Toyota - A History of the First 50 Years: Complete Digital Book
Date: Fri Jan 01 0:0:0 1988
Author: Default



Published by Toyota Motor Corporation,
1 Toyota-cho, Toyota City, Aichi Prefecture, Japan.
Copyright © 1988 by Toyota Motor Corporation

All rights reserved. No part of this work may be reproduced in any form
or by any means without prior written permission from the publisher.

Printed in Japan by Dai Nippon Printing Co., Ltd.
First edition, 1988



It was in 1987 that we at Toyota celebrated our 50th anniversary. During our first 50 years, we faced many difficult times. And in overcoming them we benefited greatly from the understanding and support of our customers, dealers and distributors, as well as affiliated companies, government institutions and many other organizations and individuals. We owe them a tremendous debt, and we take this opportunity to express our sincere gratitude.

Today, Japan has become truly internationalized. But not so very long ago, during the war and its chaotic aftermath, few Japanese were allowed to travel overseas, and foreign publications reaching Japan were rare luxuries, read and reread many times over. And when restrictions on overseas travel were finally eased, we at Toyota discovered a fascinating, brave new world outside Japan. Everywhere we went, we found things we later applied toward developing our operations in the automotive field.

A particularly apt observation was made by Sakichi Toyoda, founder of the Toyota organization, about doing business overseas. The time was 1921, and Sakichi was speaking to close associates about building a spinning mill abroad:

The first and most important step in building good relationships with people in other countries is to arouse the interest of entrepreneurs like us. We must go overseas with our products and services and live and work there side by side with the local people. If we do that and search for common interests with them, we can promote an understanding among them of how Japanese think and feel. We must also make an equal effort to understand the local people. I think that such mutual understanding will lead to close business ties, which in turn will generate goodwill and in the end mature into friendly relations between peoples.


These words of Sakichi Toyoda are a special inspiration for us today. As we at Toyota continue to build new plants and promote business activities in many countries around the world, Sakichi's words remind us of how important it is, wherever we go, to build first of all a solid foundation of mutual understanding.

As we move into our next half-century, we intend to exert ourselves sincerely in unceasing efforts to have Toyota liked by people in all countries, to make Toyota the kind of company our contemporary age demands.

We hope the publication of this English edition of our 50-year history will help to promote an even deeper appreciation of the activities of Toyota Motor Corporation.

December 1988









Sakichi Toyoda, Inventor


Founding of Toyoda Spinning & Weaving


Perfecting the Automatic Loom


Kiichiro Toyoda, Founder of Toyota Motor Corporation


Trial Production of a Passenger Car






Inception of Japan's Motor Industry


Line-off of the First Passenger Car


Founding of Toyota Motor Company


Toward All-out Production


War and War's End





Starting from Zero


Determination to Rebuild


Launching of a Small Passenger Car


Labor Dispute and the Founding of Toyota Motor Sales Company


Five-Year Plan for Modernizing Production Facilities






Japan's High Economic Growth


Marketing the Crown


Introduction of the Kanban System


Construction of the Motomachi Plant


Developing the Market for Small Passenger Cars


Introduction of Total Quality Control


Early Export Activities


Commencement of Exports to the United States and Other Regions





Japan's Second Period of High Growth


Establishing Systems for Volume Production and Marketing


Search for New Business Opportunities


Coping with Recalls and Engine Emission Problems


Expansion of Exports to North America


Early Exports to Europe


Boosting Exports to the Middle East, Africa, and Latin America and the Caribbean


Export of Knockdown Kits to Southeast Asia and Oceania


Improving the Export System






First Oil Crisis


Construction of the Kinuura and Tahara Plants


Creating Attractive Products


Organizing the Export System


Strengthening the System in North America


Reinforcing the Sales Network in Europe


Enhancement of Activities in the Middle East, Africa, and Latin America and the Caribbean


Promoting Domestic Production in Southeast Asia and Oceania



Structural Changes in the Japanese Economy


Launch of the New Toyota Motor Corporation


Putting Advanced Technology to Work


New Level of Production Technology


Joint-Venture Production with GM


Independent Production in North America


Strengthening European Operations


Enhancing Overseas Support Activities


New Developments in the Middle East, Africa, and Latin America and the Caribbean


Local Production Efforts in Southeast Asia and Oceania


Embarking on New Businesses


Expanding Public Service Activities


Looking Toward Toyota's Next Half Century


















Chapter 1: Origins of Toyota: Sakichi and Kiichiro Toyoda


Toyota Motor Corporation celebrated its 50th anniversary in 1987. For a proper perspective on the company's history, however, we must go back more than a century and begin with a Japanese inventor whose life was marked with great trial; we must begin with the story of Sakichi Toyoda, the father of founder Kiichiro Toyoda.

