New strategy: Design enhancements and flexible assembly lines geared to demand fluctuations

Toyota going for looks, lean output


Having drawn lessons from a series of predicaments since the 2008 global economic crisis, Toyota Motor Corp. is focusing on lowering production costs worldwide and improving its competitiveness in design as overseas competition builds.

“We are finally getting out of the long tunnel after the Lehman shock,” Akio Toyoda, president of the automaker, told some 230 graduates of the Toyota Technical Skills Academy in February, a training institute within the group.

But Toyoda has been repeatedly warning against complacency even after ascending to the world’s top position in new vehicle sales in 2012.

In 2008, Toyota finally surpassed General Motors Co. in sales to become the world’s top seller for the first time. Its reign was short-lived.

Sales plunged after a global economic slowdown was triggered by the collapse of the Lehman Brothers Holdings Inc. later that year. Toyoda, a scion of the automaker’s founding family, then had to deal with a massive recall in the United States shortly after taking the presidency in June 2009.

The company’s hardships were compounded by natural disasters. The March 2011 earthquake and tsunami devastated the Tohoku region and disrupted its supply chain, while massive flooding in Thailand three months later severely damaged parts suppliers, prolonging the production cutbacks.

Japan’s auto industry continued to face a difficult business climate in 2012. The yen’s rise to a postwar high against the dollar, in addition to political demonstrations and an ensuing boycott of Japanese products in China triggered by a sovereignty dispute, further pressured Toyota’s business.

Still, the Toyota group, including carmaker Daihatsu Motor Co. and truck-making unit Hino Motors Ltd., took advantage of improved sales in North America and Asia to boost global sales to a record 9.75 million units in 2012.

At home, its Aqua compact hybrid — made in disaster-hit Iwate Prefecture — saw robust demand.

Toyoda views the ongoing improvement measures as key to making the automaker resilient to changes in market conditions and capable of sustaining growth when it faces challenges from GM and Volkswagen AG of Germany, which are stronger in China and South America.

South Korea’s Hyundai Motor Co. is also catching up fast with strategies that include recruiting designers from European manufacturers.

Toyota will spare no effort to improve quality and profitability “without getting carried away” with the new sales record, Toyoda said.

The automaker now strives to adopt advanced technology that enables it to manufacture a relatively small number of vehicles cost efficiently. It has developed an assembly line whose size can be adjusted corresponding to demand fluctuations, to help control fixed costs. Such a line has already become operational in some factories in the United States.

When the Lehman shock hit the global auto markets hard, Toyota’s aggressive expansion of production lines backfired as output falls magnified the burden of fixed costs.

While the automaker is expanding sales in emerging markets, it plans no new plant construction over the next three years, except those already announced for Thailand and Indonesia.

Instead, the company aims to “make the most out of existing plants and facilities to control fixed costs,” Executive Director Takahiko Ichiji said recently.

As for product development, Toyota’s move to put more emphasis on car exterior design is evident in new models.

In December, Toyota launched a fully remodeled Crown sedan, the company’s long-running model targeted at conservative customers and corporate users. Featuring a larger front grille than that of the previous model to give it a more aggressive look, the sedan mainly sold in the Japanese market is regarded by the Toyota chief as “the symbol of Toyota being reborn.”

Hoping to transform the model’s conservative image, Toyota also offers the model in pink, among other colors.

“It’s been said Toyota cars lack character. Our rivals have strong vehicle designs. We’d like to make the design of the front section, which catches people’s eyes the most, distinctive,” said Tokuo Fukuichi, the company’s design chief.

Toyoda, who has experience participating as a driver in the 24 Hours Nurburgring endurance race in Germany, plans to play an active role in developing new models.

“We’ll make better, more attractive vehicles. Japanese are capable of doing that. I want to keep up the challenge in the global market,” Toyoda said.