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Toyota Motor Corporation

Toyota Motor Corporation

1, Toyota-cho
Toyota City, Aichi 471-8571
Japan
Telephone: (81) 565-28-2121
Fax: (81) 565-23-5800
Web site: http://www.global.toyota.com

Public Company
Incorporated:
1937 as Toyota Motor Co., Ltd.
Employees: 214,631
Sales: $119.66 billion (2000)
Stock Exchanges: Tokyo New York
Ticker Symbol: TM
NAIC: 42111 Automobile and Other Motor Vehicle Wholesalers; 332311 Prefabricated Metal Building and Component Manufacturing; 336111 Automobile Manufacturing; 336112 Light Truck and Utility Vehicle Manufacturing; 33612 Heavy Duty Truck Manufacturing; 336211 Motor Vehicle Body Manufacturing (pt); 336312 Gasoline Engine and Engine Parts Manufacturing; 336322 Other Motor Vehicle Electrical and Electronic Equipment Manufacturing (pt); 33633 Motor Vehicle Steering and Suspension Components (Except Spring) Manufacturing; 33634 Motor Vehicle Brake System Manufacturing (pt); 33635 Motor Vehicle Transmission and Power Train Parts Manufacturing; 336399 All Other Motor Vehicle Parts Manufacturing (pt)

Toyota Motor Corporation was Japans largest car company and the worlds third largest by the year 2000. The company was producing almost five million units annually in the late 1990s and controlled 9.8 percent of the global market for automobiles. Although its profits declined substantially during the global economic downturn of the early 1990s, Toyota responded by cutting costs and moving production to overseas markets. The company represented one of the true success stories in the history of manufacturing, its growth and success reflective of Japans astonishing resurgence following World War II.

The Emergence of Japanese Automobile Manufacturing in the 1930s and 1940s

In 1933 a Japanese man named Kiichiro Toyoda traveled to the United States, where he visited a number of automobile production plants. Upon his return to Japan, the young man established an automobile division within his fathers loom factory and in May 1935 produced his first prototype vehicle. General Motors and Ford already were operating assembly plants in Japan, but U.S. preeminence in the worldwide automotive industry did not deter Toyoda.

Since Japan had very few natural resources, the company had every incentive to develop engines and vehicles that were highly fuel efficient. In 1939, the company established a research center to begin work on battery-powered vehicles. This was followed in 1940 by the establishment of the Toyoda Science Research Center (the nucleus of the Toyota Central Research and Development Laboratories, Inc.) and the Toyoda Works (later Aichi Steel Works, Ltd.). The next year Toyoda Machine Works, Ltd. was founded for the production of both machine tools and auto parts.

As Japan became embroiled in World War II, the procurement of basic materials for automobile manufacturing became more and more difficult. At one point Toyoda was manufacturing trucks with no radiator grills, brakes only on the rear wheels, wooden seats, and a single headlight. Pushing toward the limits of resource conservation as the course of the war began to cripple Japans economy, the company started piecing together usable parts from wrecked or worn-out trucks in order to build recycled vehicles.

When the war ended in August 1945 most of Japans industrial facilities had been wrecked, and the Toyoda (or Toyota as it became known after the war) production plants had suffered extensively. The company had 3,000 employees but no working facilities, and the economic situation in Japan was chaotic. But the Japanese tradition of dedication and perseverance proved to be Toyotas most powerful tool in the difficult task of reconstruction.

Postwar Challenges and Innovations: The Birth of the Small Car

Just as the Japanese motor industry as a whole was beginning to recover, there was mounting concern that American and European auto manufacturers would overwhelm the Japanese market with their economic and technical superiority. Japans automakers knew that they could no longer count on government protection in the form of high import duties or other barriers as they had before the war.

Since American manufacturers were concentrating their efforts on medium-sized and larger cars, Toyotas executives thought that by focusing on small cars the company could avoid a head-on market confrontation. Kiichiro Toyoda likened the postwar situation in Japan to that in England. The British motorcar industry, he said, also faces many difficulties, but its fate will be largely determined by how strongly American automakers feel they should concentrate on small cars. It was January 1947 when Toyota engineers completed their first prototype for a small car: its chassis was of the backbone type (never used before in Japan), its front suspension relied primarily on coil springs, and its maximum speed was 54 miles per hour. After two years of difficulties the company seemed headed for success.

This was not to be accomplished as easily as expected, however. Two years later, in 1949, Toyota suffered its first and only serious conflict between labor and management. Nearly four years had passed since the end of the war, but Japans economy was still in poor shape: goods and materials of all kinds were in short supply, inflation was rampant, and people in the cities were forced to trade their clothing and home furnishings for rice or potatoes to survive. That year the Japanese government took measures to control runaway inflation in ways that severely reduced consumer purchasing power and worsened the already severely depressed domestic automotive market. Japanese auto manufacturers found themselves unable to raise the funds needed to support their recovery efforts, for the new governmental policy had discontinued all financing from city banks and the Reconstruction Finance Corporation.

Under these conditions the companys financial situation deteriorated rapidly. In some months, for example, the company produced vehicles worth a total of ¥350 million while income from sales reached only ¥250 million. In the absence of credit sources to bridge the imbalance, Toyota soon was facing a severe liquidity crisis. In large part because of wartime regulations and controls, Toyota had come to place strong emphasis on the production end of the business, so that in the early postwar years not enough attention had been paid to the proper balance between production and sales. The Japanese economy at that time was suffering from a severe depression, and because the Toyota dealers were unable to sell cars in sufficient quantities, these dealers had no choice but to pay Toyota in long-term promissory notes as inventories kept accumulating.

Finally, Toyota was unable to meet its regular payroll. Delayed payments were followed by actual salary reductions and then by plans for large-scale layoffsuntil April 1949, when the Toyota Labor Union went on strike. Negotiations between labor and management dragged on with the union leaders bitterly opposed to any layoffs. As a result, Toyota was compelled to reduce both production and overhead. Workers staged demonstrations to press their demands, and all the while Toyota kept falling further into debt, until the company finally found itself on the verge of bankruptcy.

Production dropped to 992 vehicles in March 1949, to 619 in April, and to 304 in May. Crucial restructuring efforts included a proposal to incorporate Toyotas sales division as a separate company, leading eventually to the formation of Toyota Motor Sales Company Ltd. in April 1950. Toyota Motor Sales Company handled all domestic and worldwide marketing of Toyotas automotive products until July 1982, when it merged with Toyota Motor Company.

In the meantime, discussions between labor and management finally focused on whether to admit failure, declare bankruptcy, and dissolve the company, or to agree on the dismissal of some employees and embark upon a rebuilding program. In the end management and labor agreed to reduce the total workforce from 8,000 to 6,000 employees, primarily by asking for voluntary resignations. At the management level, President Kiichiro Toyoda and all of his executive staff resigned. Kiichiro, Toyotas founder and a pioneer of the Japanese automotive industry, died less than two years later.

