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Toyota and the art of staying ahead of the Covid curve

Murali Gopalan | Updated on May 14, 2020 Published on May 14, 2020

Akio Toyoda, Chairman, Toyota Motor Corporation   -  REUTERS

Chairman Akio Toyoda believes crises have helped the Japanese automaker emerge stronger over the years

It was at the financial results meeting in Japan earlier this week that Akio Toyoda, Chairman of Toyota Motor Corporation, referred to a letter he had received from a “certain person”.

The contents were profound. “While taking a walk around a pond, I saw birds, turtles, fish and the like scurrying about. All living creatures other than human beings are going about life as before. Only human beings are running about in confusion.”

From the letter writer’s point of view, this was perhaps a good opportunity to change “our perception of the world being a theatre in which human beings play the leading role”. It was an observation that the Toyota Chairman could empathise with.

Clearly, Covid-19 has mankind on the mat as people desperately grapple for an answer to feel liberated once again. According to Toyoda, the crisis made him ponder how “we, as human beings and as companies, should live our lives”.

Beyond this, he continued, it was a reminder to appreciate the efforts of “all the people on the front lines of the medical sector” as well as for those supporting everyday routines.

“When what we take for granted ceases to be a matter of course, we notice that nothing is a matter of course and that we have things, thanks to someone somewhere working hard,” said Toyoda. It was his conviction that the need of the hour was to create a relationship in which people can say thank you to each other and “thank the Earth”.

Likewise, he added, companies and people need to think seriously about how to live and then change what they are doing. “It could be that we have all been given a great chance. And that chance might be the last one,” said Toyoda.

It was in this context that he spoke of Toyota being a global monozukuri company. This Japanese term is a synonym for ‘manufacturing/craftsmanship’, or the act of making. In this context, he said it was vital to “cultivate Toyota people in the world who can wish for and take action for the happiness of those other than themselves”.

Foundation of monozukuri

According to Toyoda, making better products at a lower cost is the foundation of monozukuri. There is, however, another element to this term: ‘making things means making people.’ As the Toyota Chairman reiterated, people are not costs but the source of continuous improvement and a driving force for the growth and development of monozukuri.

For instance, as Covid-19 infections spread, many monozukuri companies have started to produce medical face shields and protective gowns, as well as masks and other items. “We, too, are making medical face shields in the US using 3D printers, and have extended such efforts to other parts of the world,” said Toyoda. Additionally, when it comes to items that the automaker cannot produce on its own, such as ventilators, it is providing support by applying the principle of TPS (Toyota Production System) to improve productivity.

“I believe we can do these things because we have insisted on having a system for domestic production of three million vehicles, and because we have preserved monozukuri in Japan,” said Toyoda. To put this in perspective, Toyota plants in Japan have served as mother plants that support its global production. To that extent its domestic production system is the “foundation for a global Toyota”. Yet, warned its Chairman, this was not something that could be simply left to fate or taken for granted.

“Based on our conviction that we need monozukuri and a place to hone competitiveness that can drive global production in Japan, we have held fast at all costs to protect our domestic production (to three million vehicles) no matter how severe the economic environment has been,” he explained.

This was done not only to protect Toyota but also the “enormous related supply chains” and the jobs of the people involved. It also included the fundamental technologies of Japan's automotive industry and the human resources who have the skills to support such technologies.

Beyond the sacrosanct figure of three million vehicles, what the company has also been continuing to protect are its people who have “acquired the techniques and skills that enable them to make what is necessary when the world needs it”.

Toyoda said it was a matter of pride that the automaker had been continuing to protect in Japan places in which such human resources can work and be cultivated. “Even as we are now facing the Covid-19 crisis, there is not the slightest bit of distortion or wavering in this belief,” he added.

However, he pointed out that to continue to protect a certain thing and to keep doing “what we are doing” was by no means easy. “I sense that there seems to be much talk about a V-shaped turnaround. Sacrificing employment... sacrificing domestic monozukuri... by deciding to stop various things, an individual company can turn its results around,” cautioned Toyoda.

Protecting human resources

It also bothered him that far from “being criticised”, such action often seems to be praised. “That's not right. Regardless of how big or how small they might be, there are many companies in Japan that have clenched their jaws and protected their human resources who had techniques and skills,” he said.

This was being done no matter how tough times were or precisely because times were tough. “I believe that now is exactly the time when we need a society that can support such companies,” said Toyoda. Since the time he took charge as Chairman in 2009, he has seen Toyota up against numerous challenges like the global financial crisis, the recall crisis, the Great East Japan Earthquake, flooding in Thailand, and the “so-called six hardships" in Japan, including an ultrahigh yen.

While overcoming each of them successfully and rebooting its priorities in the process, the Japanese automaker has emerged stronger.

Yet, the risk lay in being complacent and Toyoda recalled the time when he was once asked if the company faced any challenges.

“The fact that there is a sense within that Toyota is doing fine,” he replied. In his view, there was a causal feeling that all was well and this is what led him to take an “intentional pause”.

The idea was to engage in both “a fight to bring back what makes us Toyota” and redesign it for the future.

It was during this period that various measures were initiated to “fundamentally revise” the executive and organisational structure. This included the introduction of an in-house company system, establishment of the ‘Seven Samurai’ (the president and six executive vice-presidents) and discontinuance of the post of executive vice-president.

In this period of “profound transformation”, Toyoda also decided to address “hitherto common practices” such as raising base wages and implementing uniform wage increases. Each time such a reform was carried out, he recalled people say: ‘You don't have to go that far.’

The fear was that the Chairman was over-instilling a sense of crisis in others. “Even so, I have continued on because I want to be able to pass the baton to the next generation in a way that I consider ideal,” said Toyoda.

According to him, the notion of ‘bringing back what it is that makes us Toyota’ was tantamount to spending time on the past. “I want my generation to be the last to spend time on the past. I want the next generation to be able to spend time on the future,” he reiterated.

Published on May 14, 2020

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