Environmental & Social Report 2005

Relations with Employees

Toyota Way 2001

Sharing the Toyota Way

The Toyota Way 2001 clarifies the values and beliefs that all employees should embrace in order to carry out the Guiding Principles at Toyota throughout the companys global activities. Until the Toyota Way was published, Toyotas management philosophies, values, and business methods had been passed on as implicit knowledge. However, the rapid growth, diversification and globalization of Toyota in the past decade have increased the scope of its manufacturing and marketing presence throughout the world. Toyota is preparing to operate as a truly global company, guided by a common corporate culture, and has identified and defined the managerial values and business methods that are known collectively as the Toyota Way. Number of Employees by Region on a Consolidated Basis
Region Japan
North America

Respect
We respect others, make every effort to understand each other, take responsibility and do our best to build mutual trust.
Respect for stakeholders Mutual trust and mutual responsibility Sincere communication

Respect for People

Social Aspects

Continuous Improvement

Teamwork
We stimulate personal and professional growth, share the opportunities of development and maximize individual and team performance.
Commitment to education and development Respect for the individual; realizing consolidated power as a team

March 2002

March 2003

March 2004

March 2005

180,273 27,721 11,894 26,814 246,702

179,039 30,775 14,418 39,864 264,096

175,096 30,806 17,349 41,159 264,410

171,087 31,543 18,554 44,569 265,753

Europe Other Total

Challenge

Kaizen Genchi Genbutsu

The Two Pillars of the Toyota Way The Toyota Way is supported by two main pillars. They are Continuous Improvement and Respect for People. We are never satisfied with where we are and always work to improve our business by providing our ideas and best efforts. We respect all Toyota stakeholders, and believe the success of our business is created by individual efforts and good teamwork. All Toyota employees, at every level, are expected to use these two values in their daily work. Since 2002, Toyota has adopted the Toyota Way for each individual function, including human resources, accounting, and overseas sales and marketing, and has been working on ensuring thorough implementation. Toyota Institute Toyota established the Toyota Institute in January 2002 as an internal human resources development organization that aims to reinforce the organic integration of global Toyota companies by way of sharing the Toyota Way. From its establishment up to the end of FY2004, more than 1,500 employees have received training at the Institute, including approximately 600 from overseas affiliates. In addition, since 2003, overseas affiliates in North America, Europe, Asia, and Africa have established their own human resources training organizations to promote a better understanding of the Toyota Way.

Labor-Management Relations Based on Mutual Trust and Respect

Mutual trust and respect between labor and management is a fundamental principle of Toyotas employee relations, as stated in the Guiding Principles at Toyota. Following a labor dispute in 1950, mutual trust between labor and management was adopted as the foundation of the LaborManagement Joint Declaration concluded in 1962. Also, the Labor-Management Resolve for the 21st Century signed by labor and management representatives in 1996, indicates the basic principle of mutual trust and respect. In order to achieve this fundamental principle in labormanagement relations, Toyota has adopted the Basic Principles of Human Resources Management, and continuously works to strengthen its labor-management relations. Stable Employment Stable employment that avoids layoffs and terminations to the maximum extent is a key pillar supporting the relationship of mutual trust between labor and management. In addition, the Toyota management system is based largely on maximizing employee abilities, reasoning skills, and creativity, and human resources are regarded as a key management asset. The layoff and termination of human

Basic Principles of Human Resources Management

(1) Creating a workplace environment where employees can work with their trust in the company
Stable employment where layoffs and dismissals are not readily made Steadily maintain and improve working conditions from a medium- to long-term perspective Ensure fairness and consistency

(2) Creating a mechanism for promoting constant and voluntary initiatives in continuous improvements
Share the management mindset and sense of critical urgency through thorough communication Reflect business results in working conditions

(3) Fully committed and thorough human resources development

Promote personal growth through work Communication of the Toyota Way/role

(4) Promoting teamwork aimed at pursuit of individual roles and optimization of the entire team
Thorough consensus building and achievement in single thrust Team results and creating a sense of unity

resources, not only damages the relationship of trust, but also hinders the maximization of employees abilities. The fundamental basis of Toyotas management philosophy is to always take a medium- to long-term management perspective and to maintain stable employment through all possible measures.
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Social Aspects

Employees

Knowledge and skills that enhance employability

Advanced training for specialists

Assistant managers

Orientation training for newly promoted assistant managers Advanced training for assistant managers

(%) 100 90 80 70 60 50 40 0

Employee Morale (Administrative and Technical)

Under consideration

Proud to work at Toyota Satisfaction with working conditions 00 02

04

(FY)

Communication with Employees Families Since FY2002, greeting cards from the president have been sent to employees and their families at the end of the year, and since FY2003, various work sites have held workplace visits for families to facilitate communication between the workplace and home. Toyota also created the Toyota Fami-net, a family oriented website, and is taking other measures to enhance relations with employees families.

