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Car Crash

One of the few podcasts I subscribe to is Peter Day’s World of Business, which combines broadcast episodes of both BBC Radio 4’s In Business and the BBC World Service’s Global Business.  The programmes are usually presented for a general audience, and cover a wide range of subjects, but surprisingly often episodes are relevant to the IT industry.   Sometimes an episode is interesting and relevant enough to my work that I make some notes on it.  Here is a set of notes from an episode broadcast earlier this year.

This subject of this particular episode is the automotive industry.  This is one of the few industries that many people can relate to, both because it is high profile and often in the news, and also because most of us own a car.  It is one that I follow because my employer has a lot of business in that sector, and I have spent several years working on systems for one of the major car manufacturers. 

This episode was first broadcast on Global Business on 5 May 2009; it should be available in the archive of past episodes if you want to listen to it.

Notes on the Programme

The first part of the programme was an interview with an expert observer James Womack, founder of the Lean Enterprise Institute, who gave a quick overview of how the US Automotive industry had come to the point where it was in trouble.  I thought his key point was the way the “Big Three” had responded to the threat from Japan by failing to compete with them during the 1960s.  Noting that Japanese cars tended to be physically smaller than the home-grown models, they effectively abdicated that part of the market by concentrating on producing larger “American” cars.  Of course this was shown to be short-sighted when the oil crisis of 1973-4 arrived, when suddenly consumers wanted smaller, more economical cars.

Also interesting was how General Motors’ response to finding itself in a dominant position had been to set its prices to maintain a 50% market share, and no more, to avoid anti-competition trust action.  Chrysler in particular was weak, but was able to survive while there was no meaningful competition from abroad.

The second part of the programme looked at Toyota, and interleaved parts of an interview with Chairman Fujio Cho on what made it so successful (until then!) with further commentary from Womack on their very different approach.  Until about 12 years ago, Toyota used to design cars for the Japanese market, and then market the same model around the world.  This changed so that today models are tailored to suit local tastes and now the Corolla has 12 or 13 variants.  At the same time Toyota has established itself around the world as a series of local entities.

Cho also outlined the three main ingredients of Toyota’s success, a philosophy which needs to be truly grasped by top level management of each company.

 1. The whole company has to become one and move together, including suppliers. 

2.  Avoidance of over-production is built into the whole mechanism 

3.  Each issue is made visible to and tackled by each and every worker. 

Of course, he also said that it wasn’t easy for other companies to copy.

James Womack further commented that the people who run Toyota want to be the best, and are obsessed about not losing their edge – there is constant self assessment and self-criticism.  By comparison, managers in Detroit have rarely reflected, and when they have they haven’t turned it into purposive effective action.  Toyota’s is a fundamentally different way of thinking about management which is not even typically Japanese – it really is especially Toyota.  It’s not just about narrow techniques (which are easy to copy) but requires a fundamental change of mindset by management.

In the final segment of the programme John Wormald, of automotive consultancy Autopolis, looked at whether Toyota had taken its eye off the ball on reaching its international Number 1 spot, in allowing Volkswagen to knock it off again immediately.  This was partly because VW had put a lot of effort into China, whereas Toyota (like other Japanese manufacturers) was quite heavily exposed to the US Market, where they had previously made a lot of money, in a way the European manufacturers weren’t.  The Toyota method is not failing at all – Wormald’s view is that if anything the downturn may strengthen Toyota because it will hone its processes even more.

A final thought tossed in towards the end – it is interesting that 1 versus 2 is Europe versus Asia, with the USA out of the picture altogether.


I found the quick gallop through the American automotive industry very interesting.  It is easy to see why the “Big Three” have struggled over the last couple of decades, after such a long period when they were unchallenged in their home market.  Clearly successive managers were enormously complacent, ducking the real issues when they had a chance to do something about it (much easier to see with hindsight, of course).   I would be interested to see the relative salaries of Ford/GM and Toyota executives; I spent some time looking but couldn’t find it in a digestible format – but I bet Toyota paid much less than the others.

At the same time it is ironic that Toyota was being held up as the example of how to run a company successfully, while it was running up the largest loss in its history.  It will be interesting to see how quickly it is turned round in the years ahead. 

My other thought about Toyota, given its constant focus on performance, is this – on the occasions when I have hired a car on holiday and by chance it has been a Toyota, each time I have found it, well, underwhelming.  OK, nothing really wrong with it, but I wouldn’t buy one.  Yet they are market leaders around the world so must be doing something right!

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