Following The Toyota Way, For Better Or Worse

Toyota worker Kunioshi Ishida i i

Toyota worker Kunioshi Ishida stands in front of his Toyota Ist, a model made only in Japan. Ishida, a Communist Party member, has prodded Toyota on workers' rights issues. Anthony Kuhn hide caption

itoggle caption Anthony Kuhn
Toyota worker Kunioshi Ishida

Toyota worker Kunioshi Ishida stands in front of his Toyota Ist, a model made only in Japan. Ishida, a Communist Party member, has prodded Toyota on workers' rights issues.

Anthony Kuhn

Rolling through the tidy streets of Toyota, Japan, in — what else? — a Toyota compact, Toyota worker Kunioshi Ishida points out the sights from behind the wheel. There's Toyota's glass and steel corporate headquarters. There's a Lexus dealership that looks ominously void of customers.

The city's name was officially changed from Koromo to Toyota City in 1959. The Toyota that Ishida drives is a model sold only in Japan, called the Ist, as in "Communist." Coincidentally, Ishida is a member of Japan's Communist Party.

On most days, Ishida stamps rolled steel into body parts for the Prius, Corolla and other models. But he's off today, he explains later, sitting in the local Communist Party office, as Toyota has mandated several nonproduction days every month this spring to keep inventories from piling up.

"At work, we've gone from two shifts to one," says Ishida, dressed in a long-sleeved white polo shirt. "We're getting less overtime pay. My income is down by $1,500 a month, and my $6,000 annual bonus is gone. For families with outstanding debt, this situation can be a big headache."

In contrast to GM and Chrysler, the Japanese carmaker has not yet laid off any full-time staff and has not sought government assistance. Efficiency and thrift have so far been the company's saving virtues, although some critics believe that Toyota has taken these qualities a bit too far.

Still, the company is going through its toughest times since its founding in 1937. After years of record profits and expansion, it lost $4.4 billion in the past fiscal year. Toyota announced earlier this month that it will cut both capital spending and dividends by a third. While lifetime employment has always been a key Toyota policy, it has had to cut around 9,000 temporary workers in recent months.

The Toyota Way

Many of these workers pack the main room at Toyota City's employment center, which bears the upbeat name "Hello Work." Around 80 percent of the city's residents work in the auto industry.

"New Year's and April are usually peak times for job-seekers, but since this New Year's, there's been nothing but peak," says Masami Kawajiri, the center's vice director. "The number of job-seekers is up by 250 percent, but job offers are down by 50 percent."

Not far away, robots greet visitors at the Toyota Kaikan Exhibition Hall. It's a place to sit inside the latest Toyota models and learn a thing about the Toyota Way: the company's philosophy of industrial efficiency.

One exhibit explains Toyota's "just in time" philosophy, in which sales drive production and inventories are kept low. A recorded narration explains: "'Just in Time' refers to manufacturing only what is needed, when it is needed and in the amount needed."

To really understand the Toyota Way, it helps to look at the company's origins. Before Toyota started making cars in the 1930s, it built automatic looms for the silk industry centered in the city of Nagoya.

One of the company's innovations was a loom that would stop immediately if a single thread broke. Tokyo-based Toyota spokesman Paul Nolasco explains that if a Toyota worker discovers a defect in a car, he is now required to stop the whole assembly line by pulling a string hanging overhead.

"The idea is to stop the problem at the source," he says. "In the case of producing vehicles, as soon as you stop the production there, you don't have to go tracking back to find out where something went wrong."

Thrift Or Stinginess?

Many analysts believe that Toyota's focus on making fuel-efficient cars will help the company emerge from the recession with a bigger market share. Nolasco says that the recession has not slowed the company's development of cars like the Prius.

"We plan in the early 2010s to be able to produce — to be able to sell — a minimum of 1 million hybrid vehicles a year," he says. "So with that in mind, we're laying that groundwork now. And we intend to be ready when the market picks up — we hope to be there, ready to roll."

The key to Toyota's survival in the near term is that, like a thrifty family, the company saves a lot of what it earns. According to its latest financial statement, its retained earnings total more than $115 billion. Toyota says that money is needed to keep the company operating — paying suppliers, financing car sales, etc.

But Ishida says that Toyota should have used its cash reserves to save temporary workers' jobs. He says that there's a fine line between thrift and stinginess, especially on some assembly lines, where workers race to assemble a car in less than 60 seconds.

"It's great that you can assemble a car in one minute and eliminate waste," he says. "For the company, it's an economically efficient way of making cars. But I understand Europeans get breaks. We, too, should have this humane touch in our system. You should at least have a second to wipe the sweat off your brow."

How tough the assembly line is depends in part on its creator. Shigenobu Matsubara has helped design assembly lines from Japan to Georgetown, Ky., which has the biggest in the United States. He says he has always designed the lines with the workers' welfare in mind.

"The workers liked me for this," he says. "But there are other ways of applying the Toyota Way. Some Toyota designers and engineers treat the workers as disposable, just like a machine. They give them big burdens and try to extract the maximum from them."

'You're Not Allowed To Cut Corners'

Toyota's corporate culture is surely one of Japan's strongest, and Ishida says he's never felt comfortable with what he considers the company's overbearing paternalism. He says that Toyota basically asks employees to leave Japan's constitution outside the company's fences.

Toyota "educates the workers a way that's quite special, even insane," says retired Toyota worker Shunichi Sakae. "I've always been impressed by the fact that workers talk about it like it's a normal thing, but it's not," he continues. "For example, when walking down the corridor from one office to another, you're supposed to turn at right angles. You're not allowed to cut corners."

Koji Endo, an auto industry analyst with Credit Suisse in Tokyo, describes Toyota's culture as "very ... disciplined and family-like, and whatever the other guy does, we have to follow. That's the kind of Toyota Way. That's probably one of the things that made Toyota very successful, but at the same time, for some people, does not look really so healthy."

As for Ishida, he is now just weeks short of retirement, and he's frank about his feelings toward his employer.

"Sure, I've criticized this company," he muses. "But this is where I got married, raised my children and spent my working life. I'm thankful to the company and thankful to myself for not giving up."

In a possible preview of his retirement, Ishida says he's been using his recent days off tending his garden and growing vegetables.

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