Company Perspectives:

We believe the potential for growth in our industry is extremely promising. Today, only about one-third of the worlds population enjoys the benefits of motor transport, while the remaining two-thirds do not have access to the convenience of automotive transport. Huge growth is in store for our industry in the emerging economies. Therefore, tremendous potential exists for quantitative expansion.

In addition, there is also room for qualitative growth, for adding value and improving the quality of the driving experience. Along with continuing initiatives to improve conventional vehicle functions, two major opportunities, already emerging, are intelligent transportation systems, ITS, and in-vehicle mobile terminals. ITS will route traffic more smoothly, reduce the risk of accidents, and make cars more fun to drive. Mobile terminals will bring a major leap forward in the types of information drivers and passengers can access on the road.

In view of this growth potential, we will continue to place emphasis on maintaining our position as a leading automobile manufacturer.

Not long after the strike was settled in 1950, two of the companys new executives, Eiji Toyoda (now chairman of Toyota Motor Corporation) and Shoichi Saito (later chairman of Toyota Motor Company), visited the United States. Seeking new ideas for Toyotas anticipated growth, they toured Ford Motor Companys factories and observed the latest automobile production technology. One especially useful idea they brought home from their visit to Ford resulted in Toyotas suggestion system, in which every employee was encouraged to make suggestions for improvements of any kind. On their return to Japan, however, the two men inaugurated an even more vital policy that remained in force at Toyota through the 1990s: the continuing commitment to invest in only the most modern production facilities as the key to advances in productivity and quality. Toyota moved quickly and aggressively in the 1950s, making capital investments in new equipment for all of the companys production facilities. Not surprisingly, the company began to benefit from the increased efficiency almost immediately.

Along with improvements in its production facilities, Toyota also worked to develop a more comprehensive line of vehicles to contribute toward the growing motorization of Japanese society. During 1951, for example, Toyota introduced the first four-wheel-drive Land Cruiser. Moreover, as the domestic demand for taxis rapidly increased, production of passenger cars also rose quickly, from 50 units per month to 250 units per month by 1953.

In production control, Toyota introduced the Kanban (or synchronized delivery) system during 1954. The idea was derived from the supermarket system, where consumers (those in the later production stages) took products (parts) from the stock shelves, and the storekeepers (those in the earlier production stages) replenished the stock to the degree that it was depleted. The Kanban system became the basis for Toyotas entire production system.

By the early 1950s, just as Toyota had anticipated, the Japanese market was crowded with vehicles from the United States and Europe. It soon became apparent that to be competitive at home and abroad, Toyota would not only have to make additional investments in manufacturing facilities and equipment, but also undertake a major new research and development effort. This was the reasoning behind Toyotas decision in 1958 to build a full-scale research center for the development of new automobiles (which also was to become Japans first factory devoted entirely to passenger-car production). Toyota also began to offer a more complete line of products. Beginning with the Crown model, introduced in 1955, Toyota quickly expanded its passenger-car line to include the 1,000-cubic-centimeter Corona, then added the Toyo-Ace (Japans first cab-over truck) and a large-sized diesel truck.

Throughout these years Toyota also was working hard on another important, if less conventional, approach to adapting itself to the rapid motorization of Japan, brought about by a remarkable increase in national income. When, for example, Toyota Motor Sales was capitalized at ¥1 billion, 40 percent of that amount (¥400 million) was immediately invested to establish an automobile driving school in an effort to help citizens acquire drivers licenses. Through this and similar efforts, Toyota made a major contribution to Japans growing motorization in the years following 1965, a trend that was to lead to a mass domestic market for automobiles.

In 1955, ten years after its defeat in World War II, Japan became a member of the General Agreement on Tariffs and Trade (GATT); but automobiles remained one of Japans least competitive industries in the international arena. Toyota, foreseeing the coming age of large-scale international trade and capital liberalization in Japan, decided to focus on lowering its production costs and developing even more sophisticated cars, while at the same time attempting to achieve the highest possible level of quality in production. This was a joint effort conducted with Toyotas many independent parts suppliers and one that proved so successful that ten years later, in 1965, Toyota was awarded the coveted Deming Prize for its quality-control achievements. That was also the year that the Japanese government liberalized imports of foreign passenger cars. Now Toyota was ready to compete with its overseas competitorsboth in price and quality.

In subsequent years Japans gross national product expanded rapidly, contributing to the impressive growth in auto sales to the Japanese public. The Toyota Corolla, which went on sale in 1966, quickly became Japans most popular family car and led the market for autos of its compact size. Toyota continued to make major investments in new plants and equipment to prepare for what it believed would be a higher market demand. In 1971 the government removed controls on capital investment. In the wake of this move, several Japanese automakers formed joint ventures or affiliations with U.S. automakers.

Two years later, the 1973 Middle East War erupted and the worlds economy was shaken by the first international oil crisis. Japan, wholly dependent upon imports for its oil supply, was especially affected. The rate of inflation increased and demand for automobiles fell drastically. Yet, in the face of the overall pessimism that gripped the industry and the nation, Toyotas chairman Eiji Toyoda proposed a highly aggressive corporate strategy. His conviction was that the automobile, far from being a luxury, had become and would remain a necessity for people at all levels of society. As a result, Toyota decided to move forward by expanding the companys operations.

Key Dates:

1918:
Sakichi Toyoda establishes Toyota Spinning & Weaving Co., Ltd.
1933:
Automobile Department is created within Toyoda Automatic Loom Works.
1935:
First Model Al passenger car prototype is completed.
1937:
Toyota Motor Co., Ltd. is formed.
1950:
Toyota Motor Sales Co., Ltd. is established.
1956:
Toyota creates the Toyopet dealer network.
1957:
Toyota Motor Sales, U.S.A., Inc. is formed.
1962:
Toyota Motor Thailand Co., Ltd. begins operations.
1982:
Toyota Motor Company and Toyota Motor Sales merge to form Toyota Motor Corporation.
1995:
Hiroshi Okuda becomes company president.
1997:
The Prius, Toyotas first eco-car, is launched.
1998:
Toyota acquires majority share in Daihatsu Motor Co., Ltd.

The 1973 oil crisis and its aftermath were valuable lessons for Toyota. The crisis demonstrated the necessity for a flexible production system that could easily be adapted to changes in consumer preferences. For example, Toyota did away with facilities designed exclusively for the production of specific models and shifted instead to general-purpose facilities that could be operated according to changes in market demand for the companys various models.

Environmental Awareness in the 1970s

In December 1970 the U.S. Congress passed the Muskie Act, which set limits on automobile engine emissions. In the United States the enforcement of this law was eventually postponed, but in Japan even stricter laws were promulgated during the same time with no postponement of enforcement deadlines. When the Muskie Act was first proposed, automakers all over the world were opposed to it. They argued that it would actually prohibit the use of all internal combustion engines currently used, and they requested that the enforcement of the law be postponed until new technology, able to meet the laws requirements, could be developed.