Greeting card from the president

Human Resources Development Framework that Emphasizes Problem Solving The three main points of human resources development for office and engineering positions are: (1) Thorough training in problem solving during the first ten years, until promotion to the post of assistant manager; (2) Training is an opportunity to trigger development of human resources; but stronger emphasis should be placed on on-the-job training (OJT); and (3) Selected employees act concurrently as instructors and mentors. Based on these points, Toyota conducts training of younger employees with a focus on original problem-solving techniques to enhance practical problem-solving skills. In addition, Toyota has systematically developed and implements training to improve the managerial skills (human resources development capabilities) of managers, and global training for employees at overseas affiliates to strengthen practical skills in implementation of the Toyota Way. Toyota also conducts a variety of self initiated development programs including language training and business-related courses to respond to the employees desire for additional learning, regardless of grade.

Developing a Business Culture that Emphasizes Technical Skills Toyota established the TMC Skill Development System to revitalize the joy of making things and to stimulate the desire to acquire specialized skills among production employees. Three ranks (A to C) are recognized according to the level of skills acquired. Specialized training is conducted at manufacturing sites in various plants, and technical trainers selected from each worksite also undergo training to enhance their training skills. As of March 2005, a total of approximately 600 trainers (including 240 full-time trainers) are working at all plants. Toyota also holds company-wide specialized skill exchange meetings and participates actively in the WorldSkills Competition to foster a business culture that emphasizes specialized skills. Toyota does not limit specialized skills to expertise in work processes, but defines them to include the skills necessary for promoting improvements in work methods and processes with an awareness of workplace issues and challenges.

Personnel Exchanges and Training on a Global Scale Toyota created a system for intercompany transfers (ICT) that allows employees from overseas affiliates to work at TMC for two years, to realize personnel exchanges and training on a global scale. Currently, approximately 300 employees are working in Japan under the ICT program.

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Career consultations with supervisors

Specialists

Orientation training for newly promoted specialists

OJT Mentor System at the workplace

Communication with Employees Toyota sees good communication as the basis for all activities. In addition to communication in the workplace, Toyota has created numerous other opportunities for discussions between labor and management including Labor-Management Councils, Joint Labor-Management Round Table Conferences, and various subcommittees. Toyota has established a number of hotlines for swift and appropriate resolution of issues related to compliance, gender harassment, mental health and working conditions. Further, Toyota implements employee morale surveys, and monitors employee job satisfaction, etc. In a survey conducted in FY2004, responses were received from 83% of the approximately 19,000 employees that were surveyed. Positive responses such as Im proud to work at Toyota and Im satisfied with my working conditions continue to be at high levels.

Human Resources Development

Making automobiles is about developing people. As these words indicate, Toyota seeks to develop human resources through the process of making things. Toyota believes that the development of human resources requires the communication of values and principles. Toyota has defined the required qualifications of professional staff for office and engineering positions associates who can create added value on their own and contribute to society, as well as utilize their strengths and exercise teamwork and T shaped human resources team members with a broad range of skills, such as foreign language skills and operational knowledge (the crossbar of the T) as well as highly specialized knowledge and experience in a particular field (the vertical bar of the T) who are able to perform day-to-day activities and expand their skills in technical positions. Company-wide training is conducted based on employee grades, as well as specialized training for individual Groups, and language training.

