TOYOTA MOTORS COPORATIONS

Introduction

Toyota Motor Corporation, commonly known simply as Toyota, is a multinational

corporation headquartered in Japan. At its peak, Toyota employed approximately 320,000
people worldwide. It is the world's largest automobile maker by sales.

The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father's
company Toyota Industries to create automobiles. Three years earlier, in 1934, while still a
department of Toyota Industries, it created its first product, the Type A engine, and, in 1936,
its first passenger car, the Toyota AA. Toyota also owns and operates Lexus and Scion brands
and has a majority shareholding stake in Daihatsu and Hino Motors, and minority
shareholdings in Fuji Heavy Industries, Isuzu Motors, Yamaha Motors, and Mitsubishi
Aircraft Corporation. The company includes 522 subsidiaries.

Toyota is headquartered in Toyota City, Aichi and in Tokyo. In addition to manufacturing

automobiles, Toyota provides financial services through its Toyota Financial Services
division and also builds robots. Toyota Motor Corporation (including Toyota Financial
Services) and Toyota Industries form the bulk of the Toyota Group, one of the largest
conglomerates in the world.

Company Overview

The Toyota Motor Company received its first Japanese Quality Control Award at the start of
the 1980s and began participating in a wide variety of motorsports. Due to the 1973 oil crisis,

consumers in the lucrative U.S. market began turning to small cars with better fuel economy.
American car manufacturers had considered small economy cars to be an "entry level"
product, and their small vehicles employed a low level of quality in order to keep the price
low.

By the early sixties, the US had begun placing stiff import tariffs on certain vehicles. The
Chicken tax of 1964 placed a 25% tax on imported commercials vans. In response to the
tariff, Toyota, Nissan Motor Co. and Honda Motor Co. began building plants in the U.S. by
the early eighties.

In 1982, the Toyota Motor Company and Toyota Motor Sales merged into one company, the
Toyota Motor Corporation. Two years later, Toyota entered into a joint venture with General
Motors called NUMMI, the New United Motor Manufacturing, Inc, operating an automobile-
manufacturing plant in Fremont, California. The factory was an old General Motors plant that
had been closed for two years. Toyota then started to establish new brands at the end of the
1980s, with the launch of their luxury division Lexus in 1989.

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In the 1990s, Toyota began to branch out from producing mostly compact cars by adding
many larger and more luxurious vehicles to its lineup, including a full-sized pickup, the T100
(and later the Tundra); several lines of SUVs; a sport version of the Camry, known as the
Camry Solara; and the Scion brand, a group of several affordable, yet sporty, automobiles
targeted specifically to young adults. Toyota also began production of the world's best-selling
hybrid car, the Prius, in 1997.

With a major presence in Europe, due to the success of Toyota Team Europe, the corporation
decided to set up TMME, Toyota Motor Europe Marketing & Engineering, to help market
vehicles in the continent. Two years later, Toyota set up a base in the United Kingdom,
TMUK, as the company's cars had become very popular among British drivers. Bases in
Indiana, Virginia and Tianjin were also set up. In 1999, the company decided to list itself on
the New York and London Stock Exchanges.

Toyota Deutschland's headquarters in Cologne

In 2001, Toyota's Toyo Trust and Banking merged to form the UFJ, United Financials of
Japan, which was accused of corruption by the Japan's government for making bad loans to
alleged Yakuza crime syndicates with executives accused of blocking Financial Service
Agency inspections. The UFJ was listed among Fortune Magazine's largest money-losing
corporations in the world, with Toyota's chairman serving as a director. At the time, the UFJ
was one of the largest shareholders of Toyota. As a result of Japan's banking crisis, the UFJ
was merged again to become Mitsubishi UFJ Financial Group.

In 2002, Toyota managed to enter a Formula One works team and establish joint ventures
with French motoring companies Citroën and Peugeot a year after Toyota started producing
cars in France.

Toyota ranked eighth on Forbes 2000 list of the world's leading companies for the year 2005.
The company was number one in global automobile sales for the first quarter of 2008.

On December 7, 2004, a U.S. press release was issued stating that Toyota would be offering
Sirius Satellite Radios. However, as late as January 27, 2007, Sirius Satellite Radio and XM
Satellite radio kits were not available for Toyota factory radios. While the press release
enumerated nine models, only limited availability existed at the dealer level in the U.S. As of
2008, all Toyota and Scion models have either standard or available XM radio kits. Major
Lexus dealerships have been offering satellite radio kits for Lexus vehicles since 2005, in
addition to factory-equipped satellite radio models.