Notwithstanding these developments, Toyota moved forward on its own to develop a new generation of cleaner and more fuel-efficient engines. After studying all the feasible alternativesincluding catalytic systems, rarefied combustion, rotary engines, gas turbine and battery-powered carsToyota settled on the catalytic converter as the most flexible and most promising and succeeded in producing automobiles that conformed to the worlds toughest emissions-control standards. (Meanwhile, imported cars were given a three-year grace period to conform to Japans strict emissions-control standards.)

International Growth in the 1980s

In 1980 Japans aggregate automobile production was actually better than that of the United States. In the same year, Toyota ranked second only to General Motors in total number of cars produced. Although Toyota made efforts over the years to improve the international cooperation between automakers, in such ways as procuring parts and materials from overseas manufacturers, Japans successes in the world auto market nonetheless resulted in the Japanese automobile industry becoming a target of criticism.

Shoichiro Toyoda, president of Toyota during the middle and late 1980s, possessed a solid understanding of American culture. Toyoda reportedly believed that Toyotas future success depended in part on the way it handled public relations with the United States, a nation that he perceived to be extremely bitter about losing trade battles with Japanese industry. By means of intense advertising and controlled public relations under Toyodas direction, Toyota tried to elevate the principle of free competition in the minds of the American people. At the same time, Toyoda carefully committed his company to greater international cooperation in both technological and managerial areas.

In 1984, for example, Toyota entered into a joint manufacturing venture with American giant General Motors called New United Motor Manufacturing, Inc. (NUMMI). This state-of-the-art facility allowed Toyota to begin production in the United States cautiously at a time of increasing protectionism, as well as learn about American labor practices. At the same time, it provided General Motors with insight into Japanese production methods and management styles. The plant was slated to build up to 50,000 vehicles a year. In the fall of 1985, moreover, Toyota announced that it would build an $800,000 production facility near Lexington, Kentucky. The plant, which was expected to begin assembling 200,000 cars per year by 1988, created approximately 3,000 jobs.

By the end of the 1980s, Toyotas position as a powerful, exceptionally well-run car company was nearly unassailable. After a decade of prodigious growth, the company stood atop the Japanese automobile industry and ranked number three worldwide, a position it had held since 1978 and strengthened in the ensuing years. By the beginning of the 1990s, Toyota commanded an overwhelming 43 percent of the Japanese car market, and in the United States it sold, for the first time, more than one million cars and trucks. Aside from these two mainstay markets, Toyota was solidifying its global operations, particularly in Southeast Asia, and carving new markets in Latin America, where the burgeoning demand for cars promised much growth. Toyota also spearheaded the Japanese automobile industrys foray into the luxury car market, leading the way with its Lexus LS400 luxury sedan, which by the mid-1990s was outselling market veterans BMW, Mercedes-Benz, and Jaguar.

Despite these favorable developments, all of which pointed toward further growth and underscored the car companys vitality, Toyotas management continued to strive for improvements. In 1990, for example, when the company was posting enviable financial results and its manufacturing processes provided a model for other companies to follow, Shoichiro Toyoda eliminated two layers of middle management, effected substantial cuts in the companys executive staff, and reorganized Toyotas product development. With the highest operating margin of any carmaker in the world, Toyota was a formidable competitor.

Toyota had little control over external forces, however, and as the 1990s progressed, a global economic downturn brought the prolific growth of Japans largest car manufacturer to a halt. The recession stifled economic growth throughout the world, while a rising yen made Japanese products relatively more expensive in overseas markets. Toyotas profits declined for four consecutive years between 1991 and 1994, falling to the lowest level in more than a decade. Midway through Toyotas net income slide, the company gained new leadership when Totsuro Toyoda succeeded his brother in September 1992. Under Totsuro Toyodas stewardship, a cost-cutting program was enacted that reduced expense account budgets 50 percent, limited travel expenditures, and eliminated white-collar overtime. Toyoda also continued the trend toward moving production to less expensive overseas markets by ordering the construction or expansion of six assembly plants in Great Britain, Pakistan, Thailand, Turkey, the United States, and Japan.

As Toyotas profit decline continued, however, the mounting losses persuaded Toyoda to intensify his cost-cutting measures. Design changes in the companys vehicles coupled with reductions in manufacturing and distribution costs saved Toyota ¥150 billion in 1993, and another ¥100 billion in savings was expected to be realized in 1994. That same year, the fourth consecutive year of negative net income growth, Toyota recorded ¥125.8 billion in consolidated net income, a little more than a quarter of the total posted in 1990, when the company earned ¥441.3 billion.

The New Global Business Plan: 1995 and Beyond

When Hiroshi Okuda was promoted to company president in 1995 his chief ambition was to revitalize Toyotas standing in the global marketplace. In June he unveiled Toyotas New Global Business Plan, which placed renewed focus on innovation and international expansion. Okudas targets were clearly defined: to raise production to six million vehicles a year; to increase Toyotas international market share to 10 percent; and to increase its share of the domestic market to 40 percent. He believed the first two goals would be achieved through the construction of new manufacturing plants in foreign markets, along with an increased emphasis on thelocalizationof parts production. The purpose of localization was to reduce the time and expense involved with shipping components across great distances, enabling Toyota to increase its overall automobile production and devote greater resources to research and development. By widening the scope of operations in Toyotas overseas locations, Okuda envisioned a more streamlined, costeffective manufacturing process. Furthermore, the stimulation of local economies was an effective public relations tool, enhancing the value of the Toyota brand name in foreign markets.

Okuda wasted no time putting his vision into practice. In 1995 Toyota announced its intention to set up a manufacturing operation in Indiana, in the hope of becoming a major participant in North Americas highly competitive large truck market. In 1997 the company opened new plants in Canada and India, and in December it announced plans to build a second European plant in Valenciennes, France, to begin production of a new line of cars specifically designed for the European consumer. The year 1997 also saw increased production in Toyotas Thailand operations, with a total output of 240,000 vehicles. In 1998 the company also raised its export levels from the Thailand plants to 20,000 units, with most of the vehicles destined for the Australian and New Zealand markets. That same year, the company opened a new operation in Brazil, and in 1999 it began construction of a transmission production plant in the Walbrzych Special Economic Zone in Poland, which would begin exporting the parts to Toyotas manufacturing centers in France, Turkey, and the United Kingdom by 2002.

One of the most promising automobile markets to open up in the late 1990s was in China. By March 1998 Toyota already had stakes in four Chinese parts manufacturing plants, one of them a wholly owned subsidiary. The company took a more significant step in November 1998, when it established the Sichuan Toyota Motor Co., Ltd., Toyotas first vehicle production plant in China. A joint venture with the Sichuan Station Wagon Factory and Toyota Tsusho Corp., the new plant was scheduled to begin manufacturing coaster-class buses by 2001.

