Toyota Motor Corporation

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Toyota Motor Corporation

founded: 1937

Contact Information:

headquarters: 1, toyota-cho
toyota city, aichi prefecture 471-71 japan phone: +81-565-28-2121 fax: +81-565-23-5800 url: http://www.toyota.co.jp and http://www.toyota.com

OVERVIEW

Toyota is the largest auto producer in Japan and ranks third worldwide. The company primarily makes passenger cars, trucks, and buses. To a lesser degree, Toyota is involved in automobile leasing and rental, aviation services, cellular telephone services, factory automation equipment, financial services, forklifts, and industrial vehicles. Toyota sells automobiles under the brand names of Lexus and Toyota. It maintains manufacturing facilities in China, Japan, Thailand, the United States, and the United Kingdom. Toyota Motor Credit Corporation serves as the financing arm of the company in the United States, providing loans and other financial services to car buyers at Toyota and Lexus dealerships.

COMPANY FINANCES

In fiscal 1997, which ended March 31, 1997, Toyota posted net earnings of $3.11 billion on sales of $98.74 billion, compared with a net of $2.42 billion on sales of $101.12 billion in fiscal 1996. The company posted net income of $1.56 billion on sales of $95.83 billion in fiscal 1995, compared with earnings of $1.28 billion on sales of $95.03 billion in fiscal 1994. The company's sales in Japan accounted for 66 percent of total revenue in fiscal 1997, with the remaining 34 percent coming from foreign sales.

Toyota's market share in Japan reached 40 percent in 1997, and Toyota stock reached a historic high on the Tokyo Stock exchange on May 6, 1997. In April 1998, Toyota's U.S. sales were up 10.5 percent from 1997, with Toyota's U.S. truck sales rising 89.4 percent because of the new Sienna minivan.

ANALYSTS' OPINIONS

International investors are grumbling about Toyota's attitude toward its shareholders. Among the objects of these complaints are a mere 7 percent return on equity, investments in unprofitable diversifications, and no dividend or buyback offerings to share the wealth. There is also fear that the drive for more market share, with its emphasis on discounts and rebates, will be at a heavy cost for the company. There are also predictions for a pretax profit decrease in 1998 due to the Asian car market slump.

HISTORY

Toyota's roots go back to September 1933 when the automotive department of Toyoda Automatic Loom Works was established. Within two years, the first Toyota dealership was opened, though Toyota Motor Company wasn't officially founded until August of 1937.

During the next decade, 100,000 Toyota vehicles were manufactured, and in April of 1950, Toyota became a separate, independent company. Over the next several years, the company introduced its Land Cruiser, a four-wheel-drive vehicle in 1951, a full-size model called the Crown in 1955, and the smaller Corona in 1957. The Crown was sold mostly for use as a taxicab. By 1962, 1 million Toyota vehicles had been produced. Shortly thereafter, in 1967, the Toyota Auto Dealer Channel was established to further the growth of Toyota dealerships worldwide.

In 1982 Toyota Motor Company Ltd. and Toyota Motor Sales Ltd. merged to form the Toyota Motor Corporation, linking production and sales to streamline the system. From that time until 1995 production of Toyota's increased from approximately 3 million annually to nearly 5 million. In 1997 the 100 millionth Toyota rolled off the assembly line.

STRATEGY

In order to fortify its product line, Toyota has introduced a number of localized products. These include the new Sienna in North America and the new European Corolla.

A huge consolidation effort took place in 1997, reducing the number of divisions of Toyota Motor Sales USA from 10 to 6. The hope is that the company will be better able to focus on strategic issues and decisions.

Plans call for Toyota Motor Sales USA to boost its market share from 7.8 to 10 percent by the year 2000. New products will have to be manufactured locally due to the politics of the trade deficit.

A fire in 1997 at the Aisin Seiki Company, brake supplier to Toyota, will change the way Toyota works with suppliers. The fire caused not only the Aisin plant to shut down but hundreds of other Toyota supply plants, because with the just-in-time system, they could not make parts without orders in hand. Toyota will try to have at least two suppliers for each part in the future.

Diversification is a key element of Toyota's strategy. President Okuda announced in 1997 that the company plans to expand its nonvehicle manufacturing businesses, particularly in telecommunications. It is speculated that cars will be linked more and more to telecom networks in the future.

A move into satellite repair centers was anticipated in 1998. These stand-alone dealer-owned repair shops are in answer to the growing trend of owners not returning to the dealership for service once their warranty expires.