In 2007, Toyota released an update of its full size truck, the Tundra, produced in two
American factories, one in Texas and one in Indiana. "Motor Trend" named the Tundra
"Truck of the Year," and the 2007 Toyota Camry "Car of the Year" for 2007. It also began the
construction of two new factories, one to build the RAV4 in Woodstock, Ontario, Canada and
the other to build the Toyota Prius in Blue Springs, Mississippi, USA. This plant was
originally intended to build the Toyota Highlander, but Toyota decided to use the plant in

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Princeton, Indiana, USA, instead. The company has also found recent success with its smaller
models the Corolla and Yaris as gas prices have risen rapidly in the last few years.

In 2009-2010, the company was heavily in debt and had to request a loan of more than $3
billion from a bank backed by the Japanese government.

Ethical issues of Toyota

Toyota admits to purposely neglecting safety concerns and delaying recall investigations
to save money

Toyota has finally admitted to engaging in unethical behavior when it comes to investigating
the safety of its vehicles. An article released by the Associated Press late Sunday night,
confirms that Toyota not only dragged its feet when looking into safety defects, but also
patted itself on the back for doing so.

In a 2009 presentation called, "Wins for Toyota Safety Group," it shows that in 2007, Toyota
purposely and repeatedly delayed safety regulations by avoiding defect investigations and
obstructing government inquiries into safety concerns.

The Associated Press also states, "The new documents show the financial benefit of delay. In
the presentation, Toyota said a phase-in to new safety regulations for side airbags saved the
company $124 million and 50,000 man hours. Delaying a rule for tougher door locks saved
$11 million."

In a situation like this it is easy to see that something went wrong, but how can things go so
wrong. Toyota is a company that has a mantra of "kaizen," or continuous improvement.
Instead they somehow found a way to justify negotiating with the government to make their
problems disappear.

However, consumers have found themselves victims of a PR spin game in which Toyota
would recall a limited amount of vehicles at certain times of the year to avoid a massive
recall. At the same time, Toyota was producing new vehicles with known safety flaws and
advertising their vehicles to be the safest and highest quality vehicles on the road.

A further look into the documents reveals several other reports entitled "Wins for Toyota &
Industry," including "favorable recall outcomes," "secured safety rulemaking favorable to
Toyota" and "vehicles not in climate legislation." Another page lists "key safety issues,"
including "Sudden acceleration on ES/Camry, Tacoma, LS, etc."

What this goes to show is that Toyota conspired with NHTSA, the government department
responsible for crash test ratings, to falsely improve Toyota's safety record while hiding the
fact that NHTSA and the Department of Transportation were neither adequately staffed nor
compensated to deal with influx of safety concerns raised by consumers.

The larger problem with this scandal is that it has created a precedent for corruption and
unethical behavior when it comes to the safety of vehicles that so many of us use and depend

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upon everyday. We now have a situation, in which we must now question the validity of all
safety scores given out not only to Toyota vehicles but to all motor vehicles.

Every company that engineers and manufactures a product strives to save costs, so this
doesn't blow us away. What does shock us is how irresponsible and uncaring the U.S.
government that we employ to represent and serve us, continues to f*ck us over.

This problem is reminiscent of what tobacco companies did to smokers during the latter half
of the last century. Tell the consumer your product is safe, make them feel at ease while using
it, and derail the government and whistle-blowers who are trying to show just how dangerous
your product is.

Unethical Behavior of Toyota

There have been many academic studies done on Toyota and articles created based on these
studies. Toyota’s manufacturing plants back home in Japan resembles some of the worst
sweat shops in the world. Their operations have been described as "slavery" and "human
trafficking". Toyota has thousands of "karoshi" claims each year. This term means "over
worked to death". Their plants have very high suicide rates as well. And when an injury has
occurred to an employee, on the job they are layer off, and receive no compensation.

Toyota is well known for their union busting, which has destroyed many small countries all
around the world. Reducing the standards of living amongst the countries citizens.

There are already 1800 instances in the US where employees at the Kentucky plant have been
injured, fired, and they disappear from the compensation pay roll. This happens at a rate of
400 Americans per year working at Toyota. Toyota builds their plants in the poorest states to
take advantage of the lowest wages in the country. Many workers have been kept on as
temporary workers for over 4 years.

Their goal is to lower the average wages in America, and Honda seems to be backing them.
Toyota is one of the world’s most profitable corporations, yet the more profits they make, the
more they lower worker wages.

So essentially Toyota uses the cheapest materials, and the poorest workers to manufacture
them.