Okuda also assumed an aggressive approach to Toyotas role in the domestic market. In late 1996 he made drastic cuts to Toyotas vehicle prices in Japan, a move that incensed the competition. In August 1998 Toyota extended its hold over the domestic market with the purchase of a majority stake in Daihatsu. The company also implemented a number of environmental initiatives during this period, both at home and abroad. In July 1999 it inaugurated an initiative that aimed to eliminate all landfill waste by 2003, and in 2000 it introduced stricter environmental regulations in its U.S. manufacturing plants, which actually went beyond the current EPA standards.

One of the most radical innovations to arise from Okudas revolution was the Prius, Toyotas first hybrid car. Launched in October 1997, the Prius combined a highly efficient gas engine with a self-regenerating electric motor, reducing carbon dioxide emissions by half. Although initial estimates showed that production would have to surpass 200,000 vehicles a year for the Prius to turn a profit, by March 1998 demand was already surpassing supply, and the future of the eco-car on the domestic market looked promising. Prius finally hit the U.S. and European markets in late 2000, amid increased fuel prices and mounting concerns over global warming.

Although a weakened euro caused Toyota to suffer losses in Europe toward the end of the 1990s, the new operation in France, scheduled to begin production in 2001 at a rate of 150,000 vehicles a year, was expected to reverse this trend. The company also experienced strong sales in the United States and Japan during this time, and in 2000 Toyotas total worldwide production exceeded five million vehicles for the first time ever.

Principal Subsidiaries

Toyota Motor Sales, U.S.A., Inc.; Toyota Motor Thailand Company Limited; Daihatsu Motor Co., Ltd. (51%); New United Motor Manufacturing, Inc. (U.S.A.; 50%); Toyota Motor Credit Corporation (U.S.A.); Hino Motors, Ltd.

Principal Competitors

Ford Motor Company; General Motors Corporation; Honda Motor Co., Ltd.

Further Reading

Butler, Steven, Toyota Puts It on the Line: Stung by Recession, the Auto Maker Embarks on Deep Cost Cutting, U.S. News and World Report, August 23, 1993, p. 47.

Higgins, James V., Toyota Is Ready to Lead a New Japanese Wave, Detroit News (Mich.), August 30, 1995, p. Bl.

Kamiya, Shotaro, with Thomas Elliott, My Life with Toyota, Toyota City: Toyota Motor Sales Co., 1978.

Pollack, Andrew,Toyota Profit Declines for a Fourth Year; Loss Had Been Feared; Future Called Brighter, New York Times, August 26,1994, p. C2.

Spindle, William,Toyota Retooled: Profits and Global Output Are Up, and New Models Are on the Way, Business Week, April 4,1994, p. 54.

Sugawara, Sandra,Toyota Steps on the Gas: A Leaner, Tougher Company Gambles on Global Leadership with New Eco-Car,Washington Post, December 14, 1997, p. HI.

Taylor, Alex, A Back-to-Basics U-Turn in Japan, New York Times, August 26, 1994, p. CI.

Williams, G. Chambers, III,Electric/Gasoline Car Is on the Road to U.S., Fort Worth Star-Telegram (Tex.), January 2, 1999, p. 1.

Jeffrey L. Covell

updated by Stephen Meyer

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Toyota Motor Corporation

Toyota Motor Corporation

1, Toyota-cho
Toyota City, Aichi Prefecture 471
Japan
(0565) 28-2121
Fax: (0565) 23-5800

Public Company
Incorporated:
1937
Employees: 108,000
Sales: ¥9.36 trillion ($94.6 billion)
Stock Exchanges: Tokyo NASDAQ
SICs: 3711 Motor Vehicles and Car Bodies; 5012
Automobiles and Other Motor Vehicles; 3448
Prefabricated Metal Buildings

Toyota Motor Corporation was Japans largest car company and the worlds third largest in the mid-1990s. The company produced over 4 million units annually and controlled 9.5 percent of the global market for automobiles. Although its profits declined substantially during the global economic downturn of the early 1990s, Toyota responded by cutting costs and moving production to overseas markets. The company represented one of the true success stories in the history of manufacturing, its growth and success reflective of Japans astonishing resurgence following the Second World War.

In 1933 a Japanese man named Kiichiro Toyoda traveled to America, where he visited a number of automobile production plants. Upon his return to Japan, the young man established an automobile division within his fathers loom factory and in May 1935 produced his first prototype vehicle. General Motors and Ford were already operating assembly plants in Japan, but U.S. pre-eminence in the worldwide automotive industry did not deter Toyoda.

Since Japan had very few natural resources, the company had every incentive to develop engines and vehicles that were highly fuel efficient. In 1939, the company established a research center to begin work on battery-powered vehicles. This was followed in 1940 by the establishment of the Toyoda Science Research Center (the nucleus of the Toyota Central Research and Development Laboratories, Inc.) and the Toyoda Works (later Aichi Steel Works, Ltd.). The next year Toyoda Machine Works, Ltd. was founded for the production of both machine tools and auto parts.

As Japan became embroiled in World War II, the procurement of basic materials for automobile manufacturing became more and more difficult. At one point Toyoda was manufacturing trucks with no radiator grills, brakes only on the rear wheels, wooden seats, and a single headlight. Pushing toward the limits of resource conservation as the course of the war began to cripple Japans economy, the company started piecing together usable parts from wrecked or worn-out trucks in order to build recycled vehicles.

When the war ended in August of 1945 most of Japans industrial facilities had been wrecked, and the Toyoda (or Toyota as it became known after the war) production plants had suffered extensively. The company had 3,000 employees but no working facilities, and the economic situation in Japan was chaotic. But the Japanese tradition of dedication and perseverance proved to be Toyotas most powerful tool in the difficult task of reconstruction.

Just as the Japanese motor industry as a whole was beginning to recover, there was mounting concern that American and European auto manufacturers would overwhelm the Japanese market with their economic and technical superiority. Japans automakers knew that they could no longer count on government protection in the form of high import duties or other barriers as they had before the war.

Since American manufacturers were concentrating their efforts on medium-sized and larger cars, Toyotas executives thought that by focusing on small cars the company could avoid a head-on market confrontation. Kiichiro Toyoda likened the postwar situation in Japan to that in England. The British motorcar industry, he said, also faces many difficulties, but its fate will be largely determined by how strongly American automakers feel they should concentrate on small cars. It was January 1947 when Toyota engineers completed their first prototype for a small car: its chassis was of the backbone typenever used before in Japan; its front suspension relied primarily on coil springs; and its maximum speed was 54 miles per hour. After two years of difficulties the company seemed headed for success.

