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Global Viewpoint

The Toyota problem: Where the car giant went wrong

The Toyota problem is a philosophical problem of management, not a technical issue.

By Kenichi Ohmae / February 24, 2010


Over the past few decades, Toyota has built a strong presence in the United States by serving its consumers well and doing what the US government has wanted. Now, it has stumbled badly, largely because its greatest strength – the Toyota way of “accumulation of small improvements,” or kaizen philosophy – has turned out to be a weakness in the age of complex electronic engines.

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There is every reason to believe Toyota will fix its technical and management problems. The question is whether, panicking in the very un-Japanese glare of the American media and political spotlight, it will dig a deeper hole by losing the air of trust and reputation for competence among customers it has spent so long building up. That would be bad for Toyota and for America.

Most auto companies in the past, including Ford and GM, have had recall problems like Toyota. They all seem to try to hide the early evidence of flaws, even if they affect safety. This goes back to the American consumer advocate Ralph Nader’s “unsafe at any speed” campaign in the US in 1965 that involved the Chevrolet Corvair produced by GM.

Today, however, with the electronic programming of cars, many of the problems emerging – such as the braking system of the Prius – are of a new nature. They are judgmental engineering calls. If they can be corrected by readjusting the setting on recalled cars, then Toyota can handle that quickly.

But what we are seeing may be a more fundamental problem that has to do with the engine control unit as a whole. In an average Toyota, there are about 24,000 inputs and outputs, with as many as 70 computer chips processing information and sending it on to other chips to operate the engine control units. It is a very complex system.

Such complex systems are a problem these days for all auto manufacturers – Germans and Americans as well as Japanese – because about 60 percent of a modern automobile is electronics. Toyota is the canary in the coal mine, so to speak, since it is the world’s largest manufacturer of cars, with more than 50 plants across the globe outside Japan. Toyota has been expanding so rapidly it has more models on the road than any other carmaker.

What we see with Toyota in particular is that this new electronic complexity has overwhelmed its famous concept of kaizen – the accumulation of small improvements – that has made Toyota such a quality brand worldwide. This company has so perfected the practice of kaizen from the bottom up at the assembly line that it has lost the big picture of how the whole electronic engine – and thus overall safety – works.

This is a limitation of the kaizen philosophy that has helped Japan become the headquarters of quality manufacturing.

If Toyota does not recognize this and tries to chalk all its problems up to floor mats touching the accelerator, or resetting a computer, it will miss the real issue. Where Toyota has failed is that rather than review the overall safety of the engine operating unit, it has focused instead on diagnosing the function of many thousands of pieces of an electronic engine.