pains to develop alliances. The firm has made statements indicating that there is a time and place for competition, but that it would cooperate when appropriate. "It is not their intention to ruffle US feathers," Hama said.

Toyota's success can be partly attributed to its cookie cutter management style. "Toyota has transplanted its management style wherever it went, whereas competitors like GM allowed the local plants to go their own way," Hama said of Toyota's kanban or just-in time system of inventory, now a global standard in the auto industry.

Historically, Toyota and other Japanese carmakers have tuned this island nation's lack of natural resources into an advantage. "Japan has very few natural resources, so Japanese companies have always thought about saving energy," Nakagawa said. "That is a big difference between the US and Japan."

Hybrid success
And at a time when the world's attainable oil supply is running low, Toyota is unrivaled in the development of fuel-efficient hybrid models, which combine gas and electric power. The company has boasted the sale of a record 106,978 hybrids in the US so far this year, a number exceeding the 2004 combined total for all auto manufacturers, such as DaimlerChrysler, Ford, Honda and Hyundai.

The company aims to start selling a million hybrid electric cars a year by early next decade. Boosting demand for hybrids are a myriad of factors, including tighter government restrictions on emissions and rising fuel prices.

Furthering its advantage in hybrids, the Fuji stake will give Toyota access to Fuji's advanced battery technology. Fuji is developing hybrid batteries that it says are longer lasting and better equipped to handle extreme temperatures than the ones in current use. Toyota also recently increased its stake from 40 to 60% in Panasonic EV Energy, a battery supplier for hybrids.

Amid global concern over high fuel costs, experts say companies such as Toyota will emerge unscathed. "The current oil crisis will not severely affect Japan because, for decades, Japanese car companies have taken measures to prevent a repeat of 1974," Nakagawa said, referring to the 1974 crisis that rocked the industrialized world.

Conversely, American automakers such as GM have been hit hard, affected by high fuel prices and a lack of demand for gas-guzzling SUVs.

"Toyota will remain strong," Nakagawa said. But as for GM, a company that has been struggling for some time now, his outlook is dubious.

Matthew Rusling is a freelance writer in Osaka. He can be reached at mjrjapan@yahoo.com

 

[Sidney Vianna]

The Toyota way in NA

https://www.autoweek.com/news.cms?newsId=103394

Bucking the trend, Toyota controls quality, cost by making many parts in house
LINDSAY CHAPPELL | Automotive News
Posted Date: 10/21/05

Making cars and car parts in the same factory is supposed to be an outdated business plan.

So why is Toyota Motor Corp. - an industry leader in efficiency and innovation for many years - hanging on to in-house parts making at its North American assembly plants?

General Motors, Ford Motor Co. and the Chrysler group have been struggling for years to make assembly plants more efficient by unloading parts manufacturing to outside suppliers.

Toyota's North American factories, which range in age from 10 to 20 years, also perform the sort of large-scale in-house parts making that more modern auto factories no longer do.

But Toyota's factories are the most efficient in North America - parts and all - and Toyota isn't so sure it wants to change.

On one hand, the company sees parts making as a critical piece of its overall quality-control program. Toyota argues that keeping some parts in-house actually makes it more efficient. Outsourcing parts simply to meet the changing industry norm is viewed warily by Toyota executives.

"I don't believe we can outsource our responsibility to the customer," Seizo Okamoto, president of Toyota's truckmaking operations in Princeton, Ind., told Automotive News.

On the other hand, there is evidence of change. Okamoto's Princeton plant used to make its own fuel tanks out of steel. Now it purchases them from a supplier that makes them out of plastic. The same plant, which builds the Tundra pickup, Sequoia SUV and Sienna minivan, also now is using an outside supplier to sort and sequence parts before they arrive at the assembly line.

Okamoto also is overseeing the 2006 launch of a Toyota factory in San Antonio. That plant will rely on a cluster of small supplier operations on Toyota's plant site, adjacent to its assembly shop.

Norm Bafunno, vice president of manufacturing at Princeton, says Toyota may outsource other components as vehicles are redesigned and, like the Tundra's fuel tank, "where it makes sense." But that will mean that potential suppliers will have to compete against a very efficient competitor: Toyota itself.

The wage model between Toyota and its supply chain is not markedly different from the Big 3's own supplier model. Toyota's own hourly wages are roughly the same as the wages paid to Big 3 assembly workers.

And Toyota's suppliers - even those in which it owns partial control - pay their workers the usual industry rates for wages, says economist Steven Szakaly of the Center for Automotive Research in Ann Arbor, Mich.

Those supplier wages are in the range of $9 to $11 an hour at small plants in the South and $15 to $18 an hour at plants in higher-cost areas around the Great Lakes, Szakaly estimates.

