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.

6 Comments

  1. John Santomer

    November 24, 2008 - 8:18 am

    You have hit all “nails in the coffin” Jon. But then again one of the hardest change any organization can hope to embrace is a strategic one. Transcending cultures, mind sets and interests are the apex of any corporate hurdles or any organization. TMC has had its own share, the “Pull System, “tatakidai”, conservative approach, kaizen are all aimed at making incremental changes to improvements but not as radical as what any of the the Big 3s should embrace without letting go of the executives who lead the firms to its current situations now. These may also contribute to the slow (from 60 years off), steady but stable growth that TMC is enjoying to this time. TMC has all the answers already, it is only a matter of external pressures that can push Toyota again to make its mind with the decision to “push the envelope” up two notches as I have once commented on your previous write up – We Do Not Make What We Do Not Sell: No More Trucks in Indiana dated July 13, 2008. I really feel strongly that Toyota should make the best out of this opportunity…Let’s hope that TMC also sees the opportunity in the same plane.

  2. Erik Stordahl

    November 24, 2008 - 12:00 pm

    Jon,
    I’ve been hoping you would post your thoughts on this subject. Thank you. I know the popular media says the problem is product offering, brand consolidation and of course legacy contracts, but I suspect that it is deeper. These all may be symptoms but not the disease. I wonder if “respect for people” isn’t just missing, but sorely missing in Detroit’s Big Three. I further wonder what Kiichiro Toyoda would do if he were CEO of GM, Ford or Chrysler. I’m not recommending that Mr. Wagoner step down, but I would like to see a more servant-leader style. Not just from the CEO’s but all executives. Toyota workers from NUMMI will say that GM didn’t have it then, I’m not certain they have it now. But I’m quite certain they will never challenge Toyota without it. And that change is difficult which is interesting to me. After “change” was the rallying cry of a recent election, I find it ironic that it is such a barrier to companies. Especially companies like the Big 3 that need it so desperately.

  3. Bryan

    November 24, 2008 - 10:15 pm

    Hi Jon,
    Great post. Right on the money. I’m wondering though if it is accurate to say that the Japanese government “invested” in auto technologies. I’m afraid that the government didn’t “invest” in auto technologies though as the graphic suggests. Toyota biographies tend to suggest that it was teh 70’s oil shock that brought this on and government regulation, ala C.A.F.E. like standards, that spurred the Japanese auto makers to create fuel efficient vehicles. Even still, perhaps the biggest benefit provided by the government for Japanese automakers was a protectionist policy, albeit a much needed one from 1945 onward and an acceptance of the keiretsu in Japanese economics. Both policies are more or less unaccepted in the U.S.
    Don’t get me wrong. I’m not advocating a protectionist policy for our Big Three. However, I’m afraid that the “investment” made by our government, a.k.a. the bailout will not come with the proper strings attached which you have pinpointed in this post. Obama’s administration cannot solve this problem, only the Big Three can in the same fashion that Toyota did in the post war era: by coming to grips with a stark reality that the future is not certain.
    With that said – bankruptcy requires no bailout and I argue that the first Big Three company to concede to the stigma of bankruptcy has the greatest chance of success. It will give them an opportunity to do the right thing.
    Thanks,
    Bryan Lund

  4. Mark Graban

    November 25, 2008 - 4:26 am

    Good stuff, Jon. It’s a bit frustrating to me that the media hasn’t mentioned the Toyota management system as a differentiator… the one excuse that I haven’t heard from GM and Ford leaders is “if only we had listened to Dr. Deming.”

  5. Al Coffman

    November 25, 2008 - 6:11 am

    Had to say this makes perfect sense.. I have personal contacts within the company who have described to me the acts of bringing workers into the plant, putting them in a room to read magazines all day because there was no work for them on the line. The management of the big 3 should endorse the removal of non-productive life time union wage guaranties and embrace chapter 11. To permit these companies to continue to operate as they have with a major influx my tax dollars would be a sensless, criminal act.

  6. Elick

    December 20, 2008 - 6:12 pm

    Big-3’s effort of technology improvement is inferior to other foreign company,especially in the field of manufacturing technology.
    In japan,cars body are made from more high tensile strength steel.Tradeoff between lightening and toughness is solved.So car weigh becomes lighter about 15% for vehicle fuel efficiency.
    But forming cost of high tensile steel costs much when leaving just as it is,because damage of stamping die for body forming becomes very much.So more durable tool steel for cold stamping die use is developed by Hitachi Metals.
    It is thought that there is also a cause which bankruptcy of big-3 may occures in the accumulation of a peripheral technology in USA.