Mighty Toyota's growing pains: the Japanese juggernaut must confront internal challenges

Chief Executive, The, August-Sept, 2004 by Toshio Aritake

Some of the issues that Toyota faces have nothing to do with its existing automotive products. At the same time that Toyota veeps are taking the 15-15 goal seriously, members of the Toyoda family are eager to diversify into new businesses. Management is being asked to examine everything from the development and manufacturing of airplanes, motorcycles, pleasure boats, bicycles and humanoid robots to civil aviation, Formula-1 and other motor sports activities, housing construction, telecommunications and information-technology, medical and financial services, education and biotech.

Shoichiro Toyoda, the 79-year-old former president and son of Toyota Motor founder Kiichiro Toyoda, apparently thought the timing could never be better to showcase some of those new businesses than in a quasi-real world environment called the Aichi Expo 05, which will be held for six months, beginning in March 2005. Toyota and its group companies expect 14 million visitors to experience its futuristic vehicles, such as the bug-shaped i-unit personal mobility car; fuel-cell hybrid buses; and the Intelligent Multimode Transport System, a computer-guided system that enables unmanned buses to run in a convoy.

No Longer An Upstart Challenger

There seem to be at least two reasons for staging the expo. One is pure business. Global auto demand will continue growing, but automakers need to develop vehicles that consume less energy and cause less environmental damage. Toyota hopes to advance the i-unit, the compact one-passenger vehicle, and other exotic technologies to offer such solutions as allowing the use of vehicles that weigh far less than conventional ones.

But at another level, top management seems to be looking for ways to inspire a Japanese work force that has aged and is no longer as driven as it once was. The climate today is a far cry from the export boom era of the 1960s, '70s and '80s, when workers dedicated most of their waking hours to their companies.

To head off complacency, the company sponsors an annual foot race with 20,000 cheering spectators even though other Japanese companies have discontinued corporate sporting and entertainment events. Toyota also is offering more generous pay packages to Japanese employees than rival automakers. "By offering better-than-average benefits to employees, our hope is that employees can enjoy the sense of unity and belonging," says managing officer Hata. At the same time, Toyota is improving workplace infrastructure, such as expanding child-nursing facilities at manufacturing plants and hiring more handicapped people and women.

Add it all up and it's clear that Toyota is trying to cope with the problems of becoming a more mature multinational rather than being an upstart challenger. Cho is keenly aware of the challenges of managing a global company. "Toyota's weakness, if you will, is related to information," he says. "Many of our vital functions are concentrated in Toyota City. This could mean that we are late in getting wind of important information. In the IT age where information is abundant, we must be extra careful about what is vital information and what is not."