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Toyota president Akio Toyoda bows at the start of a news conference in Nagoya in February (KIM KYUNG-HOON/KIM KYUNG-HOON/REUTERS)
Toyota president Akio Toyoda bows at the start of a news conference in Nagoya in February (KIM KYUNG-HOON/KIM KYUNG-HOON/REUTERS)

Toyota: Too big, too fast Add to ...

As a management guru-in-training, U.S. business lecturer Steven Spear embarked on pilgrimages to a shrine of industrial efficiency about 320 kilometres west of Tokyo.

His destination was Toyota City, an industrial centre of 400,000 dominated by its major employer, Toyota Motor Corp. From this base, the car company had spawned an industrial revolution - as well as rewriting the vocabulary of business to encompass terms like just-in-time, total quality and lean manufacturing.

As he observed the company up close, something nagged at Mr. Spear. Toyota had pledged in the late 1990s to become the biggest car company in the world. It embarked on extraordinary growth, spawning new models, entering new regions and enlisting new suppliers outside its traditional family.

But as it grew, its old system of mentorship broke down, Mr. Spear says, and the culture of quality was not extending to outposts far from Toyota City. While he admired Toyota and spent much of his career studying it, Mr. Spear sometimes worried the company was an accident waiting to happen.

"Capabilities are the source of their competitive advantage, and the gap between business growth and capability growth is the source of their vulnerability," says Mr. Spear, now an author and lecturer at the Massachusetts Institute of Technology.

That became jarringly clear over the past month, as Toyota careened from crisis to crisis, dealing with unsafe, defective parts and ordering the recall of 4.8 million vehicles. It led Friday to an abject apology by Toyota CEO Akio Toyoda, grandson of the car company's founder, who also announced the creation of a new quality committee led by himself -confirmation that there is, indeed, trouble in Toyota City.

"We are now sadly seeing that the capacity for developing people can be overstretched," Mr. Spear says. "It was not recognizing this, and succumbing to the temptation to make growth its first priority, that led to Toyota's current problems."

Mr. Spear, author of Chasing the Rabbit , a book that lauds Toyota as a "high-velocity company," displays the ruefulness typical of academics and consultants who have followed the company like rock-star groupies. The threat is not just to Toyota's once-vaunted reputation, but to the resilience of their future and existing book titles. If the era of Toyota supremacy is truly over, so go the themes that launched a million Power Points.

Asked if he is feeling a bit like a lover spurned, Mr. Spear says: "It's more like having a friend who you see stumbling and you feel bad for them."

In fact, the rapid growth that finally took Toyota to the top of the global car market, supplanting General Motors Corp. in 2008, proved to be its undoing. Toyota's expansion undermined the precise skills learned as an underdog on the way up - an unbending devotion to quality while competing on speed and cost.

"Any company knows that growth is sometimes their worst enemy. All your systems get stressed, and it happens from a financial and production perspective," says Chris Piper, a management professor at the Ivey School of Business at the University of Western Ontario

The sad fact is that Toyota appears to have seen the accident happening in slow motion. Its new president Mr. Toyoda signalled this awareness when, after taking office last June, he emphasized that quality would have to be rebuilt. "No one was prescient enough to say, 'Oh, it will be accelerator pedals in January, 2010,'" Mr. Spear says. "But they were aware enough that something was going to go wrong. It wasn't just clear what it was going to be."

While confidence is shaken, it has not entirely dissipated because Toyota's supply chain has displayed its customary ability to respond. The company is not paralyzed by denial, and has taken concrete action to shut down production of the affected models.

But while Toyota remains efficient as a production machine, it is clumsy and isolated in its communications, with defensive responses coming out in dribs and drabs as crises break out daily. While it is the most worldly company in design and production, so much of its culture is still locked in the corridors of Toyota City, which is both its strength and its weakness.

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  • Toyota Motor Corp
  • Updated June 21 4:02 PM EDT. Delayed by at least 15 minutes.

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