Sakichi developed many useful devices, but he is especially well-known as the inventor of Japan's first automatic loom. Indeed, his inventions represented so great a contribution to Japan's modernization that the Japanese Patent Office recognized Sakichi in April 1985 as one of the country's 10 most influential inventors over the past 100 years.

Sakichi Toyoda was born in the small village of Yamaguchi, now part of the city of Kosai, Shizuoka Prefecture, on February 14, 1867, the year before the Meiji government came to power. The leaders of the new Meiji government dedicated themselves to the enormous task of transforming Japan into a modern state by catching up with the leading nations of the West. The rapid influx of industrial goods from Europe and the United States following the opening of Japan to the West made both the Japanese government and individual entrepreneurs realize that modernization of the nation's industries was critically important.

The sudden inflow of inexpensive goods from abroad overwhelmed many traditional industries. Among these, the domestic cotton industry was dealt a tremendous blow by the inexpensive, high-quality cotton goods from England and elsewhere. The government responded to the effects of these imports


Sakichi Toyoda, Inventor

by promoting the dissemination of new technologies through National Industrial Exhibitions and other industrial fairs. Specifically, it worked to foster a modern spinning industry capable of competing with imported cotton yarn by taking such protective measures as opening state-run spinning mills and selling spinning machinery to private businesses at nominal prices. But modernization of the textile industry did not progress smoothly, and most businesses failed because of the small scale of their operations.

The area around Sakichi's home village had long been active in producing cotton. Although Sakichi was born into a family that had been farmers for generations, his father was a carpenter by trade, and his mother wove cloth to supplement the family income. After graduating from elementary school, Sakichi learned carpentry from his father. And, like his father, Sakichi poured everything into his work. Seeing the impoverished farmers in his own village and those of the surrounding area, however, and hearing of the efforts being made throughout the nation to modernize Japan's industries, he became filled with a desire to contribute to society by accomplishing something of consequence.

Japan's Patent Law was promulgated in 1885. Around this time, Sakichi participated in an evening study group attended by young men who, like himself, were eager to satisfy their thirst for knowledge. The group discussed the current state of affairs in Japan, and it was during those discussions that Sakichi resolved to do something that would benefit the nation and contribute to its development. Upon hearing about the main points of the Patent Law, he determined that he would achieve his goal through invention.

In the spring of his 20th year, Sakichi began studying ways of improving looms. He later described his motivation in these words:


In those days, spinning and weaving was not a thriving business as it is today. The work was done by old women sitting at home and weaving the cloth by hand. Although everybody in my village was a farmer, every house also had its own handloom. I began thinking about ways to power the looms so that weaving could be done faster, and more cloth could be made more cheaply. People could then buy cotton goods for less, and that would benefit society substantially.

Since he was expected to follow in his father's footsteps, Sakichi was trained as a carpenter. He thus found it easy to apply his woodworking skills to the wooden looms as he sketched them and built test models. He began to tinker with looms whenever his father was not watching, looking for ways to improve the design. Eventually, he became so busy with the looms that he was no longer able to concentrate on the carpentry work. Despite opposition from his father and many of the villagers, who largely regarded him as an eccentric, Sakichi's enthusiasm for inventing only grew.

Improving the looms was not an easy task for Sakichi, who had the skills of a carpenter but lacked the necessary basic technical knowledge. He made repeated efforts on a trial-and-error basis, but progress was slow. "I was like a man possessed," he said later, reflecting on his life at the time with some amusement. "People around me probably thought I was some kind of madman."

In 1890, when Sakichi heard about the Third National Industrial Exhibition being held that year in Tokyo, nothing could deter him from going to see it for himself. About 1,700 foreign products, many of which had been shown at the Paris Exhibition held the previous year, were on display. Sakichi visited the exhibition's machinery pavilion every day for two


weeks to see how these machines worked. He then visited a number of factories in the Tokyo-Yokohama area before returning home. Although the trip did not produce any immediate tangible results, it seemed to be effective in dispelling any remaining self-doubt in Sakichi.

That autumn, after several months of experimentation with different prototypes, Sakichi perfected his first invention. It was a wooden, manually operated loom, which he patented in May 1891. When Sakichi persuaded a weaver in a neighboring village to put the loom to practical use, the quality of the weaver's woven cloth improved drastically and his productivity rose by 40%-50%.