However, this was not to be accomplished as easily as expected. Two years later, in 1949, Toyota suffered its first and only serious conflict between labor and management. Nearly four years had passed since the end of the war, but Japans economy was still in poor condition: goods and materials of all kinds were in short supply; inflation was rampant; and worst of all, people in the cities were forced to trade their clothing and home furnishings for rice or potatoes in order to keep themselves alive. That year the Japanese government took measures to control runaway inflation in ways that severely reduced consumer purchasing power and worsened the already severely depressed domestic automotive market. Japanese auto manufacturers found themselves unable to raise the funds needed to support their recovery efforts, for the new governmental policy had discontinued all financing from city banks and the Reconstruction Finance Corporation.

Under these conditions the companys financial situation deteriorated rapidly. In some months, for example, the company produced vehicles worth a total of ¥350 million while income from sales reached only ¥250 million. In the absence of credit sources to bridge the imbalance, Toyota was soon facing a severe liquidity crisis. Largely because of wartime regulations and controls, Toyota had come to place strong emphasis on the production end of the business, so that in the early postwar years not enough attention had been paid to the proper balance between production and sales. The Japanese economy at that time was suffering from a severe depression, and because the Toyota dealers were unable to sell cars in sufficient quantities, these dealers had no choice but to pay Toyota in long-term promissory notes as inventories kept accumulating.

Finally, Toyota was unable to meet its regular payroll. Delayed payments were followed by actual salary reductions and then by plans for large-scale layoffsuntil April of 1949, when the Toyota Labor Union went on strike. Negotiations between labor and management dragged on with the union leaders bitterly opposed to any layoffs. As a result, Toyota was compelled to reduce both production and overhead. Workers staged demonstrations to press their demands, and all the while Toyota kept falling further into debt, until the company finally found itself on the verge of bankruptcy.

Production dropped to 992 vehicles in March of 1949, to 619 in April, and to 304 in May. Crucial restructuring efforts included a proposal to incorporate Toyotas sales division as a separate company, leading eventually to the formation of Toyota Motor Sales Company Ltd. in April 1950. Toyota Motor Sales Company handled all domestic and worldwide marketing of Toyotas automotive products until July of 1982, when it merged with Toyota Motor Company.

In the meantime, discussions between labor and management finally focused on whether to admit failure, declare bankruptcy, and dissolve the company, or to agree on the dismissal of some employees and embark upon a rebuilding program. In the end management and labor agreed to reduce the total work force from 8,000 to 6,000 employees, primarily by asking for voluntary resignations. At the management level, President Kiichiro Toyoda and all of his executive staff resigned. Kiichiro, Toyotas founder and a pioneer of the Japanese automotive industry, died less than two years later.

Not long after the strike was settled in 1950, two of the companys new executives, Eiji Toyoda (now chairman of Toyota Motor Corporation) and Shoichi Saito (later chairman of Toyota Motor Company), visited the United States. Seeking new ideas for Toyotas anticipated growth, they toured Ford Motor Companys factories and observed the latest automobile production technology. One especially useful idea they brought home from their visit to Ford resulted in Toyotas suggestion system, in which every employee was encouraged to make suggestions for improvements of any kind. However, on their return to Japan the two men inaugurated an even more vital policy that remained in force at Toyota through the 1990sthe continuing commitment to invest in only the most modern production facilities as the key to advances in productivity and quality. Toyota moved quickly and aggressively in the 1950s, making capital investments in new equipment for all the companys production facilities. Not surprisingly, the company began to benefit from the increased efficiency almost immediately.

Along with improvements in its production facilities, Toyota also worked to develop a more comprehensive line of vehicles in order to contribute toward the growing motorization of Japanese society. During 1951, for example, Toyota introduced the first four-wheel-drive Land Cruiser. Moreover, as the domestic demand for taxis rapidly increased, production of passenger cars also rose quickly, from 50 units per month to 250 units per month by 1953.

In production control, Toyota introduced the Kanban (or synchronized delivery) system during 1954. The idea was derived from the supermarket system, where consumers (those in the later production stages) took products (parts) from the stock shelves, and the storekeepers (those in the earlier production stages) replenished the stock to the degree that it was depleted. The Kanban system became the basis for Toyotas entire production system.

By the early 1950s, just as Toyota had anticipated, the Japanese market was crowded with vehicles from the United States and Europe. It soon became apparent that to be competitive at home and abroad, Toyota would not only have to make additional investments in manufacturing facilities and equipment, but also undertake a major new research and development effort. This was the reasoning behind Toyotas decision in 1958 to build a full-scale research center for the development of new automobiles (which was also to become Japans first factory devoted entirely to passenger-car production). Toyota also began to offer a more complete line of products. Beginning with the Crown model, introduced in 1955, Toyota quickly expanded its passenger-car line to include the 1000-cubic-centimeter Corona, then added the Toyo-Ace (Japans first cab-over truck) and a large-sized diesel truck.

Throughout these years Toyota was also working hard on another important, if less conventional, approach to adapting itself to the rapid motorization of Japan, brought about by a remarkable increase in national income. When, for example, Toyota Motor Sales was capitalized at ¥1 billion, 40 percent of that amount (¥400 million) was immediately invested to establish an automobile driving school in an effort to help citizens acquire drivers licenses. Through this and similar efforts, Toyota made a major contribution to Japans growing motorization in the years following 1965, a trend that was to lead to a mass domestic market for automobiles.

In 1955, ten years after its defeat in World War II, Japan became a member of the General Agreement on Tariffs and Trade (GATT); but automobiles remained one of Japans least-competitive industries in the international arena. Toyota, foreseeing the coming age of large-scale international trade and capital liberalization in Japan, decided to focus on lowering its production costs and developing even more sophisticated cars, while at the same time attempting to achieve the highest possible level of quality in production. This was a joint effort conducted with Toyotas many independent parts suppliers and one which proved so successful that ten years later, in 1965, Toyota was awarded the coveted Deming Prize for its quality-control achievements. That was also the year that the Japanese government liberalized imports of foreign passenger cars. Now Toyota was ready to compete with its overseas competitorsboth in price and quality.

In subsequent years Japans gross national product expanded rapidly, contributing to the impressive growth in auto sales to the Japanese public. The Toyota Corolla, which went on sale in 1966, quickly became Japans most popular family car and led the market for autos of its compact size. Toyota continued to make major investments in new plants and equipment in order to prepare for what it believed would be a higher market demand. In 1971 the government removed controls on capital investment. In the wake of this move, several Japanese automakers formed joint ventures or affiliations with U.S. automakers.

Two years later, the 1973 Middle East War erupted and the worlds economy was shaken by the first international oil crisis. Japan, wholly dependent upon imports for its oil supply, was especially affected. The rate of inflation increased and demand for automobiles fell drastically. Yet, in the face of the overall pessimism that gripped the industry and the nation, Toyotas chairman Eiji Toyoda proposed a highly aggressive corporate strategy. His conviction was that the automobile, far from being a luxury, had become and would remain a necessity for people at all levels of society. As a result, Toyota decided to move forward by expanding the companys operations.

