Tyota Global Strategy

Car company must beware of arrogance, complacency on march to become world's biggest, division president says

OTTAWA -- 'The enemy of Toyota is Toyota," says Ken Tomikawa, the Toyota Canada president who has driven Japan's No. 1 auto maker to a record 10.6 per cent share of the Canadian new-vehicle market so far this year, a 0.7-per-cent jump over the same period in 2003.

The goal for the rest of the decade is much grander.

Earlier this year, it was revealed that Toyota is working away at a new strategy called Global 15. That is, Toyota intends to achieve a 15 per cent global share between 2006 and 2010, and thus become the No. 1 auto maker in the world (General Motors currently has about 14.7 per cent of global share). That would represent a big jump from Toyota's current 11.3 per cent share of global sales.

Tomikawa's point, made during a dinner to discuss the company's aggressive truck strategy, is as Toyota goes down this path toward becoming the world's biggest car company, it will run into trouble only if arrogance and complacency set in and grip the company.

Don't think it isn't possible. As recently as the end of the last decade, Ford had a corporate strut perfectly reflected in since-ousted CEO Jacques Nasser. Then, the bottom fell out of Ford's plans and $6.45-billion (U.S.) in losses ensued. Ford has not yet recovered.

Go back a little farther and recall the hip condescension of Chrysler during the heart of the Bob Lutz/Bob Eaton years.

And GM? What was good for GM was good for the country, right?

Look at those three now. Ford and GM don't make money on selling cars at all; if not for their finance arms, both would be in big trouble. Chrysler, since being taken over by Daimler-Benz, has fallen to the depths and is only now showing a few signs of returning to consistent profitability. But we can't be sure Chrysler's is a lasting recovery yet.

Tomikawa, like other senior bosses at Toyota, is concerned about arrogance. He says he worries about the new, young, swaggering Toyota employees who have never experienced bad times and who seem to be comfortable with the idea that Toyota is just naturally superior to all the other auto makers.

"This is a problem we must address in Toyota," says the hard-driving Tomikawa, a short, intense sales and marketing executive who loves his golf and, alas, his cigarettes.

Toyota, of course, is on a global roll. It is increasing its market share steadily, enjoys a remarkable degree of environmental cachet, its Lexus luxury car division is a leader in quality and has been for more than a decade and the corporate coffers are full with some $30-billion in cash and equivalent reserves, driven by profits such as the nearly $11-billion Toyota earned in fiscal 2003.

Toyota is the world's most profitable per-vehicle volume car company. Period.

The arrogance of success is a real worry, though. Detroit's auto makers have suffered from it and so have Europe's.

Consider Volkswagen. Through the 1990s, Europe's largest auto maker was a shining example of smart platform engineering to produce a multitude of good products. This year, VW is on track to lose as much as $1-billion in North America alone. Analysts suggest VW wasted resources on a bold but ultimately unwise attempt to get into the luxury car business with models like the Phaeton.

Mercedes-Benz, meanwhile, is battling with well-documented quality issues. Some suggest they are a byproduct of aggressive global expansion plans -- the takeover of Chrysler, the purchase of a controlling interest in Mitsubishi -- that have led to senior management diverting attention from the core Mercedes brand.

Tomikawa says Toyota CEO Fujio Cho warns constantly about what he calls "big company disease." They both recognize the disease, but preventing it from infecting the organization is a different matter.

To inoculate the company from complacency, Toyota is moving ahead aggressively with radical improvements to what are already the world's best product development and manufacturing systems.

Officials say that when a massive wave of new models begins arriving in 2005, the company will have found ways to save a staggering 30 per cent in development and manufacturing costs over the current generation of models.

Insiders say Toyota's manufacturing engineers believe they have devised a new system to enable new products to be built on assembly lines half the length of today's. This will be the system Toyota uses when it opens a new truck plant in Texas in 2006.

Then there is the matter of styling. It is a significant weakness. The truth is, Toyotas for the most part are considered bland, uninspired designs.

That