Europe is seen as one of the markets offering opportunities for growth. At present, Japanese carmakers have a 10 percent market share in Europe. They want to see this up to 15 percent by 2005. Toyota plans to do this by opening a new 150,000-car assembly plant in northern France, as well as by expanding its Derbyshire factory and building an engine manufacturing facility in North Wales.

Cashing in on the theme park trend, Toyota will add two driving courses and three pavilions to a planned entertainment complex on the Tokyo waterfront. The site will have a museum and virtual reality center, but the highlight is the ability to test drive Toyota's cars of the future.

CURRENT TRENDS

Two areas on which Toyota is focusing include environmental responsibility and corporate globalization. Since environmental responsibility will, at some point, become a legal necessity, Toyota will have to make modifications anyway. By making a move toward these modifications, and toward developing cleaner, greener vehicles, it will create good publicity, good will, and spend money that would eventually have to be spent anyway. Globalization also works this way. By creating manufacturing plants around the world, hiring local workers, and taking an interest in local communities, Toyota defrays some of its import and transportation costs, creates new markets for itself, and boosts local economies, boosting good will toward the Toyota brand.

Localization efforts continued with the production of the Sienna minivan at the Toyota plant in Kentucky. November of 1997 saw The Supplier's Guide mounted on the Web site. This will give suppliers an easy way to offer their products to Toyota.

Toyota has a history of customer satisfaction. Consumers are often repeat buyers, creating a loyal customer base and word-of-mouth advertising. The recent trend toward customer-oriented service, made popular in the early 1990s in America by Saturn, has worked in Toyota's favor, and it has used this trend to make clear its customer service and satisfaction record.

The auto industry has seen a number of mergers and alliances in recent years. Toyota plans to make Daihatsu, the minivehicle manufacturer, a subsidiary by increasing Toyota's stake from 34.5 percent to more than 50 percent. Toyota's stake in Hino Motors, a truck manufacturer, will also be increased from 20 percent to more than one-third, giving Toyota management control.

May 1998 sales were among Toyota's best, thanks to the use of rebate incentives. This auto industry trend boosted sales not only for Toyota but also other car manufacturers. Executive vice president Yale Gieszl feels that cutting back incentives could stop the recent increase in sales.

PRODUCTS

Toyota's main products are car and truck models including Camry, Corolla, 4Runner, Celica, Land Cruiser, Tercel, and Lexus. Toyota engine technology can also be seen in marine engines and recreational boats.

FAST FACTS: About Toyota Motor Corporation

Ownership: Toyota is a publicly owned company traded on NASDAQ.

Ticker symbol: TOYOY

Officers: Shoichiro Toyoda, Chmn.; Iwao Isomura, VChmn.; Hiroshi Okuda, Pres.; Y. Ishizaka, Pres., Toyota Motor Sales, U.S.A.

Employees: 150,700

Chief Competitors: Toyota's major competitors in the automotive industry include: BMW; Daimler-Benz; Ford Motor Company; General Motors Corporation; Honda; Nissan; and Volkswagen.

To expand on its green policies, Toyota has begun manufacturing both a hybrid electric vehicle and an all-electric vehicle. In May of 1998, the city of New York purchased 37 Toyota RAV4-EV electric vehicles for use by city agencies. Toyota also has begun using its D-4 direct injection engine, which allows cars to run more efficiently, increasing mileage up to 30 percent more than conventional engines.

Toyota sees great potential in the liter-car (1000cc) market. The Storia, Daihatsu's liter car will be marketed by Toyota with a target of several thousand vehicles per month. These cars, which fall between a minicar and a subcompact, get about 21 km per liter.

CORPORATE CITIZENSHIP

Toyota's corporate citizenship is demonstrated in a number of ways including environmental stewardship, educational funding, technological leadership, and contributions to the communities in which Toyota operates. Within Toyota's guiding principals, established as such in the late 1980s and early 1990s, Toyota enunciates the above-mentioned goals. Having them built into the corporate mission statement indicates a push toward accepting these principals as a way of doing business.

In terms of Toyota's commitment to environmental issues, an earth charter was developed in the early 1990s, listing environmental goals through the year 2000, by which time Toyota hopes to have achieved these goals. The basic policy consists of a comprehensive approach, preventive measures, and social contributions. The comprehensive approach includes developing technologies to minimize environmental impact and implementation of environmental programs throughout Toyota's design, production and marketing, parts suppliers, vehicle distributors, and dealers. The action plan to meet these goals includes making as many parts recyclable as possible, developing production processes with the least amount of industrial waste possible, and developing cars with the lowest possible amount of noise and exhaust emissions. To this end, 1997 saw the introduction of the following technologies: a direct-injection system to increase engine efficiency, hybrid electric systems, pure electric "zero emission" vehicles, and new fuel-cell systems. Toyota also has shown an interest in participating in civic activities geared toward environmental awareness, such as reforestation and university environmental research.

