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Saturday, Feb. 4, 2006

How to get ahead in car building

Continued from Page 1

Toyota founder Kiichiro Toyoda was the son of prominent inventor Sakichi Toyoda, whose Toyoda Automatic Loom Works first began experimenting and even refining the lean manufacturing processes known now as the Toyota Production System or TPS.

In Shift, Mr. Ghosn succinctly describes the TPS, developed by the engineer Taichi Ohno, as "a pragmatic approach founded on observations of an American supermarket. The goal of the TPS was the complete elimination of the wastage -- of raw materials, time and space -- that characterizes heavy industry. It was at Toyota that 'lean production' was born."

Productivity is in fact one key factor that has helped all three companies thrive. According to the 2004 Harbour Report, the time that the three American auto giants spend on the production of each vehicle is, on average, 5.5 hours more than Honda, Toyota and Nissan's combined average of 19.5 hours. (Nissan, the fastest, takes 17.25 hours to make a car, compared to 20.65 for Honda and 20.69 for Toyota).

The TPS has received a great deal of attention in various studies, including the well-received study of about a decade ago called The Machine That Changed the World. But not to be overlooked is the human element in Toyota's success.


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Kiichiro Toyoda, an engineer by training, founded the Toyota Automotive Company in the 1930s with seed money provided by Sakichi Toyoda. His ideas about "just-in-time" manufacturing were influenced by Ford Motor Co.'s production practices in the 1930s and 1940s, but Kiichiro added a very personal spin: personal accountability. Kiichiro Toyoda famously resigned and shouldered the blame personally for failures during the post-Second World War period, when the company suffered horrendous losses that triggered significant labour unrest and loss of face for the company.

"The philosophy of Toyota to this day is to think beyond individual concerns to the long-term good of the company, as well as to take responsibility for problems," Prof. Liker writes. "Kiichiro Toyoda was leading by example in a way that is unfathomable to most of us. Toyoda family members grew up with similar philosophies."

Through the decades, Toyoda family members have led the company and continue to hold senior positions.Mr. Ghosn concedes that the third member of Japan's Big Three car companies, Nissan, was the greatest mystery to him when he arrived in Tokyo in 1999.

"Compared to Honda and Toyota, Nissan's image was a little hazy," he writes in Shift. "It was a company capable of operating at a high technical level," yet "Nissan's corporate personality was confused. It gave the impression of an amalgamation of elements piled up on top of one another, without anything resembling a strategy."

Ghosn's fuzzy image of Nissan is not terribly surprising, given the company's history. Unlike Honda and Toyota, both founded by strong leaders who nurtured their companies from the outset, Nissan was the product of a merger of three companies: Kwaishinsha Motor Car Works and Jitsuyo Jidohsa Co., which came together in 1926 to form Dat Jidosha Seizo Co., followed in 1933 by the merger with Tobata Casting Co.

In June of 1934, the company changed its name to Nissan Motor Co. Ltd., led by former Tobata chief Yoshisuke Aikawa, an industrialist who looked to the United States and its burgeoning car business for help in growing his company.

But Mr. Aikawa never had the same kind of lasting impact as the Honda and Toyoda families in their companies. And while Nissan did grow and prosper after some initial postwar struggles, by the late 1990s, the company had become dysfunctional and indebted.

Mr. Ghosn admits that the Nissan of 2005 is an emerging creature, though the stamp of change is evident. The key to the turnaround has been what Ghosn describes as "cross-functional" teams comprised of executives from all parts of the company -- from marketing to engineering to design and sales.

"The idea," he says, "was to tear down the walls, whether visible or invisible, that reduce a collective enterprise to a congregation of groups and tribes, each with their own language, their own values, their own interests. To compel people to talk to one another, to listen to one another, to exchange knowledge. That was the essence of their power."


Japan's Big Three car companies remain highly profitable, although the falling dollar is affecting their bottom line.

For the third quarter of 2004, Honda's group operating profit dropped 6.9 per cent to US. $1.51 billion

At Toyota, the company posted a smaller than expected 3.5-per-cent increase in operating income, earning $4.2 billion for the third quarter.

Nissan's third quarter operating profit increased 5.1 per cent to $1.92 billion.

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