The 1973 oil crisis and its aftermath were valuable lessons for Toyota. The crisis demonstrated the necessity for a flexible production system that could easily be adapted to changes in consumer preferences. For example, Toyota did away with facilities designed exclusively for the production of specific models, and shifted instead to general-purpose facilities which could be operated according to changes in market demand for the companys various models.

In December of 1970 the U.S. Congress passed the Muskie Act, which set limits on automobile engine emissions. In the United States the enforcement of this law was eventually postponed, but in Japan even stricter laws were promulgated during the same time with no postponement of enforcement deadlines. When the Muskie Act was first proposed, automakers all over the world were opposed to it. They argued that it would actually prohibit the use of all internal combustion engines currently used, and they requested that the enforcement of the law be postponed until new technology, able to meet the laws requirements, could be developed.

Notwithstanding these developments, Toyota moved forward on its own to develop a new generation of cleaner and more fuel-efficient engines. After studying all the feasible alternativesincluding catalytic systems, rarefied combustion, rotary engines, gas turbine and battery-powered carsToyota settled on the catalytic converter as the most flexible and most promising, and succeeded in producing automobiles that conformed to the worlds toughest emissions-control standards. (Meanwhile, imported cars were given a three-year grace period to conform to Japans strict emissions-control standards.)

In 1980 Japans aggregate automobile production was actually better than that of the United States. In the same year, Toyota ranked second only to General Motors in total number of cars produced. Although Toyota made efforts over the years to improve the international cooperation between automakers, in such ways as procuring parts and materials from overseas manufacturers, Japans successes in the world auto market nonetheless resulted in the Japanese automobile industry becoming a target of criticism.

Shoichiro Toyoda, president of Toyota during the mid- and late 1980s, possessed a solid understanding of American culture. Toyoda reportedly believed that Toyotas future success depended in part on the way it handled public relations with the United States, a nation that he perceived to be extremely bitter about losing trade battles with Japanese industry. By means of intense advertising and controlled public relations under Toyodas direction, Toyota tried to elevate the principle of free competition in the minds of the American people. At the same time, Toyoda carefully committed his company to greater international cooperation in both technological and managerial areas.

In 1984, for example, Toyota entered into a joint manufacturing venture with American giant General Motors called New United Motor Manufacturing, Inc. (NUMMI). This state-of-the-art facility allowed Toyota to begin production in the United States cautiously at a time of increasing protectionism, as well as learn about American labor practices. At the same time, it provided General Motors with insight into Japanese production methods and management styles. The plant was slated to build up to 50,000 vehicles a year. In the fall of 1985, moreover, Toyota announced that it would build an $800,000 production facility near Lexington, Kentucky. The plant, which was expected to begin assembling 200,000 cars per year by 1988, created approximately 3,000 jobs.

By the end of the 1980s, Toyotas position as a powerful, exceptionally well-run car company was nearly unassailable. After a decade of prodigious growth, the company stood atop the Japanese automobile industry and ranked number three worldwide, a position it had held since 1978 and strengthened in the ensuing years. By the beginning of the 1990s, Toyota commanded an overwhelming 43 percent of the Japanese car market, and in the United States it sold, for the first time, more than one million cars and trucks. Aside from these two mainstay markets, Toyota was solidifying its global operations, particularly in Southeast Asia, and carving new markets in Latin America, where the burgeoning demand for cars promised much growth. Toyota also spearheaded the Japanese automobile industrys foray into the luxury car market, leading the way with its Lexus LS400 luxury sedan, which by the mid-1990s was outselling market veterans BMW, Mercedes-Benz, and Jaguar.

Despite these favorable developments, all of which pointed toward further growth and underscored the car companys vitality, Toyotas management continued to strive for improvements. In 1990, for example, when the company was posting enviable financial results and its manufacturing processes provided a model for other companies to follow, Shoichiro Toyoda eliminated two layers of middle management, effected substantial cuts in the companys executive staff, and reorganized Toyotas product development. With the highest operating margin of any car maker in the world, Toyota was a formidable force.

Toyota had little control over external forces, however, and as the 1990s progressed, a global economic downturn brought the prolific growth of Japans largest car manufacturer to a halt. The recession stifled economic growth throughout the world, while a rising yen made Japanese products relatively more expensive in overseas markets. Toyotas profits declined for four consecutive years between 1991 and 1994, falling to the lowest level in more than a decade. Midway through Toyotas net income slide, the company gained new leadership when Totsuro Toyoda succeeded his brother in September 1992. Under Totsuro Toy odas stewardship, a cost-cutting program was enacted that reduced expense account budgets 50 percent, limited travel expenditures, and eliminated white-collar overtime. Toyoda also continued the trend toward moving production to less-expensive overseas markets by ordering the construction or expansion of six assembly plants in Great Britain, Pakistan, Thailand, Turkey, the United States, and Japan.

As Toyotas profit decline continued, however, the mounting losses persuaded Toyoda to intensify his cost-cutting measures. Design changes in the companys vehicles coupled with reductions in manufacturing and distribution costs saved Toyota ¥150 billion in 1993, and another ¥100 billion in savings was expected to be realized in 1994. In 1994, the fourth consecutive year of negative net income growth, Toyota recorded ¥125.8 billion in consolidated net income, just over a quarter of the total posted in 1990, when the company earned ¥441.3 billion. Although Toyotas financial prospects remained bleak as it entered the mid-1990s, the recovery of Japans economy and a return to more robust economic times in Europe meant that relief was in sight. Solidly positioned to take advantage of this expected economic revitalization, Toyota continued with its decades-long emphasis on becoming and remaining the worlds premier car maker.

Principal Subsidiaries

Toyoda Automatic Loom Works, Ltd.; Aichi Steel Works, Limited; Toyoda Machine Works, Ltd.; Toyota Auto Body Co., Ltd.; Toyota Tsusho Corporation; Aisin Seiki Co., Ltd.; Nipponsdenso Co., Ltd.; Toyoda Spinning & Weaving Co., Ltd.; Towa Real Estate Co., Ltd.; Toyota Central Research & Development Laboratories, Inc.; Kanto Auto Works, Ltd.; Toyoda Gosei Co., Ltd.; Hino Motors, Ltd.; Daihatsu Motor Co., Ltd.

Further Reading

Butler, Steven, Toyota Puts It on the Line: Stung by Recession, the Auto Maker Embarks on Deep Cost Cutting, U.S. News and World Report, August 23, 1993, p. 47.

Kamiya, Shotaro, with Thomas Elliott, My Life with Toyota, Toyota City: Toyota Motor Sales Co., 1978.

