On 31st October 1957 Toyota set up a dealership in Hollywood. In 1958 it launched its first car in the US market called the Toyopet Crown. That year it sold 288 of them and also one Land Cruiser. Its performance in the first few years was so bad that it seriously thought of quitting the US market.
But instead of doing that it sat back and analyzed the reasons for its failure. It quickly understood that the ugly looking and underpowered vehicle would never sell in the US and it eventually withdrew it from the market.
All this is now history. In its 50th year in the US Toyota is on track to sell 9.34 million vehicles worldwide, surpassing GM to become the largest car manufacturer in the world by numbers. It had already become the most profitable car manufacturer several years back. Today its market capitalization is greater than the Big Three put together plus Honda plus Nissan! The Big Three plan to close down 26 plants over the next five years and to shed thousands of jobs.Toyota on the other hand is opening a new plant in Texas this fall and another in Ontario in 2008. Today 60% of the cars Toyota sells in America are made here. It is not outsourcing to make profits. It is creating jobs in the US. It's offering union wages and health benefits. Above all it is selling cars made by Americans to Americans at a profit.Its cars have a 'retail turn rate'-that is the number of days a dealer has to keep a car before selling it of 27 days. For Ford it is 82, GM 83 and for Daimler Chrysler it is 107 days.(figs. for 2006).
Toyota has successfully challenged the American model of manufacturing and management. There are several, by now familiar, reasons for it. The first is the belief in 'kaizen' or continuous improvement, and in 'jidoka' or not letting a defect go from one machine to the next. Then there is the secret designation for certain projects known as 'irei' which roughly means 'not ordinary' and refers to vehicles which the company will go to any lengths to perfect. In the early 1990's, the Prius enjoyed this designation. Toyota plans decades in advance and is not unduly concerned with quarterly and annual balance sheets. True, it enjoys certain cost advantages, like lower health care costs, but what people overlook is the huge cash reserves it has built up and the massive amounts it is spending every year on research and development. Of late it has been hit by vehicle recalls due to manufacturing defects and has recently lost the top spot of being the safest car, slipping to third place, but it is still the clear leader of the pack. It is currently able to sell all the cars it produces in the US, and with the US having more cars per household than drivers, it should be able to do so in future as well.