For now, Toyota remains content to build parts in-house that its competitors have been trying to outsource for decades.

What inefficiency?

"Toyota is as vertically integrated today as GM was 30 years ago," efficiency expert Ron Harbour, president of Harbour Consulting Inc. in Troy, Mich., told Automotive News. "But the difference is, Toyota can make all of its integrated parts operate efficiently together. For Toyota, it works."

Toyota emerged as the industry's most efficient automaker in this summer's Harbour Report, a closely read annual analysis of automaker operations across the continent. According to the study, Toyota spent 27.90 hours of labor to stamp and assemble its vehicles and powertrains in North America, compared with 29.43 hours at No. 2 Nissan North America Inc., and 34.33 hours for GM, the most efficient of the Big 3.

And those numbers include parts work that its competitors are not performing.

At its Camry-Avalon-Solara plant in Georgetown, Ky., Toyota workers produce the cars' bumpers, instrument panels and plastic trim parts for the instrument panel and the vehicle interiors. A metal fabricating operation welds the company's steel fuel tanks, while the plant produces its own stamping dies, knocks out suspension parts and other small stampings, assembles the suspension systems and paints its own bumpers, oil pans and suspension systems.

At Toyota's assembly plant in Cambridge, Ontario, in addition to building the Corolla, Matrix and Lexus RX 330, workers produce cockpits, instrument panels, headliner systems and bumper fascias. Instead of using an electronics supplier, Cambridge even produces its own andon boards - the electronic overhead displays that track production activity throughout Toyota plants.

Some automakers still do some of those jobs in-house. Several of Ford's plants assemble their own headliners and fuel tanks. But no automaker does them all, according to Harbour.

Toyota's engine plants in Georgetown; Huntsville, Ala.; and Buffalo, W.Va., are the only three engine plants in the industry that produce their own piston pins, according to Harbour's data. The camshafts, another engine piece that is being outsourced increasingly to third parties, also is made in-house at Toyota.

Despite the added work, Toyota Buffalo is the industry's most efficient engine plant, building one engine every 1.88 hours in 2004, according to Harbour. The most efficient Big 3 engine plant is GM's Tonawanda, N.Y., plant, which spent 2.33 hours per engine in 2004. The industry average was 3.97 hours per engine.

A different beat

GM, Ford, Chrysler, Renault SA, Nissan and the European operations of DaimlerChrysler AG are marching to a different beat. They have spent years - and in some cases, decades - eliminating in-house parts production.

Two years ago, Chrysler sold its big Huntsville electronic components plant to Germany's Siemens VDO Automotive. The sale took about 2,300 Chrysler jobs that were paying about $30 an hour and turned them into supplier jobs that - while still supplying Chrysler - pay about half that.

Chrysler is building a plant in Toledo, Ohio, that will use three outside suppliers to construct and operate portions of the Jeep Wrangler assembly process. Nissan's assembly plant in Canton, Miss., has conveyer systems delivering cockpits, front-end modules and other complete vehicle sections from supplier operations on the other side of Nissan's factory wall.

Why is Toyota resisting the industry shift toward outsourcing?

Jeffrey Liker, a University of Michigan engineering professor who has studied Toyota for two decades, says vertical integration makes Toyota more efficient in two ways.

By building a part in-house, Toyota can focus on eliminating waste from its production - something that is central to Toyota's operating system, says Liker, whose book The Toyota Way was published last year. And by not relying on a supplier, Toyota has immediate control over quality issues, avoids problems with delivery and logistics, saves transportation costs and maintains total flexibility on scheduling and engineering changes.

Cost disadvantage

But what about Toyota's obvious cost disadvantage? Suppliers almost universally pay their workers lower wages than auto assembly plant wages.

"Sure, a supplier could make a given part with lower wages," Liker told Automotive News. "But labor costs are only part of the equation. Let's assume that a supplier's workers earn 25 percent less than Toyota's. Toyota could easily find ways through its practice of continuous improvement to eliminate 25 percent of its own labor cost. And once that's out of the way, what real advantage does the supplier have to offer?"

Toyota's Georgetown assembly plant is completing a three-year cost-cutting drive that will reduce its powertrain manufacturing costs by 40 percent, according to Liker.

Says Dan Sieger, a spokesman for Toyota's North American manufacturing office: "We view this as a competitive issue. We have a team that carefully analyzes each issue of whether we should make something or have it made by a supplier, based on different factors.

"But our basic philosophy is that the fundamental elements of the vehicle should be manufactured by Toyota. We do consider it something that's desirable."

More work

But there are dangers to trying to do so much internally, says Craig Cather, CEO of CSM Worldwide in Farmington Hills, Mich. As Toyota expands in North America, Europe and China, it must hire new people. New managers and workers are not necessarily as adept at Toyota's various businesses as seasoned outside suppliers would be.