Pollack, Andrew, Toyota Profit Declines for a Fourth Year; Loss Had Been Feared; Future Called Brighter, New York Times, August 26, 1994, p. C2.

Spindle, William, Toyota Retooled: Profits and Global Output Are Up, and New Models Are on the Way, Business Week, April 4, 1994, p. 54.

Taylor, Alex, A Back-to-Basics U-Turn in Japan, New York Times, August 26, 1994, p. C1.

updated by Jeffrey L. Covell

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Toyota Motor Corporation

Toyota Motor Corporation

1 Toyota-cho
Toyota City, Aichi, 471
Japan
0565-28-2121

Public Company
Incorporated: July 1, 1982
Employees: 62,000
Sales: ¥6324 billion (US$39.7 billion)
Market Value: ¥4599 billion (US$28.8 billion)
Stock Index: Tokyo NASDAQ

In 1933 a Japanese man named Kiichiro Toyoda traveled to America where he visited a number of automobile production plants. Upon his return to Japan, the young man established an automobile division within his fathers loom manufactory and in May 1935 produced his first prototype vehicle. General Motors and Ford were already operating assembly plants in Japan but U.S. pre-eminence in the worldwide automotive industry did not deter Toyoda.

Since Japan has very few natural resources of its own, the company had every incentive to develop engines and vehicles that were highly fuel efficient. In 1939, the company established a research center to begin work on battery powered vehicles. This was followed in 1940 by the establishment of the Toyoda Science Research Center (the nucleus of todays Toyota Central Research and Development Laboratories, Inc.) and the Toyoda Works (presently Aichi Steel Works, Ltd.). The next year Toyoda Machine Works, Ltd. was founded for the production of both machine tools and auto parts.

As Japan became embroiled in World War II, the procurement of basic materials for automobile manufacturing became more and more difficult. At one point Toyoda was manufacturing trucks without radiator grills, brakes only on the rear wheels, wooden seats, and a single headlight. Pushing toward the limits of resource conservation as the course of the war began to cripple Japans economy, the company started piecing together usable parts from wrecked or worn-out trucks in order to build recycled vehicles.

When the war ended in August of 1945 most of Japans industrial facilities had been wrecked, and Toyodas (or Toyota as it was known after the war) production plants had suffered extensively. It had 3,000 employees, but no working facilities; and the economic situaton in Japan was chaotic. But the Japanese tradition of dedication and perseverance proved to be Toyotas most powerful tool in the difficult task of reconstruction.

Just as the Japanese motor industry as a whole was beginning to recover, there was mounting concern that American and European auto manufacturers would overwhelm the Japanese market with their economic and technical superiority. Japans automakers knew that they could no longer count on government protection in the form of high import duties or other barriers as they had before the war.

Since American manufacturers were concentrating their efforts on medium size and larger cars, Toyotas executives thought that by focusing on small cars the company could avoid a head-on market confrontation. Kiichiro Toyoda likened the postwar situation in Japan to that in England. The British motorcar industry, he said, also faces many difficulties, but its fate will be largely determined by how strongly American automakers feel they should concentrate on small cars. It was January 1947 when Toyota engineers completed their first prototype for a small car: its chassis was of the backbone typenever used before in Japan; its front suspension relied primarily on coil springs; and its maximum speed was 54 mph. After two years of difficulties the company seemed headed for success.

However, this was not to be accomplished as easily as expected. Two years later, in 1949, Toyota suffered its first and only serious conflict between labor and management. Nearly four years had passed since the end of the war, but Japans economy was still in poor condition: goods and materials of all kinds were in short supply; inflation was rampant; and, worst of all, people in the cities were forced to trade their clothing and home furnishings for rice or potatoes in order to keep themselves alive. That year the Japanese government took measures to control runaway inflation in ways that severely reduced consumer purchasing power and worsened the already severely depressed domestic automotive market. Japanese auto manufacturers found themselves unable to raise the funds needed to support their recovery efforts, for the new governmental policy had discontinued all financing from city banks and the Reconstruction Finance Corporation.

Under these conditions the companys financial situation deteriorated rapidly. In some months, for example, the company produced vehicles worth a total of ¥350 million while income from sales reached only ¥250 million. In the absence of credit sources to bridge the imbalance, Toyota was soon facing a severe liquidity crisis. It should be noted here that, largely because of wartime regulations and controls, Toyota had come to place strong emphasis on the production end of the business, so that in the early postwar years not enough attention had been paid to the proper balance between production and sales. The Japanese economy at that time was suffering from a severe depression, and because the Toyota dealers were unable to sell cars in sufficient quantities, these dealers had no choice but to pay Toyota in long term promissory notes as inventories kept accumulating.

Finally, Toyota was unable to meet its regular payroll. Delayed payments were followed by actual salary reductions and then by plans for large-scale layoffsuntil April of 1949 when the Toyota Labor Union went on strike. Negotiations between labor and management dragged on with the union leaders bitterly opposed to any layoffs. As a result, Toyota was compelled to reduce both production and overhead. Workers staged demonstrations to press their demands, and all the while Toyota kept falling further into debt, until the company finally found itself on the verge of bankruptcy.

Production dropped to 992 vehicles in March of 1949, to 619 in April, and to 304 in May. Crucial restructuring efforts included a proposal to incorporate Toyotas sales division as a separate company, leading eventually to the formation of Toyota Motor Sales Company Ltd., in April 1950. Toyota Motor Sales Company handled all domestic and worldwide marketing of Toyotas automotive products until July of 1982 when it merged with Toyota Motor Company.

In the meantime, discussions between labor and management finally focused on whether to admit failure, declare bankruptcy and dissolve the company, or to agree on the dismissal of some employees and on a rebuilding program. In the end management and labor agreed to reduce the total work force from 8,000 to 6,000 employees, primarily by asking for voluntary resignations. At the management level, President Kiichiro Toyoda and all of his executive staff resigned. Kiichiro, Toyotas founder and a pioneer of the Japanese automotive industry, died less than two years later.

Not long after the strike was settled in 1950, two of the companys new executives, Eiji Toyoda (now chairman of Toyota Motor Corporation) and Shoichi Saito (later chairman of Toyota Motor Company) visited the United States. Seeking new ideas for Toyotas anticipated growth, they toured Ford Motor Companys factories and observed the latest automobile production technology. One especially useful idea they brought home from their visit to Ford resulted in Toyotas suggestion system in which every employee is encouraged to make suggestions for improvements of any kind. However, on their return to Japan the two men inaugurated an even more vital policy that remains in force at Toyota today, namely, the continuing commitment to invest in only the most modern production facilities as the key to advances in productivity and quality. Toyota moved quickly and aggressively in the 1950s, making capital investments in new equipment for all the companys production facilities. Not surprisingly, the company began to benefit from the increased efficiency almost immediately.