A Closer look at the Toyota’s “Sudden Acceleration” Problem

In light of a recent tragedy in which an off-duty CHP officer and three members of his family
were killed, many have raised questions about what the true cause may have been.

According to a recent article in the Los Angeles Times, there may be more to the story than
first explained by Toyota issued a statement pointing to the installation of an improper floor
mat from another vehicle, as we previously reported as the cause of the crash. Then just one
month after the crash involving the Saylor family, Toyota issued the largest call in company
history, affecting 3.8 million vehicles dating back to 2004.

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Yet some believe that the issue goes beyond the floor mats – and lands likely in what many
believe to be a flawed design with the highly computerized engine control system which
lacks a fail-safe mechanism for emergency situations. The need for a fail-safe mechanism is
being currently considered as a possible solution by Toyota, putting them in a position of
implicit agreement.

In addition to the attorneys of victims, survivors, press organizations, and Toyota considering
alternatives, there have also been nine different federal inquiries and investigations since
2000. Of the nine cases involving federal probing, only two cases pointed to the floor mats as
the definite cause. Of the remaining cases, five have dismissed Toyota of fault, one pointed to
a loose part, and one case is still open.

At the current time the only way to shut the vehicle off in a similar emergency would be to
follow the directions outlined within the owner’s manual, which reads, “If you have to make
an emergency stop, press and hold the ‘power’ switch for more than three seconds.” A Toyota
spokesperson points out that this will also disable power assisted steering and braking.

In a case such as Saylor’s where the owner is unfamiliar with the vehicle, relying on the
driver’s in-depth knowledge of the owner’s manual is not practical, pointing to the need for a
more obvious solution. Safety experts also pointed out the fact that modern brake-assist
systems operate with a vacuum powered assistance – a vacuum that is reduced or eliminated
under full throttle. The result is that considerable force on the brake pedal may result in
minimal stopping power.

To demonstrate the problem of relying on power-assisted brakes in the case of sudden and
uncontrollable acceleration, the attorney for Guadalupe Gomez explained the details of his
client’s case, “He [Gomez] was held hostage for 20 miles on a Bay Area freeway by a 2007
Camry traveling more than 100 mph. Gomez was unable to turn off the engine or shift into

neutral and then burned out his brakes before slamming into another car and killing that
driver.”

According to The National Highway Traffic Safety Administration there is still an open
investigation into sudden acceleration events involving Toyota vehicles.

Toyota Financing, Repossession & Unethical Auction

An acquaintance had his car repossessed after losing his job and not being able to keep up
with payments. He kept hoping that things pick up and he could start making his payments
again but then one day there was a pounding on his front door. A man had already hooked up
his car to a tow truck and was ready to cart it off but just wanted to give him his business card
“just in case”.

He told my friend that the car would be at a certain location for at least a month in case he
could catch up with his payments. A last ditch effort phone call to Toyota’s financial
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department to stop the repossession was in vain. They refused to take the last bit of money on
a credit card my friend had and off the car went.

Well not only did the car not remain at the location specified by Toyota’s tow truck driver
(some 50 miles away from my friend’s present location), it was transported 200 additional
miles away making it totally impossible for him to get it back.

Within a week and a half of the tow, Toyota sent him a letter informing him he would have to
pay all the back payments, plus “cleaning” costs, more magical fees and then they sprung it
on him that they moved the car to some city he had never heard of. They didn’t take the car
back to the dealer from whom he purchased it – 50 miles away, in a town where he used to
live. They didn’t keep the car at the location specified by the tower – in the county where he
was now living. They took it to never-never land! So even if he could catch up on his
payments, how on earth was he going to make the journey to the new location? He couldn’t.

The reason I say Toyota Motors financing department sucks is the manner in which they went
about auctioning off the car. They deliberately sold it for less than half it’s fair market value
and expected him to pay for their losses. That’s insane! The law usually understands the
concept of fair market value but apparently not in the case of a repossessed auto and how car
companies play the repo game. At least not in California. It’s unethical. And the law should
be changed to provide a measure of fairness to the poor chap who gets his car towed away.

I know you could argue that he was his own fault for not making his payments. Well it
wasn’t his fault that he lost his job because of the unethical actions of banks in creating this
crapping economy.

Toyota’s once Unbeatable Business Model

Shocking, yes? But no less shocking than Toyota, the world-class manufacturing quality
expert, recalling millions of cars across its product lines. Three generations after its founder
created Toyota on a philosophy that built quality into every step, it turns out that Toyota’s
quality has been steadily eroding.

Today, Toyota’s quality issues are deep and systemic.

