The Future of Kaizen at Toyota is Epic

Despite is vaunted Toyota Production System, culture of kaizen and a line up of fuel-efficient vehicles Toyota Motors is being hit hard by the crisis affecting the automotive manufacturers. In addition to slowing demand due to high gasoline prices and a weakening economy, the strong yen has particularly hurt Toyota. The nasty downward spike in the chart above hits the top line first, folks. Newspapers report that Toyota’s bottom line for the second quarter was down by a massive 70% and they project that they will lose many millions of dollars this quarter. There is a chance that Toyota may not end the year with a profit, for the first time in more than a half century.

President Katsuaki Watanabe has been famously promoting a healthy sense of crisis at Toyota since taking the position a few years ago. Back then the car company looked unstoppable and backsliding due to complacency seemed like a very real danger. Hopefully the people at Toyota have not grown tired of his crying wolf, now that a huge back of big bad wolves have shown up and serious action is needed. The latest effort to kaizen the cost and raise profit according to a Financial Times article on Thursday November 6, 2008 titled Toyota’s troubles show no one is immune:

But Toyota appeared to begin a new chapter on Thursday when it said it had established an “Emergency Profit Improvement Committee”, to be chaired by Katsuaki Watanabe, its president.

I wonder if they realized that Emergency Profit Improvement Committee spells EPIC! It was probably just a lucky translation.

It was thanks in part to three crises that we have lean manufacturing today. The Toyota Production System came from the need for Toyota to reinvent itself after its bankruptcy in 1950, the oil shock in 1973 and the first time the yen-dollar exchange rate dove from the 100 yen range to the 80 yen range in the early 1990s. Each time Toyota used kaizen to pull through with renewed vigor, powered by the creativity of their people making process innovations that cut costs. Toyota will continue to do all of those things that smart companies do when times are tough: look for ways to cut costs and adjust the product portfolio to what people will buy. If they can pull out of this crisis without massive government intervention and without resorting to the unthinkable – layoffs – this will be another truly epic chapter in Toyota’s history.

1 Comment

  1. John Santomer

    November 18, 2008 - 10:23 pm

    TMC has all the answers to these questions already it is only a matter of “frame bending” in the beginning when the “boy was still crying wolf” – but now, the man need to rally the whole corporation for strategic changes. Sometimes this is a prevalent downside to the “Pull System” -but then time and again TMC has weathered things out. Hopefully this one as well. It is not bad to listen cautiously and draw a comprehensive risk plan even when the business is booming…sooo its not bad to be the boy who cried wolf after all. It’s bad news for the ones who have not heeded the call.