Sakichi built four or five of his patented looms and took them to Tokyo, where he opened up his own weaving business. His cloth acquired a good reputation, but his handlooms attracted little interest. Small-scale textile businesses short on capital were not likely to buy a manually operated loom whose operation took up all of a weaver's time, even if productivity did improve by half. Sakichi renewed his research with a new goal -- the development of a power-driven loom. But his business was not profitable enough to provide the funds he needed to invent such a machine.

Around this time, Sakichi married Tami Sahara, the younger sister of his good friend Gorosaku Sahara. Although Sakichi remained entirely preoccupied with his work on the power loom, in 1893 he was forced to close his weaving business and return to his home village.

In Sakichi's words, "Apart from food and clothes, I also needed money for my research and my projects. It seems like serious inventors always end up being poor and being cut off from others; sometimes they even get persecuted. It's as if an inventor has to have his fill of hardship before he can fulfill his ambitions." Even though his first son Kiichiro had been born in


June 1894, Sakichi left his home to visit an uncle in Toyohashi, Aichi Prefecture, and remained there; it was this move that eventually led to the breakup of his marriage.

Settling in Toyohashi, Sakichi decided to make an improved yarn-reeling machine. He invented a reeling machine that produced constant lengths of yarn twice as efficiently as conventional devices.

In 1895, Sakichi opened a company, Toyoda Shoten, in Nagoya. It seemed that finally he had a means of funding his inventions. While making a business out of building and selling his reeling machine, Sakichi focused his efforts on the invention of a power loom.

Sakichi married again in 1897, this time to Asako Hayashi, a young woman from his home village. Asako not only raised Kiichiro but also managed Toyoda Shoten at the same time, proving to be an invaluable support for Sakichi and his inventing. Sakichi's brother Heikichi, meanwhile, eight years Sakichi's junior, took over sales of the reeling machine and quickly became Sakichi's right-hand man. It was not long after this that Sakichi perfected Japan's first power loom.

A customer who was using Sakichi's reeling machine recognized the immense potential of the new loom and suggested that they go into the weaving business together. Sakichi built 60 power looms and contributed them as his investment in the new partnership. In 1898, Sakichi and his new partner opened a textile mill fitted with steam-powered looms. Although a mill hand could operate only one conventional loom at a time, he could operate two or three power looms simultaneously. Productivity increased fourfold at the new mill, and costs decreased by over 50%. These factors, coupled with the high quality of the product, spurred the rapid growth of the new company.

Around this time, Mitsui & Co., already one of Japan's


largest trading companies, observed the demand in China for narrow-width cotton fabric and decided to throw its full weight behind the Toyoda power loom. Sakichi's invention was suddenly thrust into the limelight. A succession of dignitaries visited Toyoda Shoten, and the name of the 32-year-old inventor became known throughout Japan.

Mitsui wanted the exclusive selling rights for Sakichi's power looms, and in 1899 it signed a 10-year agreement with Sakichi and established Igeta Shokai in Nagoya to produce and sell the looms. As the company's chief engineer, Sakichi concentrated his efforts on further improving the power loom.

The Toyoda power loom cost 93 yen, compared with 872 yen for the German Hartmann loom and 389 yen for the French Diederichs loom. Besides being much less expensive, the small, wooden Toyoda loom was also much easier to handle. Business was so good that Igeta Shokai was unable to keep up with the flood of orders for looms from small textile manufacturers competing in the rapidly growing export market for narrow-width cotton fabric.

In 1902, after almost two years of toil, Sakichi patented a let-off device that maintained the warp at a constant tension as it was being fed. This outstanding invention served as the prototype for the let-off devices used in looms today. Having taken this first step toward automation, Sakichi next concentrated on developing a device for automatically replenishing the weft. Conventional looms had to be stopped when the weft ran out so that the wooden bobbin on which the weft was wound could be replaced.

Founding of Toyoda Spinning & Weaving

Japan faced a severe recession after the Sino-Japanese War of 1894-1895, and the spinning industry was hit particularly hard. There was no room for expansion in the domestic market, and


competition from Indian and Chinese companies in the promising Chinese market was becoming increasingly intense.

Business at Igeta Shokai also markedly worsened, resulting in restrictions on Sakichi's research budget and leading him to resign from the company. In 1902, he returned to Toyoda Shoten, his old business; he renamed it Toyoda Shokai and installed 138 looms, vowing to support his research with his own earnings.

Leaving the management of the mill to his wife Asako and his younger brother Sasuke, Sakichi devoted himself to inventing a device that would automatically replenish the weft. He succeeded the following year. This new automatic shuttle-changing device yielded excellent results when fitted to narrow-width power looms.