In August of 1998, Toyota was scheduled to open a new recycling plant for shredding steel and nonferrous metal. It also will recover urethane foam, copper, glass, and other materials. With a projected 100 tons of shredder residue to be processed per day, one-half of the automobile shredder residue by weight will be recovered.

By the year 2002, Toyota hopes to buy at least 5 percent of its supplies from minority suppliers, an increase of 2 percent over present practices. Overall, North American spending for supplies is more than $7 billion per year.

Furthering the company's commitment to the environment, Toyota researchers are hard at work cultivating trees. The new species will be hardy enough to grow in urban settings and help reduce smog through natural respiration processes.

Finally, Toyota's citizenship reaches out to promote education. The Toyota USA Foundation was created solely to grant money to innovative K-12 programs, particularly those in math and the sciences, though it also supports the arts, culture, and civic and community affairs. Any public or private K-12 school with programs that it feels meet the Toyota USA Foundation's guidelines may apply for a financial grant.

CHRONOLOGY: Key Dates for Toyota Motor Corporation

1933:: The automotive division of Toyota Automatic Loom Works is established
1937:: Toyota Motor Company is incorporated
1950:: Toyota becomes a separate independent company; Toyota Motor Sales Company, Ltd. is established to handle marketing
1958:: Builds a full-scale research center for the development of new automobiles
1962:: Produces its one millionth car
1970:: Toyota creates the catalytic converter to reduce engine emissions on their cars
1982:: Toyota Motor Sales and Toyota Motor Company merge to form Toyota Motor Corporation
1997:: Produces its 100 millionth car

GLOBAL PRESENCE

Toyota vehicles excel in a global market. Toyota enjoys sales in Europe, North America, Asia, and Oceania. By offering lower-end models, such as the Tercel and Corolla, the company reaches a younger market, which includes a number of first-time car buyers. The company's Lexus brand name is marketed to an older, more affluent customer base, and recent sport vehicles, such as the 4Runner and Land Cruiser, reach the young professional. By diversifying the type of vehicles available, Toyota has broadened its market share.

Toyota Motor Corporation responded to the increased globalization of economies with its global business plan, announced in June of 1995. The main goals of increased localization and increased importation are meant to accelerate Toyota's international business as early as 1998.

According to the plan, the goal of increased localization will be achieved in several ways. First, Toyota intends to increase the proportion of overseas-built vehicles in worldwide sales. The 65 percent goal (excluding sales within Japan) was reached in 1998, as projected. Toyota also plans to strengthen its network of suppliers, transferring technology and creating regional parts complementary programs, whereby other companies may manufacture Toyota parts regionally. The plan for localization then is broken down into a region-by-region outline, offering specifics for localization within North America, Europe, Asia, and Oceania.

The second element of Toyota's plan calls for increased importation of foreign makers' passenger cars. The heart of this portion of the plan is Toyota's pledge to help sell other makers' vehicles internationally in joint dealerships, primarily those with VW/Audi and the GM-built Toyota Cavalier. Toyota also pledges to "increase opportunities for business by seeking out new suppliers and technology" and "help raise the competitiveness of our current suppliers."

To increase its presence in Europe, Toyota plans to build a passenger car plant in France. Along with this comes a plan to double, and possibly redouble, output at the Deeside Engine Plant in Wales, in order to supply engines to the French plant. The aim is to sell 600,000 cars per year in Europe by the year 2000.

EMPLOYMENT

Working for Toyota is very much a team affair. Small work groups are organized to increase employee satisfaction and provide support for the company's goals. The various departments and managerial levels are instilled with a "we're all in this together" philosophy. Toyota believes this is the key factor not only to employee satisfaction but also to the production of a superior product.

Toyota's human resources philosophy is based on respect and trust. Norbert D'hiet, head of Toyota's European human resources department, said, "The whole of our corporate culture resides in the notion of mutual trust, which means respecting our employees. This respect not only applies to the relationship between managers and employees but to the quick and efficient way in which we respond to questions concerning human resources."

Because of a mix of cultural, legal, and economic factors, Toyota employees are less likely to suffer the layoffs and plant shutdowns their American counterparts do. Before a Japanese company can lay off employees, it needs to demonstrate an attempt to cut costs, including a freeze on new hiring, executive pay cuts, and early-retirement options. Experts, however, see the Japanese eventually adopting more Western-style labor practices.

SOURCES OF INFORMATION

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