economics

February 27, 2010

Toyota’s philosophical flaw

Filed under: Uncategorized — ktetaichinh @ 4:48 am
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Writing From Tokyo – Toyota has built a strong presence in the United States by serving its consumers well and doing what the U.S. government has wanted. Now it has stumbled badly largely because its greatest strength — the Toyota way of “accumulation of small improvements,” or kaizenkaizen philosophy — has turned out to be a weakness in the age of complex electronic engines.

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 trust and reputation for competence among its customers. That would be bad for Toyota, and for America.

Most auto companies in the past, including Ford and GM, have had recall problems. They all seem to try to hide the early evidence of flaws, even if they affect safety. Recall General Motors’ Chevrolet Corvair and consumer advocate Ralph Nader’s “Unsafe at Any Speed” campaign against it in the 1960s.

Today, however, with 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, 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% of a modern automobile is electronics. Toyota is the canary in the coal mine, so to speak, because it is the world’s largest manufacturer of cars, with more than 50 plants around the globe outside of Japan. Toyota 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 concept of kaizen — continuous improvements — that has made Toyota such a high-quality brand worldwide. This company has so perfected the practice of kaizen from the assembly line on up that it has lost the big picture of how the whole electronic engine — and thus overall safety — works.

If Toyota does not recognize this and tries to chalk up all of its problems to floor mats touching the accelerator or a computer glitch, 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 on diagnosing the function of many thousands of pieces of an electronic engine.

What this company is missing is the human factor — a single person who has a comprehensive understanding of the details of the engine and how the parts interact and work as a whole.

In the old days, one chief engineer designed everything. This was also true with ships and airplanes. Now, design and production are broken down into so many details that there is no one in the current generation of Toyota engineers who seems to have the whole picture. A 45-year-old engineer at Toyota today would have spent the last 25 years working on “the accumulation of small improvements.”

What this suggests is that Toyota has to come up with a new organizational ethos beyond kaizen that can oversee the crucial safety features that may have been compromised by so much incremental improvement over the years. This is a philosophical problem of management, not a technical issue. A new system of “man and machine interface” needs to supplement the kaizen philosophy.

I believe Toyota can meet this challenge. The challenge I fear it will fail to meet is the psychological one, enveloped as the company’s leaders seem to be in a sense of panic at being attacked politically and in the media in their most lucrative market, the United States.

For the modest and taciturn Akio Toyoda, whose English is only passable and who has difficulty finding the right words, to testify in front of the U.S. Congress invites the wrong impression: There is such a clash between aggressive American political and media culture and reserved Japanese ways.

As America brings Toyota to account on safety, it must also put the company in the right perspective. Toyota has also always done what the American market and politicians demanded without losing quality or productivity. The U.S. asked Toyota to come to the U.S. to produce cars instead of export them from Japan, and use up to 50% local content.

Today, 2.5 million cars are produced annually in the U.S. at several plants; this has created thousands of jobs. Toyota’s annual spending on parts, goods and services from hundreds of U.S. suppliers totals more than $22 billion. Ninety-five Japanese component companies were transplanted from Japan to supply Toyota through its “just in time” manufacturing process, building a supply network along the Mississippi Valley that didn’t exist before.

Toyota is on the hot seat today. But everyone should understand that the issue at hand is the trade-off between complexity and safety in an age in which electronics and computers dominate the vehicles we all use on a daily basis.

Kenichi Ohmae is a prominent management consultant in Japan and the author of numerous books, including “The Mind of the Strategist” and “The Borderless World.” His comments are adapted from an interview with Global Viewpoint Network editor Nathan Gardels.

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