It was just around this time, stimulated by the outbreak in 1904 of the Russo-Japanese War, that a sudden demand for cotton cloth arose and smaller textile companies began to expand their facilities. Sakichi responded to the new market demand with his inexpensive, efficient power looms, and sales of Toyoda Shokai looms thrived. Even as business thus boomed, Sakichi continued improving his automatic shuttle-changing device and experimenting with its application to broad-width looms.

Kanegafuchi Spinning Co., Ltd. (now Kanebo, Ltd.), one of Japan's leading spinning companies, contacted Sakichi in 1905 to say it was interested in conducting performance tests to compare his automatic broad-width loom with other makes. Although Sakichi was still building and improving experimental models, Kanegafuchi convinced the reluctant inventor to let them conduct the tests by offering to manufacture the loom if it could use the patent. The performance tests continued for a year. They showed that looms made by the British firm Platt Brothers & Co., Ltd., operated best overall, and that the Toyoda looms were less efficient and produced inferior cloth.

Reflecting on the causes of the poor results, Sakichi later


wrote: "You can't be creative and complete a piece of work unless, above all, you work on the construction yourself, attend carefully to every single detail and experiment over and over again. And you must never leave the production to anyone else. These are the lessons I learned from experience, and they should be minded." For the rest of his life, Sakichi conducted all his own tests, without relying on outsiders.

At the urging of Mitsui, Sakichi decided to start a full-fledged loom-manufacturing company. In December 1907, he dissolved Toyoda Shokai and in its stead established Toyoda's Loom Works, capitalized at 1 million yen. Sakichi became managing director, and the new situation let him concentrate on research.

Toyoda's Loom Works was a large-scale enterprise for its time: The paid-in capital of 1 million yen was the same as that of Mitsui. But when the economy went into recession after the Russo-Japanese War, business slumped badly. Although Sakichi's research progressed smoothly, culminating in the successful development of a broad-width automatic power loom in 1908, his large research budget was blamed for contributing to the company's poor performance. Notwithstanding, Sakichi pushed ahead with improvements in factory equipment, tool improvements and procurement, and construction of a pilot plant. He had no intention of revising his strong belief in research and testing. In the end, however, invention and research proved incompatible with profitability, and disagreements within the company prompted Sakichi's resignation in 1910.

In May 1910, still disappointed from his experience at Toyoda's Loom Works, Sakichi traveled to the United States. Visiting Seattle, Chicago and New York, Sakichi was deeply impressed by the tremendous industrial strength everywhere he


went. He was particularly impressed with the automobile, which struck him as a veritable conglomeration of parts and mechanisms. The automobile had its beginnings in Europe, the first successful ones being Karl Benz's gas-powered three-wheeled motor car in 1885 and Gottlieb Daimler's gasoline-powered four-wheeled motor carriage the following year; it was the Americans, however, who were the first to mass-produce the automobile. When Sakichi went to the United States in 1910, less than two years had passed since the Model T Ford, a car built for the masses, was marketed. Nevertheless, American manufacturers were already turning out over 100,000 automobiles a year, and the car was becoming an everyday means of transportation.

Sakichi's main interest at that time, however, was looms, and he visited the quality textile-producing centers in the Boston area. At the time, most American mills were using Northrop automatic looms, and when Sakichi compared their speed, frequency of breakdown and product quality with his own looms, his faith in his inventions was restored.

Sakichi returned home on New Year's Day 1911, resolved to embark once more on the research and development of an automatic loom. Having learned from his two previous failures, he sought personal financial backing for an independent, self-supporting plant so he would not have to rely again on outside capital. After obtaining financing, he built a new textile mill in Nagoya. Together with his family, he moved to the mill and immersed himself in the further development of automatic looms. Every morning before work commenced, he would enter the office where he conducted his research and pore over his drawings. During the day, he would study the automatic looms while they were running to look for points that could be improved, and he would get completely covered with oil in the process. At night, he would shut himself up in his office again and continue with his research. Sakichi's enthusiasm spread to his staff, and in


a short time the number of looms in operation was increased from 100 to 200 as the mill's business steadily grew.

The Japanese spinning industry was still technologically backward, and 80% of its production was of thick, coarse yarn. Using yarn of such inferior quality presented a problem: It was unsuitable for testing the looms, because when the yarn snapped it was impossible to determine whether the cause was a defect in the loom or in the yarn.

Sakichi, therefore, decided to start his own spinning business and make yarn himself that was of dependable quality. But the scale he had in mind was too small to be considered profitable by conventional standards; the average Japanese spinning mill had 50,000-60,000 spindles, and Sakichi planned to use only 6,000. He received offers of help, however, from Ichizo Kodama, manager of Mitsui's Nagoya branch. The spinning mill began operating in February 1914.