Structural Diagram of Toyotas Human Resources Development

Training target Training by grade level
Induction training for newly joined staff

Workplace

Newly-joined staff Administration staff

Skills and abilities necessary for working at Toyota

Advanced training for administration staff

OJT and practical training

Environmental & Social Report 2005

Respect for Diversity and Creating a Sense of Unity

With the globalization of business, the social advancement of women, and other social changes, diversity in human resources (nationality, gender and other differences) can enhance a companys competitiveness. Aspiring to be a company that is an attractive arena of self-realization for a diverse range of human resources, Toyota respects diversity and works to create a sense of unity. In FY2002, Toyota rolled out the Diversity Project with particular emphasis on promoting active roles for women, and made a three-pronged effort to: (1) Help enable women to work and raise children at the same time; (2) Assist in womens career building, and (3) Reform the working environment and employee awareness. Trends in Ratio of Female Employees (Example of Administrative Positions)
35%

total of 11 (two in FY2004). To support return to the workplace after childcare leave, the system has been enhanced by adopting flexible working hours (e.g. exemption of core time in flex system, partial working at home, shortening of working hours), resulting in an almost 100% return-to-work rate.

Employment of Elderly Workers Regarding the best approach to work arrangements and employment once staff reach 60 years of age, labor and management at Toyota have undertaken repeated discussions and investigations with the aim of taking active initiatives in the interests of expanding employment opportunities and securing livelihoods.

Increased Support for Balancing Work with Childcare With consideration to the implementation of Policies and Measures to Support Fostering Next-Generation Youth, Toyota has conducted surveys and interviews with staff as well as talks between labor and management. An action plan based on the results was formulated and submitted to the Labor Bureau in April 2005. Toyota is promoting further improvement in the work environment, with three main action points: support for production staff combining work with childcare, career design support, and raising of corporate awareness.

(%) 40 30 20 10 0

00

01

02

03

04

(FY)

Childcare Centers and Number of Staff Taking Childcare As a measure to support employees balancing work and childcare, a childcare center was opened in FY2002, followed by the addition of another facility in FY2003, bringing the total capacity to 100 children. The number of employees taking childcare leave is also increasing. The number of male employees who have taken childcare leave since FY1999 reached a cumulative Trends in Number of Employees Taking Childcare Leave 216
(Number of people) 200 150 153 100 100 50 0 00 01 02 03 128 172

Long-term Contracts Offered to Contract Employees A revision of the law in 2004 extended the maximum contract length for temporary employees from one year to three years. Many contract workers want to find work that is more stable and offers a better sense of achievement and fulfillment. In a survey carried out in 2004, it was found that 62% of respondents were interested in acquiring specialized skills and knowledge. Toyota is engaged in improving working conditions, not only in order to secure human resources who will serve as a strategic force, but also to improve the employment prospects for temporary staff after the end of their contracts.

Communication that Involves All Employees In order to enhance communication that involves all employees, Toyota is striving to create a sense of unity and improve workrelated skills and work ethic. One example is the utilization of quality control (QC) circles to create a shared awareness of problems, as well as to foster collegiality and a desire for improvement. QC circles involve not just TMC, but are developed globally on a company-wide basis to include suppliers, overseas affiliates, and other relevant parties. Moreover, the aim is not restricted to work practice but extends to the creation of a sense of unity, and the activities include a range of events that take place during employee leisure time. At the Ekiden longdistance relay race held for the 56th time in 2004, 292 teams, including seven from overseas affiliates, participated in a closely fought contest. Examples of Quality Control Circle Activities in FY2004
All-Toyota Total Quality Management Associate Convention Held in September for 39th time Attended by 1,500 participants from the Toyota Group, Kyohokai, and Eihokai, with the aim of creating a sense of unity throughout the entire company Toyota Global QC Circle Convention Held in November for 17th time Opportunity for exchange with 130 participants from 33 overseas affiliates in 21 countries

Social Aspects

04

(FY)

Employment of Disabled People As of March 2005, Toyota employed 832 disabled people, and its disabled employees ratio* reached 1.84%, exceeding the 1.8% Legal Employment Quota. Toyota believes in helping disabled people achieve autonomy within society, and makes it a basic rule to have them work together with other employees. Consequently, disabled employees can be found in many kinds of positions at various workplaces. At each business site, efforts are made to create a workplace environment that is safe and easy to work in by devising various ways to adapt facilities that accommodate the nature of employees disabilities.
*In April 2004, the basis for calculating the disabled employees ratio was altered

