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How even the mightiest can sometimes succumb to their own success

by David Mcneill

Special To The Japan Times

Toyota was famously slow to respond to the glut of claims of sudden acceleration problems afflicting some of its vehicles — at least until a now-notorious recording of an emergency 911 call made from one of the passengers stuck in 45-year-old California Highway Patrolman Mark Saylor’s speeding Lexus on Aug. 28, 2009.

“We’re doing 120 (mph [193 kph]). We’re in trouble … we can’t … there’s no brakes,” said the caller, moments before the car crashed at a San Diego intersection and burst into flames, killing everyone inside — Saylor, his wife, daughter and brother-in-law.

The distress call, repeatedly aired on network TV and posted on YouTube, triggered a very public media trial of the Japanese carmaker.

Four years later, and after one of the worst periods in the company’s 75-year history, Toyota is back. It posted quarterly profits in March of ¥314 billion, its best financial showing in five years. Sales in America, its biggest export market, have rebounded. Last year, the company produced 9.75 million vehicles — half a million more than chief rival General Motors, making it again the world’s No. 1 carmaker.

Meanwhile, in 2010 Toyota quietly settled a compensation suit with Saylor’s family on condition that it accepted no liability.

Despite a string of looming lawsuits and continuing questions about the safety of its in-car electronics, the crisis that some thought might knock Toyota from its perch seems to have passed — to much relief in the city of Toyota, Aichi Prefecture.

Fortunes in this city of 420,000 people rise and fall on the back of Toyota’s balance sheet. About 80 percent of the local workforce are said to depend directly or indirectly on the company’s seven factories in the area and its thousands of subsidiaries and suppliers.

Toyota Motor Corporation is largely responsible for one of the lowest regional unemployment rates in Japan, and one of its busiest hubs: Goods passing through nearby Nagoya Port have for years accounted for around half the country’s trade surplus — while in 1959 residents of Koromo opted to permanently change the city’s name to Toyota. There, Toyota’s museum proudly notes the company’s phenomenal two-decade expansion, pointing out that it now makes vehicles in “26 countries and regions around the world.” However, cars are just part of a growing multinational portfolio that includes homes, boats, industrial robots, biotechnology and financial services.

Many folk there believed the U.S. safety crisis was overhyped — a claim backed in Japan’s mass-selling weekly magazines. “America is at war with Toyota,” screamed Shukan Shincho in 2009. Many Japanese commentators accused U.S. newspapers and TV of playing up Toyota’s problems for political effect. “Behind this story is the collapse of General Motors,” said Shukan Shincho, bitterly criticizing the media feeding frenzy against Toyota — a company that employs 200,000 American workers.

But Toyota itself has learned a lesson, says John Harris, a Japan-based communications consultant to the car industry, declaring, “It was a wakeup call and by all accounts they have woken up.”

He says the company has been quietly devolving power from its Japanese heartland to America and Europe, a strategy announced in March 2011, promising more “local initiative in management.”

For his part, Toyota President Akio Toyoda insists the company is leaner, more nimble and transparent.

Harris believes Toyota grew too big too fast, and lost control over its key selling point: quality.

“In manufacturing, you can have good, quick and cheap, but you can’t have all three,” he notes. “Toyota tried to have all three. They were cutting costs faster and harder than other car companies, while bringing in new plant and people. Expansion and cost-cutting puts a strain on any organization. Something was bound to give.”

Employees say Toyota’s enthusiasm for cutting costs grew after the shock waves from September 2008′s collapse of U.S. financial giant Lehman Brothers hit in 2009. Consequently, production lines were shut down and contract workers, including many from abroad, were sacked, leaving a pared-down workforce of full-time employees.

However, many analysts concur in believing that the pressures of globalization and the company’s determination to overtake General Motors eroded the very qualities that helped make it successful: the efficiency and loyalty of its suppliers and the thousands of smaller companies that labor in its shadow.

Stories of how Toyota relentlessly drove its suppliers to cut prices, in some cases even putting them out of business, grew around the company’s heartland.

One supplier, Sankyo Seiko in the industrial town of Kariya in central Aichi Prefecture, did the unthinkable in 2010 when its owner, Teruo Moewaki, went on TV to publicly say he would no longer take orders from the car giant.

“Toyota said we were all one big family,” he told The New York Times. “But now they are betraying us.”

The 2009-11 economic crisis that afflicted much of the world sent a shiver of fear through the city of Toyota as many feared their and its best days may have gone.

Perhaps the carmaker’s quality issues are emblematic of the entire country’s declining fortunes, and the fraying of the social contract that sustained postwar Japanese capitalism. “We started with nothing after the war and fought hard to get to the top,” a small shopkeeper in the city told me in 2010. “People seem to be forgetting that struggle today and are letting things slip.”

Nonetheless, pride in the achievements of the company with which that city is synonymous is still strong. Crime is low, the streets are pristine and few shops have visibly shuttered. Unlike the hucksterism of its Detroit rival, General Motors, the atmosphere is low-key: Toyota Motors’ headquarters squats in the center of a sprawling complex of nondescript factories and office blocks, its tiny logo barely visible in the orderly urban landscape that has grown around it.

The carmaker seems to have heeded the advice of experts who warned after 2009 that it had to move back to basics — shifting from expansion back to maintaining quality.

Toyoda, the company’s president, said this year that growth must be slow and sustainable. “We have to keep improving, getting better and better, not taking for granted that we have recovered,” he said.

Whatever happens, however, Toyota has “lost something” says Harris. “It used to have this godlike reputation for quality. But now it has shown that it has feet of clay.”