One result of the business relationship with Kodama was a deepening of the friendship between the two men, and in 1915 Sakichi's daughter, Aiko, married Kodama's younger brother, Risaburo, with Risaburo adopting the Toyoda family name. At the time, 31-year-old Risaburo was general manager of the Manila branch of C. Itoh & Co., one of Japan's foremost trading companies in the raw cotton business. He left C. Itoh, however, and joined and became a key management figure of the Toyoda enterprises. Aiko supported her husband in his work, and she later encouraged and supported her elder brother Kiichiro in his automobile venture.

The First World War broke out soon after Sakichi's spinning business got under way, and the economy boomed. The spinning mill was deluged with orders, and a succession of expansions in its facilities rapidly transformed it into a huge operation. This led to the establishment in January 1918 of Toyoda Spinning & Weaving Co., Ltd. Capitalized at 5 million yen, the new company had 34,000 spindles, 1,000 looms and a staff of 1,000. Sakichi was


president, Risaburo managing director, and in 1920 Sakichi's eldest son Kiichiro, who had just graduated from the Faculty of Engineering at Tokyo Imperial University, now the University of Tokyo, joined the company's technical staff.

Toyoda Spinning & Weaving continued to flourish in this favorable business climate, becoming the foundation for what was later to become the Toyota Group.

Perfecting the Automatic Loom

With the rapid expansion of the weaving sectors of the major spinning concerns and the availability of inexpensive, domestically produced power looms to smaller textile makers, the Japanese cotton weaving industry grew spectacularly. In terms of revenue, exports of cotton cloth overtook imports in 1909. Japan had consistently suffered an unfavorable balance of trade since trade with Western nations opened in the late nineteenth century; but now, besides the decrease in imports as a result of the First World War, the steady growth of cotton and other exports resulted in trade surpluses from 1915 to 1918.

Around 1920, impelled by the high import tariffs imposed by China on Japanese cotton goods, Japanese spinning companies began setting up subsidiaries in China. In November 1921, with Toyoda Spinning & Weaving now a going concern at home, Sakichi opened the Toyoda Spinning & Weaving Works in Shanghai. The mill had 60,000 spindles and 400 looms.

Through overseas production, Sakichi hoped to raise the funds he needed to improve the automatic loom and, at the same time, promote friendly ties between China and Japan. Sakichi noted:

China is of vital importance to Japan, and we must maintain a particularly special, friendly relationship with her.


Politically, economically and commercially, Japan can't afford to be cut off from China, and it can't afford to cut itself off from China. The first and most important step in building good relationships with people in other countries is to arouse the interest of entrepreneurs like us. We must go overseas with our products and services and live and work there side by side with the local people. If we do that and search for common interests with them, we can promote an understanding among them of how Japanese think and feel. We must also make an equal effort to understand the local people. I think that such mutual understanding will lead to close business ties, which in turn will generate goodwill and in the end mature into friendly relations between peoples.

Acting on these convictions, Sakichi moved his family to Shanghai, where he made a success of his first overseas venture. At long last, he was able to immerse himself in his research without financial worries.

Sakichi's research on automatic looms was interrupted temporarily after another important patent was obtained, on a let-off device, in 1914. When research was resumed with renewed vigor around 1921 under Sakichi's direction, research on automatic looms continued day and night. Kiichiro, with his mechanical engineering background, played a central part in making many improvements which were achieved in rapid succession. For example, a new automatic shuttle-changing device was developed, with a different mechanism from the one Sakichi had patented in 1903; also, mechanisms were developed for feeding the warp and for automatically halting the loom when a thread broke, which were vital elements for an automatic loom.

In 1923, an automatic loom pilot plant was constructed in


Kariya, Aichi Prefecture. The plant was equipped with 200 newly designed automatic looms, and practical testing began. The development of the automatic loom now proceeded rapidly, spawning numerous patent applications. The automatic weft replenishment device had a shuttle-change mechanism that made it revolutionary: It allowed shuttles to be replaced smoothly, without damage to the shuttles and without reducing the speed of the running loom in the slightest. Ten shuttles could be positioned in front of the shuttle box; when the weft ran out, a new shuttle would automatically move into place, pushing the empty shuttle out at the back.

Finally, in 1924, an automatic loom was perfected whose performance both satisfied Sakichi's expectations and surpassed the highest of contemporary international standards. An iron works was leased in Nagoya and converted into a foundry, and preparations were begun to go into mass production.