After all, the company’s problems:

• Involve multiple components, vehicles and years of manufacture.

• Create dangerous safety issues – failing brakes and uncontrollable self-accelerating gas
pedals.
• Were surfaced years ago yet are leading to recalls only under regulatory pressure.
• May not have had the attention of top management until after all hell broke loose. (Toyota’s
CEO just recently committed to creating a senior level “quality committee” to look into the
problem.)
• May not yet be truly resolved. While the accelerator fix has been identified, it’s unclear
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whether there’s an electrical system glitch causing some uncontrolled accelerations.
• Are not being presented truthfully. Toyota’s leaders make false statements that put Toyota in
a better light, only to rescind these comments when a government agency points out the truth.

He winning value promise

Toyota’s compelling and unique value promise propelled Toyota to surpass GM as the
world’s largest automobile manufacturer: With Toyota, you can have comfort without
frustration, a welcomed relief in an industry formerly fraught with reliability issues from all
but Honda.

Leveraging its quality advantage, Toyota built a line of cars from economy to luxury that
reduced the frustration of car ownership (Lexus versus Mercedes/BMW and Camry versus
GM/Chrysler/Ford brands). Its brands also increased comfort compared to Honda’s reliable
line. The Prius extended Toyota’s brand promise into its hybrid engine cars.

The root cause of the Toyota’s quality problems

No one would expect 100% perfection on Toyota’s part. Suppliers and designs change,
materials have defects, etc. in manufacturing companies. But quality issues in multiple parts
and vehicles and a growing number of recalls over the years point to the deeper cause of
Toyota’s quality issues.

New automobile component technologies (more electronic and less mechanical) should have
led to new quality systems and far more careful attention to drivers’ experiences than Toyota
provided. Whether it was over-confidence in its historical quality systems or pressure to keep
production and profits rolling as demand grew, internal forces precluded a relentless drive to
fine-tune internal systems to Toyota’s value promise as technology changed.

This drive to align everything to the value promise while generating profitability – should be
front and center in any strategic leader’s agenda. Instead, Toyota maintained its brand
promise in external communications, but failed to align internal decisions with its value
promise.

Another piece of evidence that Toyota lost an internal focus on its value promise comes in
Toyota’s reactions to its quality issues. Toyota fixed new cars being produced without
recalling cars in the field, delayed communicating quality issues to customers and regulators
and made many misstatements to the public. Toyota’s historic value promise for sure didn’t
drive these decisions. Rather, Toyota’s reactions have raised frustration and reduced
perceived reliability of the Toyota brand, the opposite of its value promise.
The lesson

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Growth often destroys brands. As companies get larger, C-Suite leaders lose the pulse of the
business at the same time that communication channels to the C-Suite become convoluted or
blocked. Growth and profits become aims, while delivering on the value promise becomes
secondary or even forgotten. A disconnection arises – between what is promised and what is
then delivered that erodes brand equity.

Hopefully Toyota will learn the lesson that a business’ value promise must drive all internal
actions and decisions. It will take an incredible communicator to instill a singular focus on
the value promise all over again, a focus Toyota’s founder created and his son and grandson
lost. Meanwhile, Ford and Hyundai are driving their cars and messaging right through the
hole Toyota left in the market.

Do you regularly ask or hear in meetings, “What should we do in light of our value promise?”
If not, make sure everyone in your organization knows your company’s value promise and
get busy with alignment. Your Toyota moment may not be as public. But the lost reputation,
revenue and profits will nevertheless be substantiated.

Problem Solving Using the Toyota A3 Method

The idea is to solve problems as a team by looking at the symptoms, understanding the
business context, and identifying the root causes. You can grow or shrink the sheet to fit the
paper. The original technique uses ISO A3 because it is a good size to use in a workshop, then
later place on a team notice board.

The simple example in the spreadsheet is based on a real situation I encountered at the start of
2007. My objective this time was to explore layouts, shapes, and alignment. Please forgive
my choice of colors m no graphic artist. I hope you find the A3 technique useful.

The A3 system was originally created by the Toyota Motor Corporation and was named for
the paper size on which it was printed. Toyota used the A3 methodology to help develop its
famed Toyota Production System (TPS).

Steve includes both a blank template, and a fully completed example. The basic steps of the
A3 method is

1. Theme or Background (What should be happening?)

2. Current Condition (What is happening? and Context)
3. Cause Analysis (Symptoms and Causes)
4. Target Condition (Draw the solution)
5. Implementation Plan (Actions: Who, What, When, Where)

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6. Follow Up (How will you know when you have fixed the root cause?)

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