The Big 3 Must Follow in Toyota’s Footsteps to Survive

The Big 3 automotive companies must follow in Toyota’s footsteps to survive. There are three things that need to happen for General Motors, the Ford Motor Company and Chrysler to avoid becoming case studies in how not to run global manufacturing companies. These three steps are not kaizen, respect for people and making cars that customers want to buy. Those would be platitudes at this point, necessary but not sufficient. Something far more radical is needed at this point. We can learn from three key factors in Toyota’s success by tracing their footsteps over the past half century.

Toyota started out on their journey almost 60 years ago and their first step was bankruptcy. The first step to survival for any of the Big 3 automotive companies is to file for Chapter 11 bankruptcy protection. This would allow them to reorganize both their management and their labor contracts. Neither have been serving the best interest of the company, its people, the customers or the community for the last few decades. They must fire the executives who make millions without merit and forge a true union between workers, the community and the management.

The second step is to benefit from the massive investment that the Obama administration will make in new technologies that create jobs, make use of alternative energy sources and reduce environmental impact. As a key industry and one of the largest employers, the U.S. automotive industry stands to benefit from increased demand in these areas, although the shift in their sales philosophy, design and manufacturing infrastructure will be more difficult than it was for Toyota to make trucks and jeeps for the U.S. military during the Korean War.

The third step is for the Big 3 to take full advantage of the energy crisis and the emerging consumer consciousness that will create a demand for fuel-efficient vehicles. Demand for these vehicles may be spurred not only by the patriotic urge to for energy security and independence, reduced pollution and lower fuel prices but also by government policies toward carbon taxes or tax credits for buyers of these vehicles. For decades the lack of fuel efficient vehicles in the U.S. market has been less a matter of technical capability and more a matter of a lack of will. Tesla can, Toyota can and yes, the Big 3 can.

It took Toyota over 20 years to fully benefit from the three forces of bankruptcy reorganization, government spending and the energy crisis. The Big 3 auto firms could perform this hat trick in one single year. What took Toyota decades to accomplish, the Big 3 could accomplish in less than a decade.

Consider this: Toyota is still profitable, has lots of cash and has already invested significant capital and infrastructure in the hybrid vehicle, but the Big 3 all still have these options left. Toyota does not have these options. Toyota operates the Toyota Production System, the most complete and advanced example of lean manufacturing, and a supply chain that can keep up, while for the most part the Big 3 have yet to build this capability and reap all of the benefits from doing so. Toyota could find themselves in real trouble should the leaders of the Big 3 find the courage and wisdom to follow in Toyota’s footsteps.

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