An automatic loom designed for mass production was perfected in November 1925. One year later, after installing 320 such machines in the pilot plant and confirming that they worked satisfactorily, Sakichi founded Toyoda Automatic Loom Works, Ltd., in Kariya, capitalized at 1 million yen. A foundry, an iron works and a woodwork shop were built, and in 1927 production and sales of the Toyoda G-type Automatic Loom began.

Although the G-type loom cost 630 yen, compared with 200 yen for conventional looms, one worker could operate 25 of them at once, and it was estimated that the capital investment for a mill with 1,000 of these looms could be recovered within a year. One after another, the nation's major textile mills shifted to the automatic loom, and exports to mills in countries like China and India grew as well.

Platt Brothers, then the world's largest maker of spinning and weaving machinery, commissioned Mitsui, their sole agent


in Japan, to evaluate the performance of the Toyoda G-type loom. Then in 1929, Platt Brothers approached Toyoda with an offer to purchase the patent rights. Kiichiro went to England in December to negotiate with them, and agreement was reached on a price of 100,000 pounds. The purchased patent rights covered the entire world with the exception of Japan, China and the United States.

In 1930, Toyoda Automatic Loom Works began work on the development and manufacture of a high-draft spinning frame, as well as a carding machine and other machines for fore-spinning processes, where raw textile was prepared for spinning. Now head of the engineering staff, Kiichiro was instrumental in the development of these machines. The success of Toyoda Automatic Loom Works marked the beginning of the transition for Toyoda enterprises from the textile to the machinery industry, and in fact it signified their first step toward the manufacture of automobiles.

At this time, the Toyota Group began to take shape as a number of affiliated companies set up around the three core enterprises of Toyoda Spinning & Weaving, Toyoda Spinning & Weaving Works in Shanghai and Toyoda Automatic Loom Works. Prominent among these were Kikui Spinning & Weaving, established in 1918, Shonaigawa Dye Works, set up in 1928, and Toyoda Oshikiri Spinning & Weaving Company and Chuo Spinning & Weaving, founded in 1929. Although Sakichi's forte was as an inventor, he also showed a unique talent for entrepreneurial management not often seen in inventors. Besides being loyally served by members of the Toyoda family, many other people in charge of technical matters and finances helped lead his enterprises to success.

In April 1927, Sakichi had just returned from Shanghai when he suffered a mild cerebral hemorrhage. Though he appeared to be on the road to recovery, complications occurred in the form


of acute pneumonia, and on October 30, 1930, he passed away at the age of 63.

All his life, Sakichi not only believed in but lived by the three maxims of labor, gratitude and service. Ordinarily a man of few words, even after his success Sakichi was fond of repeating, "Japan is still a poor nation. Entrepreneurs, managers and staff must all work together." He encouraged his subordinates with comments like "Let's give it a try" and "Don't be afraid to make mistakes," mottoes he himself also put into practice. He admonished those working under him that the smallest things have their proper place and must be valued. Even after he became company president, Sakichi could be seen picking up nails, bits of cotton or anything else that might have fallen on the factory floor.

Sakichi always maintained a sense of gratitude, not only toward members of his family or those who helped him, but also toward society as a whole. He believed that he owed his success to the world at large and that it was important to be of service to humankind by working in good faith, not purely for monetary gain. One example of how he put this philosophy into practice was his donation of 1 million yen to the Imperial Institute of Invention and Innovation to promote the development of a storage battery.

Those working under Sakichi inherited his convictions and applied them even after his death as basic tenets for the management of every concern affiliated with Toyoda. Risaburo and Kiichiro Toyoda later codified these principles, and on October 30, 1935, the fifth anniversary of Sakichi's death, they presented them in the form of the "Toyoda Precepts":

The Toyoda Precepts

  1. Be contributive to the development and welfare of the country by working together, regardless of position, in faithfully
  2. 38

    fulfilling your duties.

  3. Be at the vanguard of the times through endless creativity, inquisitiveness and pursuit of improvement.
  4. Be practical and avoid frivolity.
  5. Be kind and generous; strive to create a warm, homelike atmosphere.
  6. Be reverent, and show gratitude for things great and small in thought and deed.

The fundamental spirit of these precepts constitutes the basis on which the Toyota Group functions today. They have been handed down to the present generation and still serve as guidelines for the Group's policies and activities, as well as for all management and staff.

Kiichiro Toyoda, Founder of Toyota Motor Corporation

Kiichiro Toyoda majored in mechanical engineering at the Faculty of Engineering, Tokyo Imperial University. Not only did he receive the finest technical education available in Japan, but he had a natural affinity for anything mechanical. At work, he constantly went around the shops, giving the staff advice on how to improve their jobs, often himself getting covered with oil and grease in the process. Kiichiro believed that advanced technical knowledge was useful only if one first mastered the practical technology of the shop floor, an attitude he inherited from his father, Sakichi.

