VitalAccurateThinking

Toyota and GM

Today, Toyota announced:

a 39 percent jump in profit in its fiscal first quarter, with strong vehicle sales around the world keeping the company on a pace to possibly overtake General Motors as the world's No. 1 automaker in coming years.

Contrast that with the world's number one auto maker:

General Motors Corp., the world's largest automaker, reported a second-quarter loss because of a $3.7 billion charge to eliminate 34,400 jobs. GM's profit from operations exceeded analysts' estimates, sending shares to a 10- month high.

To me, it is only a matter of time before GM is bankrupt and Toyota becomes number one. In my view, Toyota is the number one manufacturer in the world, bar none. They are the best-run production company in the world. And here is why:

While no one questions whether or not Toyota Motor Company will have any problem achieving the second, the automaker is already a tightly run ship. Nevertheless, about 300 of its most creative engineers have figured out how to cut build costs of its popular 3.5-liter engine, by a significant margin.

...small increments of efficiency gains wouldn't be good enough for Toyotas Executive Vice President Kosuke Shiramizu, mind you, who announced a new goal of reducing production costs by 50 percent to foundry workers at the Bodine Aluminum Troy, Missouri engine facility back in 2003.

A new technology was being developed for pouring molten aluminum into molds for engine components, resulting in new equipment that made up Toyotas new cost-cutting program dubbed Simple Slim. Basically, Simple Slim lets Toyota use smaller, cheaper molds to produce engine parts, and the system was easily implemented into its U.S. foundries as well as those in Japan and China. Another reason the new engine is cheaper to produce is that it uses less aluminum, an expensive metal, than the current version. The new aluminum block weighs 55 pounds less than the 3.3-liter engine, a 27 percent reduction in overall mass. Another improvement to the new 3.5 includes a redesigned cylinder head that needs fewer honeycomb-like fuel and air passageways.

Toyota cut the manufacturing cost of the Camry engine in HALF. That is 50% folks. GM and Ford can only dream of a 5% decrease. They don't even fantasize about a 50% decrease and yet Toyota did it. This is why GM and Ford do not stand a chance. Toyota knows it, but GM and Ford don't. Toyota pretty much told Honda and the other Japanese car manufacturers, "don't lower your prices and destroy GM."

Japan's car makers should consider giving their US rivals a breathing space to avoid the risk of a political backlash, the boss of Toyota has said.

Japanese car makers have taken nearly one third of the US market. Last week, General Motors posted a quarterly loss of $1.1bn, and Ford's profits fell.

By contrast, Nissan had record profits, and Honda's net profit rose 27%.

"We need to give time for some American companies to take a breath," said Toyota Motor chairman Hiroshi Okuda.

When your competitor says this, you are done. It is over. In Lance Armstrong talk, you have cracked and he is going to kick your butt up and down the mountain. They only reason Toyota does not crush GM is the specter of protectionist tactics by the US government. That is why there is talk of an alliance. Toyota does not needed it except to avoid protectionism. That is the only reason to pursue such a strategy.

Don't get me wrong, I am not picking on GM and Ford. Both of those companies made their choices to adopt management practices that basically destroyed their companies. Instead of choosing empowering their employees and implementing Total Quality Manufacturing techniques, they chose to embrace big, top down, totalitarian management. GM had a chance in 1984 to learn from Toyota when they joint ventured in California.

Ironically, Toyota got its first foothold in the US through a joint venture known as "NUMMI" with GM to build Toyota products in California. The joint venture began in 1984 when the US created an import tariff on foreign pickup trucks. The joint venture with GM allowed Toyota to avoid the tariff and build up a base in the U.S. NUMMI is still an active venture that currently produces the Toyota Tacoma, Toyota Corolla and the Pontiac Vibe lines of vehicles.

The PBS does not even tell a fraction of the NUMMI story. GM's California plant was the worst of any GM plant in the world. They had the highest costs, most defects and most labor strife. Toyota took over the plant and implemented the "Toyota Way". This totally turned around the plant and made it into the most efficient of all GM plants. In fact, it is still in operation today. GM never learned the lessons of NUMMI nor used any of the techniques at all their other plants. And for that, they doomed GM to mediocrity at best and bankruptcy eventually.

And the shame of it all is that in the post-WWII time period, it was people like Dr. Deming who introduced Total Quality Manufacturing techniques to the Japanese. In the US, it was Bill Creech who was the TQM pioneer. Alas, most of the US manufacturing industry ignored Deming and Creech which cast the mold for the Japanese takeover of cars, electronics and computer manufacturing.

It really is a shame, because the American worker has shown that they can compete with the Japanese. When Toyota and Honda open plants in the US with Americans, they can get within a few percentage points of their Japanese counterparts in all critical manufacturing categories. In fact, whereverer in the world Toyota operates, they can train the local populations to be within four or five percent of the Japanese plants. Therefore, I conclude that the decline of US manufacturing is a result of management, not workers. Failure to fully adopt and embrace TQM in favor of top-down bureaucracies was the fatal flaw of American manufacturing.

We are seeing the fruits of those decisions. How much money did GM lose again? How many are they laying off? What a tragedy.

Update: ack! Of course it is Deming not Denning

posted by Jim VAT @ 8:10 PM