Along with improvements in its production facilities, Toyota also worked to develop a more comprehensive line of vehicles in order to contribute toward the growing motorization of Japanese society. During 1951, for example, Toyota introduced the first 4WD Land Cruiser. Moreover, as the domestic demand for taxis rapidly increased, production of passenger cars also rose quickly, from 50 units per month to 250 units per month by 1953.

In production control, Toyota introduced the Kanban System (Synchronized Delivery System) during 1954. The idea was derived from the supermarket system where consumers (those in the later production stages) took products (parts) from the stock shelves, and the storekeepers (those in the earlier production stages) replenished the stock to the degree that it was depleted. This Kanban System became the basis for Toyotas entire present-day production system.

By the early 1950s, just as Toyota had anticipated, the Japanese market was crowded with vehicles from the United States and Europe. It soon became apparent that to be competitive at home and abroad, Toyota would not only have to make additional investments in manufacturing facilities and equipment, but also undertake a major new research and development effort as well. This was the reasoning behind Toyotas decision in 1958 to build a full-scale research center for the development of new automobiles (which was also to become Japans first factory devoted entirely to passenger car production). Toyota also began to offer a more complete line of products. Beginning with the Crown model, introduced in 1955, Toyota quickly expanded its passenger-car line to include the l000cc Corona, then added the Toyo-Ace (Japans first cab-over-truck) and a large size diesel truck.

Throughout these years Toyota was also working hard on another important, if less conventional, approach to adapting itself to the rapid motorization of Japan, brought about by a remarkable increase in national income. When, for example, Toyota Motor Sales was capitalized at ¥1 billion, 40% of that amount (¥400 million) was immediately invested to establish an automobile driving school in an effort to help citizens acquire drivers licenses. Through this and similar efforts, Toyota made a major contribution to Japans growing motorization in the years following 1965, a trend that was to lead to a mass domestic market for the automobile.

In 1955, ten years after its defeat in World War II, Japan became a member of GATT (the General Agreement on Tariffs and Trade); but the Japanese auto industry, remained one of Japans least competitive industries in the field of international trade. Toyota, foreseeing the coming age of large-scale international trade and capital liberalization in Japan, decided to focus on lowering its production costs and developing even more sophisticated cars, while at the same time attempting to achieve the highest level possible of quality production. This was a joint effort cxonducted with Toyotas many independent parts suppliers and one which proved so successful that ten years later, in 1965, Toyota was awarded the coveted Deming Prize for its quality control achievements. That was also the year that the Japanese government liberalized imports of foreign passenger cars. Now Toyota was ready to compete with its overseas competitorsboth in price and quality.

In subsequent years Japans GNP expanded rapidly, contributing to the impressive growth in auto sales to the Japanese public. The Toyota Corolla, which went on sale in 1966, quickly became Japans most popular family car and led the market for autos of its compact size. Toyota continued to make major investments in new plants and equipment in order to prepare for what it believed would be a higher market demand. In 1971 the government removed controls on capital investment. In the wake of this move, several Japanese automakers formed joint ventures or affiliations with different companies of the United States largest automakers.

Two years later, the 1973 Middle East War erupted and the worlds economy was shaken by the first international oil crisis. Japan, wholly dependent upon imports for its oil supply, was especially affected. The rate of inflation increased and demand for automobiles fell drastically. Yet, in the face of the overall pessimism that gripped the industry and the nation, Toyotas chairman Eiji Toyoda proposed a highly aggressive corporate strategy. His conviction was that the automobile, far from being a luxury, had become and would remain a necessity for people at all levels of society. As a result, Toyota decided to move forward by expanding the companys operations.

The 1973 oil crisis and its aftermath were valuable lessons for Toyota; the crisis demonstrated the necessity for a flexible production system which could easily be adaptable to changes in consumer preferences. For example, Toyota did away with facilities designed exclusively for the production of specific models, and shifted instead to general-purpose facilities which could be operated according to changes in market demand for the companys various models.

In December of 1970 the United States Congress passed the Muskie Act which set limits on automobile engine emissions. In the U.S. the enforcement of this law was eventually postponed, but in Japan even stricter laws were promulgated during the same time with no postponement of enforcement deadlines. When the Muskie Act was first proposed, automakers all over the world were opposed to it. They argued that it would actually prohibit the use of all internal combustion engines currently used, and they requested that the enforcement of the law be postponed until new technology, able to meet the laws requirements, could be developed.

Notwithstanding these developments, Toyota moved forward on its own to develop a new generation of cleaner and more fuel efficient engines. After studying all the feasible alternatives, including catalytic systems, rarefied combustion, rotary engines, gas turbine and batter-powered cars, Toyota settled on the catalytic converter as the most flexible and most promising, and succeeded in producing automobiles which conform to what are the worlds toughest emissions control standards. (Meanwhile, imported cars were given a three year grace period to conform to Japans strict emissions control standards.)

In 1980 Japans aggregate automobile production was actually better than that of the U.S. In the same year, Toyota ranked second only to General Motors in total number of cars produced. Although Toyota made continuous efforts over the years to improve the international cooperation between automakers in such ways as procuring parts and materials from overseas manufacturers, Japans successes in the world auto market have nonetheless resulted in the Japanese automobile industry becoming a target of criticism.

The current president of Toyota, Yukiyasu Togo, possesses a solid understanding of the nature of American culture. Togo is said to believe that Toyotas future success depends in part on the way that it handles public relations with the United States, a nation that he preceives to be extremely bitter about losing trade battles with Japanese industry. By means of intense advertising and controlled public relations under Togos direction, Toyota has tried to elevate the principle of free competition in the minds of the American people. At the same time, Togo is carefully committing his company to greater international cooperation in both technological and managerial areas. In the fall of 1985, for example, Toyota announced that it would build an $800,000 production facility near Lexington, Kentucky. The plant, which is expected to begin assembling 200,000 cars per year by 1988, will create approximately 3,000 jobs. Moreover, the General Motors and Toyota joint venture, called New United Motor Manufacturing, Inc., will also begin building up to 50,000 vehicles a year to be sold by Toyota dealers. This strategy, it is hoped, will help to ease the tensions between the U.S. and Japan over their inequitable trade relations.

Principal Subsidiaries

Kanto Auto Works, Ltd. (49.06%); Towa Real Estate Co., Inc. (49%); Toyota Machine Works, Ltd.; Toyota Central Research & Development Laboratories, Inc. (54%); Calty Design Research, Inc. (60%); New United Motor Manufacturing Inc. (50%); Toyota Motor Sales, USA, Inc.; Toyota Motor Manufacturing USA, Inc.; Toyota Technical Center, USA, Inc. (80%).

Further Reading

My Life with Toyota by Shotaro Kamiya with Thomas Elliott, Toyota City, Toyota Motor Sales Co., 1978.

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"Toyota Motor Corporation." International Directory of Company Histories. . Retrieved October 24, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/toyota-motor-corporation-1