Although the most popular engineering course was shipbuilding when Kiichiro was at the university, students were already becoming interested in internal combustion engines. With the advent of the First World War, the attention of mechanical engineering students focused increasingly on automobile and airplane engines, and Kiichiro was no exception. After graduating


in 1921, he accompanied Risaburo and his wife Aiko -- Kiichiro's younger sister -- on a tour of European and American textile mills.

Inspired by the American auto industry when he visited the United States many years earlier, Sakichi had once come up with an idea for a motor similar to today's rotary engine. And now it was Kiichiro's turn, for when he saw how popular automobiles had become in the United States and Europe, the meaning of his father's words some years earlier came home to him: "We are entering the era of the automobile." Kiichiro returned to Japan nurturing a dream of entering the auto industry himself.

In the fall of 1929, Toyoda Automatic Loom Works was on the verge of signing an agreement with Platt Brothers to sell the use of the patent for the G-type Automatic Loom. Kiichiro traveled to England by way of the United States to conclude the negotiations, but on the way he wanted to see for himself how far the automobile industry had developed. Leaving negotiations about the patent to Mitsui representative who was traveling with him, Kiichiro spent his time visiting auto assembly plants and parts makers in the United States and Great Britain.

At the time, the American auto industry was using a conveyor system of mass production to turn out over 5 million vehicles a year. Ford Motor Company, founded in 1903, was enjoying spectacular growth with its mass-produced, mass-marketed Model T. General Motors Corporation (GM), established in 1908 and led by Alfred P. Sloan, challenged the all-black, standardized Model T with a wide product line of colorful models, and with frequent model changes. Then, in 1927, GM surpassed Ford in number of units produced. After its founding in 1925, meanwhile, Chrysler Corporation had skillfully usurped the replacement demand from the Model T with its fresh intermediatesize cars, and it was growing rapidly.

In short, the American auto industry was making the transition from a period of competition among over 80 automakers to


the era of the Big Three, and the situation was changing from that of a seller's to a buyer's market. The time was also coming when automakers would open new markets even as they were competing with each other in the old ones. The Big Three were starting to expand overseas and were already on their way to dominating the world market.

Meanwhile, the Japanese auto industry was still in its infancy. The number of vehicles owned by Japanese exceeded 12,000 units in 1923 and grew rapidly thereafter, but the majority of these were European or American imports.

Kiichiro was one of many young Japanese entrepreneurs to visit the United States or Europe during this period and be struck by the civilization on wheels. Like them, he returned home determined to make automobiles. Shintaro Yoshida was another; he owned a small bicycle shop in Tokyo, and perfected Japan's first gasoline-powered automobile in 1907. Also, Masujiro Hashimoto, who had studied engine production in the United States, built an automobile in 1914 and started producing it commercially in 1918 when he founded the company Kaishinsha.

When the Military Automobile Subsidization Act was promulgated in March 1918, enterprises with sufficient capital seriously began to consider entering the automobile industry. Among these were Tokyo Gas & Electric Industry Co., Ltd., which initiated preparations for automobile production in 1917, and Tokyo Ishikawajima Shipyard Co., Ltd., which began preparing for manufacture of motor vehicles in 1920 and formed a separate company for that purpose, Ishikawajima Automobile Manufacturing Co., Ltd., in 1929.

Most pioneers, however, were hampered by the fact that in Japan the parts and machinery industries were not developed sufficiently and did not expand beyond the level of family enterprises. Nor could enterprises that were new t the auto business


establish a commercial base for themselves.

In the aftermath of the Kanto Earthquake of September 1, 1923, eight hundred Ford truck chassis were imported to be used for building buses as an emergency measure in Tokyo, whose transit system had been destroyed. The transport efficiency of these vehicles awakened public awareness of the automobile practically overnight, and American automobiles were soon coming into the country in great numbers.

After studying the Japanese market, Ford entered it in 1925 by establishing Ford Motor Company of Japan (Ford-Japan) and building an assembly plant in Yokohama. In 1927, GM set up General Motors Corp. of Japan (GM-Japan) and built an assembly plant in Osaka. Both were huge knockdown assembly plants, far exceeding the output of which the Japanese auto industry was capable. The Ford plant turned out 8,000 units a year, and GM's plant 10,000 units. With the Americans setting the pace, the automobile quickly caught on in Japan. The number of vehicles on Japanese roads grew from 50,000 units in 1927 to 80,000 units in 1929. however, one by one the Japanese automakers were going into bankruptcy. In the end, only three domestic manufacturers remained -- Tokyo Gas & Electric, Ishikawajima Automobile and Dat Motor Co., Ltd. -- and their collective output in 1929 was only a little over 400 units.

