By December 22, 2008 10 Comments Read More →

Toyota Expects Its First Loss in 70 Years

Article – NYTimes.com

Marketwatch.com article

Breaking news (but not entirely unexpected if you’ve been following the news in the last week):

Toyota Motor, the Japanese auto giant, announced Monday that it expected the first loss in 70 years in its core vehicle-making business, underscoring how the economic crisis is spreading across the global auto industry.

From their President:

“The change in the world economy is of a magnitude that comes once every hundred years,” Toyota’s president, Katsuaki Watanabe, told a news conference in Nagoya, Japan, near the company’s Toyota City headquarters. “We are facing an unprecedented emergency.”

Mr. Watanabe said the company would respond by suspending investment in new plants, including the delay in starting a factory in Mississippi announced last week, and moving some production lines to single shifts. The company has even unplugged electric hand dryers at some offices in an effort to cut costs.

Toyota has been letting go temporary workers, but has held tight in not laying off full-time staff. As the article points out, Toyota has quite cash cushion ($18B) to ride out slow times. They aren’t a charity…. how long will they hold on to employees in factories that aren’t producing vehicles?

This will be interesting to follow. Will Toyota continue to focus on the long-term during these challenging times? This news is hardly a repudiation of the Toyota Production System. It just goes to show that TPS/Lean is not a cure-all for any business.

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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10 Comments on "Toyota Expects Its First Loss in 70 Years"

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  1. Anonymous says:

    The TV news said “Toyota is in trouble.”

    Um, there’s trouble and then there’s TROUBLE.

    Toyota’s not in the same boat as Detroit, not by a long shot.

  2. Anonymous says:

    As a relative newbie to lean and the TPS something I have pondered about for some time is precisely how does Toyota define customer value? Do they use R->L thinking to create a value proposition? and do they really ask what the customer will want in X years time and build their operations around that value chain?
    This news from Toyota seems to suggest they have missed the target on these fronts?
    I have 2 friends who are car dealers and they say if they had enough budget cars on their forecourts they could sell 100s a day!
    Tom

  3. Vladimir Dzalbo says:

    Anonymous,
    It looks like global turmoil is exactly something Nassim Nicholas Taleb once called a “Black Swan” in his book. It looks like everybody nowadays is saying “Ah yes, the whole crisis thing was due to come, that’s clear for everybody” and still it came completely out of blue and none of those managers could base their operational plans based on this.

    How would you expect Toyota to define a higher need for budget cars if the turmoil is not something they could foresee in their customer value studies?

    Companies will have to diversify and change their value proposition strategies, but this cannot happen in just one day. I am quite sure that lean companies will be much more capable to do adapt to the situation.. That is why Toyota has a trouble, while other Automotive giants seem to have TROUBLE as nicely mentioned the first commentator.

  4. Kevin says:

    I think it’s a good idea that Toyota is cutting costs at all points, even going to such radical means such as unplugging hair dryers.

    However, what I wonder is if all the lean blogosphere that just absolutely have an infatuation with Toyota will blast them as strongly as they mockingly made fun of GM for their cost cutting by similar means?

    Many in the lean world have the Apple-like obsession with all things Toyota and a convienient disdain for all things Detroit…so the reaction to this news will be intriguing to say the least.

    By the way, the previous paragraph in NO way applies to Mark Graban and his fantastic lean blog. He has always been very fair in his commentary on the domestic US carmakers.

    Merry Christmas to all…and hopefully 2009 is better than we think it will be!

  5. Mark Graban says:

    Here’s the article from today’s WSJ:

    LINK

    “ounded in 1937, Toyota has reported an operating profit every year since 1939. For the current fiscal year, it expects net income of 50 billion yen, helped by interest income and dividends from affiliates. That’s less than a tenth of its previous forecast of a 550 billion yen profit, and a fraction of the 1.72 trillion yen it posted in the year-earlier period.”

    and

    “But the company already had reacted to the slowdown. Over the summer, when sales of trucks and sport-utility vehicles sank as gas prices soared, Toyota announced a three-month shutdown at two plants making the Tundra pickup. Now, only one of the two manufacturing lines at its San Antonio plant is running.

    Several months ago, Mr. Watanabe created an emergency committee to assess ways to save cash. One result was to postpone indefinitely the opening of the company’s eighth North American assembly plant, a Mississippi factory that was slated to begin making the top-selling Prius hybrid vehicle in May 2010.

    In keeping with its corporate culture, Toyota hasn’t laid off workers but instead has them make improvements to their work areas and attend seminars aimed at boosting their skills.”

    They’re looking at cutting costs:

    “”We are looking at every project we are involved with” to cut costs, said Toyota spokesman Irv Miller. That could include combining production of vehicles into a single plant or reviewing the viability of a particular product, Mr. Miller said, declining to be more specific.”

  6. Mark Graban says:

    Thanks to Dan Markovitz for these other links:

    Public Radio interview with Jeff Liker, talking about the Toyota loss and “The Toyota Way” — the long-term philosophy.

    Article about the importance of Toyota to the U.S. economy.

  7. Mark Graban says:

    Toyota President Watanabe is stepping down to become chairman next year. Is the timing on this related to the loss announcement or was this planned??

    http://www.freep.com/article/20081223/BUSINESS01/81223026/1014

  8. Mark Graban says:

    NY Times is reporting that the next President might be a Toyoda family member:

    "The president of Toyota Motor Company, Katsuaki Watanabe, is expected to step aside next year and could be succeeded by Akio Toyoda, the grandson of the auto company’s founder, people with knowledge of the situation said Tuesday."

    http://www.nytimes.com/2008/12/24/business/worldbusiness/24toyota.html?partner=rss&emc=rss

  9. Mark Graban says:

    New story on Toyota succession:

    http://news.yahoo.com/s/nm/20081225/bs_nm/us_toyota_successor_3

    Sounds like Chairman Fujio Cho is stepping down for health reasons, so President Watanabe will be advanced to Chairman.

    Either way, it sounds like Watanbe is not resigning because of (or being blamed for) the loss.

    “Another Toyota official noted that the company’s president usually serves two or three terms of two years each, however, and that Watanabe’s relinquishing his post next year would be a natural course of events. If Toyoda takes over in April, however, it would be a departure from the typical management reshuffle in June, timed with the annual shareholders’ meeting.

    The New York Times and Wall Street Journal both said Kinoshita, who oversees finances, was still a possibility, while BusinessWeek, citing a source close to Toyota, said Toyoda had won the board’s support to succeed Watanabe. The magazine said in its online edition that Watanabe had requested to step down several months ago due to personal reasons.

    The Wall Street Journal also named Executive Vice President Tokuichi Uranishi and Shuhei Toyoda, also from the founding family and currently president of Toyota affiliate Toyota Boshoku Corp, as dark-horse candidates.

    Hit by a global economic crisis that has pounded car demand, Toyota is facing its toughest year in recent memory, forecasting this week a 150 billion yen ($1.66 billion) operating loss for the business year to March 31. Last year, it made a record 2.27 trillion yen.

    A source with close ties to Toyota said Watanabe’s stepping down would have nothing to do with its dismal performance this year, denying a Bloomberg News report that Watanabe would be resigning to take responsibility for the historic loss.”

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