Ekiden race held in December 2004

A childcare center

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Social Aspects

Employees

Health and Safety

Safety, along with quality and the environment, is an important topic that is connected to the very foundation of a corporation. Toyota is making an effort to create a safe and energetic work environment, based on the philosophy of Respect for people, and the fundamental policies that Safety is management itself and that Placing safety first is everyones responsibility, from senior executives to every employee at the workplace. 5-Year Policy (2000 - 2004)
1. Zero STOP6-type accidents and designated occupational diseases by reinforcing a proactive prevention system and structure 2. Building a workplace environment that is healthy for the mind and body

Industrial Accident Frequency (Frequency of Lost Workday Cases)

2 1.5 1 0.5 0 Automobile manufacturing industry Toyota 02 All industries Manufacturing industries

00

01

03

04 (Year)

*The figures for all industries, manufacturing industries and the automobile manufacturing industry for 2004 are preliminary

Health and Safety

Main Actions Taken in FY2004
1. Notification and thorough enforcement of safety regulations and workplace management items 2. Thorough countermeasures against frequent machine stoppages (breakdowns where repair time is limited to a number of minutes) 3. Further expansion of measures against ergonomic (musculoskeletal) disorders 4. Promotion of measures against noise and dust 5. Management and guidance for construction work by contracted companies on Toyotas premises

Building Good Health When health checks are conducted, verification items independently selected by Toyota are added to those prescribed by law. In 2004, the ratio of completely healthy employees4 showed no change and fell short of the target of 70%, but the number of employees aiming to improve their health by regularly exercising or taking part in health seminars is steadily on the rise. In the future, through developing BIP2 activities5 centered on the approach of behavioral change (BMI, smoking), the aim is to strengthen workplace activities that target practical achievements in building health and to continue activities designed to improve the health awareness of every employee.
4. Completely healthy employees: Employees with an A ranking for health management (no health problems found during health checks and not receiving medical treatment) 5. BIP2 activity: Behavior Change Innovation Program, a lifestyle improvement campaign with targets set for body mass index (BMI) and smoking rate

Mental Health Care Regarding mental health at the workplace, all of the newly appointed managers and supervisors participate in active listening courses6 that are effective for the prevention and early detection of mental problems. In FY2004, this system was extended to include newly appointed division general managers, and training sessions were given to include department general managers, group managers, etc. Also, as part of a self-care approach, mental health care measures for individual employees were enhanced through selfcare training, stress management methods, and other measures. Through these activities, Toyota aims to create a workplace environment with better communication in the future.
6. Active listening courses: Experiential training in methods of building good communication through understanding and sympathy for others feelings and emotions; a technique of active listening

Beginning with the thorough implementation and development of Full Observation Activities to reduce the risk of workplace accidents, Toyota has developed a range of voluntary activities to prevent accidents. As a result, the number of STOP6-type accidents1 and designated occupational diseases2 in 2004 was the fewest to date. Unfortunately, however, one fatal accident did occur. As a measure to prevent the recurrence of such an accident, a so-called Lockout System3 was introduced covering all company machines and equipment (see photos on the right). Additionally, improved levels of health and safety are being targeted by implementing the P (plan), D (do), C (check) and A (act) management cycle as part of the daily routine.
1. STOP6-type accidents: Six types of accidents that may cause death or disability (being caught in a machine, contact with a heavy object, contact with a vehicle, falls, electric shocks, and contact with a heated object) 2. Designated occupational diseases: Occupational diseases resulting from dust and noise, or musculoskeletal disorders 3. Lockout System: A system to protect the safety of workers whereby a blocking mechanism is locked in place when the power supply is turned off, for the purpose of the maintenance or repair of machines and equipment, so that the power will not be mistakenly switched back on at the machine/equipment involved

Trend in Percentage of Completely Healthy Employees

(%) 60 50 40 30 00 01 02 03

04 (Year)

Lockout System
(Old system) Warning Tag: DO NOT SWITCH ON!

Global Health and Safety Initiatives With the aim of achieving the highest levels of health and safety at Toyotas 45 production-related overseas affiliates, relevant divisions at TMC and mother plants are collaborating based on action items proposed in Japan to implement health and safety activities geared to conditions in each country and region. In addition, employees who are assigned overseas and families accompanying them undergo physical examinations before, during, and after their overseas stays. Doctors and other specialist personnel conduct surveys of local medical facilities, and consult with employees and their families to alleviate concerns about living overseas. In FY2004, with the aim of enhancing self-reliance and increasing the level of health and safety at overseas affiliates, 44 health and safety staff from 31 overseas manufacturing companies were invited to spend four days in September or November to reaffirm their knowledge of the Toyota Way in Safety, to share information, and to exchange views on a range of other issues.