"They are getting bigger on a global basis every year," Cather told Automotive News. "They need to be very careful that they have the management and manpower to continue doing this work in-house, or else that their family-owned suppliers can keep up with them as they grow.

"The rest of the industry is relying more and more on outside expertise for that sort of support. Toyota is relying on itself."

Although GM now is backing away from using suppliers such as Lear Corp. and Intier Automotive to design and integrate entire interiors, it still is relying on outside companies for critical expertise on brakes, stability control, safety and electronics.

The Chrysler group is building a Jeep Wrangler factory in Toledo that will entrust the design and tooling of large parts of the plant to three outside companies. Chrysler then will rely on the suppliers to perform portions of the actual vehicle production.

Toyota is simply following a different model, says Dave Cole, chairman of the Center for Automotive Research in Ann Arbor.

"There isn't one magical business formula in the auto industry," Cole says. "Vertical integration works for Toyota. It doesn't work so well for the others."

 

[Marc]

Good post. And no TS 16949 to boot...

 

[Sidney Vianna]

Not all is well in the Q front.....

(broken link removed)

GLOBAL REPORT / FINANCIAL TIMES
Toyota Fretting Over Quality

Recent recalls and a slip in ratings have tarnished its image. The carmaker is taking measures.
By David Ibison and James Mackintosh, Financial Times


TOKYO — Toyota Motor Corp.'s top executives are growing increasingly concerned that the frantic pace of growth at the Japanese carmaker, which could become the world's largest next year, is hurting its reputation for quality.

The carmaker is running a "back to basics" campaign after its image was tarnished by a series of recalls of vehicles for repair, even as it prepares for a final push to take the coveted No. 1 position from troubled General Motors Corp.

Shinichi Sasaki, president and chief executive of Toyota in Europe and a former head of quality for the group, says new factories outside Japan and rapid recruitment of new workers at home have hurt the "built-in quality" culture. He points to the widely watched J.D. Power & Associates measure of quality and customer satisfaction, as well as the recalls, as prompting "very serious concern" at the top of Toyota.

"Competitors are catching up with Toyota in their J.D. Power scores," he said. "In some areas, especially Europe, our score is not good enough for our expectations."

Toyota has lost its position as the top mass-market brand in the J.D. Power table to GM's Buick, although Toyota's Lexus premium badge remains the overall best-rated.

The recalls in recent weeks have put a spotlight on this small but significant slip in quality. Last month, Toyota announced a recall of 1.27 million cars in Japan — its biggest ever — followed within weeks by a recall of 246,592 vehicles in Japan and the possible recall of an additional 1.05 million globally. In May it recalled 790,000 pickup trucks in the U.S. It has also recalled 160,000 Prius hybrid cars worldwide — particularly humiliating as the gasoline-electric cars are regarded as a symbol of the company's technical prowess.

The company says record production levels had put its suppliers under pressure. "When you are making more vehicles, everyone has to work harder and faster," Sasaki said. Faults have crept in: "Some are design defects, some are manufacturing defects."

Toyota's main suppliers, all of which are reaping record profits from Toyota's success, are hurrying to build extra production capacity to meet demand. But with Toyota expected to announce a plan this year to increase global auto production by 900,000 units to more than 9.2 million units in 2006 — a level that should allow it to pass GM — the pressure on suppliers is likely to increase, the company says.

In this environment, Toyota could be forced into making further recalls. So is the company sacrificing quality in its drive to become No. 1?

It would be a sin Japan's manufacturers have committed in the past. In the 1970s and 1980s, the country's car manufacturers sacrificed profitability, and eventually quality, to secure market share — a move that prompted an outbreak of anti-Japanese sentiment in the U.S.

The recalls this time have another explanation. Toyota is suffering, Sasaki said, because less-experienced workers and new factories take time to adopt the company's culture of quality.

But there are more fundamental problems affecting all manufacturers. These include increased sharing of components across a number of models, which increases the effect of otherwise minor problems, and a stricter regulatory environment.

"The more parts you share, the more it magnifies the mistake," said Kurt Sanger, auto analyst at Macquarie Securities in Tokyo.

Toyota is setting up special centers in Britain and the U.S. to drive home the message that quality should be "built in," not imposed by post-production inspection and checks.

 

[amanbhai]

Toyota poised to over take GM

Only today I noticed in the newspaper GM ad that says that GM is investing billions of dollars in canada dismising rumers that says GM is closing their plants in the province/ country & set to leave.

 

[Randy]

Right now I'm at a facility very close to the GM plant in Bowmanville/Oshawa and the folks here say their neighbors have been told to go job hunting.

Kinda confusing if the previous post is true