Portable plug

(New system)

Padlock used to lock equipment into off mode

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Environmental & Social Report 2005

Examples of Initiatives
Asia

Toyota Motor Thailand Uses Improvement as Foundation for Growth during Baht Crisis
(TMT, Thailand)
Today, Toyota Motor Thailand Co., Ltd. (TMT) is a pivotal point within Toyotas global strategy serving as a production and export base for finished vehicles and parts, with emphasis on the IMV* Project. Looking back, Vice Presidents Apichai Sidrattakul and Wichien Emprasertsuk note that the companys current growth is thanks to systematic improvements taken during the baht crisis. The crisis started suddenly on July 1, 1997. Over the next several months, the baht plunged from 25 to the dollar to 50 to the dollar, and the Thai economy took an abrupt downturn. At that time, the reputation of the Soluna, a model designed exclusively for the Thai market, was extremely high, and TMT received orders for 30,000 vehicles, requiring its plant to operate two shifts and take a variety of other measures to increase production. However, reflecting the sudden slowdown in the economy, the number of units produced fell sharply, with the daily operating time cut to just four hours. Employment Maintained through Deep Cost Cutting Against this background, TMT showed a strong commitment to uniting with the whole workforce as well as suppliers and dealers to ride out the crisis. This commitment was shared with the labor union, and the entire company together with the Toyota Group implemented thorough measures to make operations more lean, utilizing the resulting excess labor to implement improvement initiatives as well as additional education of employees and suppliers. For example, based on the concept of just in time, energy was supplied to each process when it was needed and in just the right amount; personal wastebaskets were reduced to one-quarter of their original size to encourage less paper usage; and localization was promoted by extending local procurement to Tier 2 and Tier 3 suppliers. Under these circumstances, TMT presented a Soluna to His Majesty the King of Thailand. This action inspired great confidence in employees, dealers, suppliers and all other stakeholders. From His Majesty, TMT received a sum equivalent to the price of the Soluna and it was suggested that the money be used as the

Social Aspects

TMT manufactures and exports IMV Project vehicles

basis for building a rice milling plant with the cooperation of the Toyota Group. With the support of the different group companies, TMT built a rice milling plant near the Gateway Plant. This contributed to the local community and provided temporary employment for employees who would otherwise have been laid off. Meanwhile, TMT also directed energy into the education and training of employees. As a result of these efforts, without having dismissed a single full-time employee, inventories were cleared in January 1998 and production began to rise again. In 2004, TMT produced 273,980 vehicles. By gritting its teeth during a tough period and cultivating fundamental stamina, TMT paved the way for the strides forward it is making today.
*IMV: Innovative International Multi-purpose Vehicle

Rice milling plant that provided jobs to employees during the baht crisis

Africa

TSAM Supports AIDS Countermeasures for Workers

(TSAM, South Africa)
In South Africa, AIDS is a serious social problem. At Toyota South Africa Motors (Pty.) Ltd. (TSAM), its effect on employees, their families, and local communities is also a great problem. In response, the company is implementing an HIV/AIDS Support Program. Based on a policy of providing all employees with a safe and healthy workplace and working consistently to improve employee health, TSAM supports health management by its employees by providing information on AIDS and offering counseling and treatment by specialist doctors. As a measure against AIDS, it is important for employees to be aware of the state of their own health and to take steps to avoid infection. To this end, in FY2004, 10,000 copies were published of the information booklet Toyota vs HIV/AIDS and distributed to all employees. The booklet gives concrete and clear information on routes of AIDS infection, what to do if one becomes infected, and what action to take in the face of the serious problem of AIDS directly present in everyday life. In addition to AIDS prevention, TSAM is investing time and energy in education to eliminate the discrimination from families and friends, which is one of the hardest things that people with HIV face, and also in training 200 employees to become specialists in AIDS education, known as peer educators. These are two areas where TSAM is working to raise awareness among employees. Additionally, TSAM has set up an anonymous telephone advice line.

Peer educators on World AIDS Day 57