In March 1930, fresh from a study of auto plants in the United States and Europe and now determined to build an automobile himself, Kiichiro set aside a corner of the Toyoda Automatic Loom Works plant for his research, gathered his engineers together and began working on a small gasoline engine. He wanted to start with the engine, as the heart of the automobile, but he soon found that even this initial step involved constant trial and error, as the research staff confronted problem after problem.

At the same time, Kiichiro believed that before moving


into auto production, the company must first acquire the technology to carry out precision machining and become familiar with mass production methods. He introduced a conveyor system to loom production and imported high-quality German and American machine tools, ostensibly to improve the precision of the looms and spinning machines. He also installed an electric furnace in the foundry to provide high-grade castings, and introduced Japan's first molding machine. Toyoda's automatic looms were also the first to have chrome plating to improve the precision and durability of their rotating parts, for which purpose the company hired its own chemical analyst. Meanwhile, Kiichiro pored over Henry Ford's My Life and Work and urged everyone around him to read it too.

Kiichiro never rested. Even as he struggled to master the technologies required for auto manufacture, he visited the companies selling auto parts and also visited machine tool makers. By purchasing parts and analyzing them, he acquired an accurate view of the state of the parts industry, upon which the auto industry must have its foundation. unlike Europe and the United States, Japan had never had a carriage industry and had not, therefore, developed any sizable parts industry. Now, however, the opening of the Ford-Japan and GM-Japan assembly plants had given rise to domestic manufacturers who supplied parts to both companies, and a trend toward improved quality was becoming apparent.

Trial Production of a Passenger Car

During this period, Ford-Japan and GM-Japan built up nationwide sales and service networks and cornered most of the Japanese market. When Ford carried out its initial survey of the Japanese auto market prior to entering Japan, it found that the


Military Automobile Subsidization Act provided for production by private companies of only the small quantity of automobiles required by the military. It also discovered that the various automakers shared no common standards and were unwilling to cooperate with one another. Further, the government's automobile import tariffs were light, consisting of a 50% duty ad valorem on imported auto chassis but only 30% ad valorem on parts and a specific duty of 20 yen per 60 kg on engines. There was obviously no interest in protecting domestic automakers.

In an environment thus ideally suited for knockdown assembly production, both Ford and GM made good profits. But as the assembly plants of the two companies went into full operation and the import volume soared, Japan's balance of international payments worsened; the government's attitude toward Ford and GM changed, and it reversed its policy. In May 1931, the government took its first steps toward stimulation of domestic auto production when the Ministry of Commerce and Indusrty set up a committee to study promotion of the motor industry. The committee decided to put the auto industry on a firm footing by producing vehicles with standard specifications. The three firms of Tokyo Gas & Electric, Ishikawajima Automobile and Dat Motor, together with the Ministry of Railways, were given the task of design and trial production, and in March 1932 they completed a chassis for buses and trucks with a 1.5- to 2-ton capacity, a size larger than Ford's and Chevrolet's chassis.

The government urged the three domestic automakers to merge in order to mass-produce this standardized vehicle. The first phase took place in March 1933 with the merger of Ishikawajima Automobile and Dat Motor, but the conflicting interests of the two companies prevented much progress being made toward mass production.

Spurred by this new government attitude, large enterprises like the shipbuilders of the Mitsui and Mitsubishi zaibatsu


groups, which subsequently gave up making headway in the auto business, now began test-producing new vehicles. Yoshisuke Aikawa, the head of the new zaibatsu group Nihon Sangyo Co., Ltd., also made his move into the auto industry. Nihon Sangyo acquired the manufacturing and sales rights to the Datsun compact from Dat through a subsidiary, Toyota Imono Co. Ltd., and founded the Jidosha Seizo Co., Ltd. in December 1933 with a capital of 10 million yen. The following year, the name of the firm was changed to Nissan Motor Co. Ltd.

Kiichiro was making steady progress in his preparations for Toyoda's entry into the auto business. He visited friends from his university days who were now involved in the promotion of the auto industry and inquired about trends in both government and industry. Those friends included Kazuo Kumabe, an assistant professor at Tokyo Imperial University who served on the committee of the Ministry of Commerce and Industry mentioned above; Kaoru Ban, who researched strategies for promoting the auto industry at the ministry; and Hideo Kobayashi, who headed the standardized vehicle design team at the Ministry of Railways. Never one for small talk, even in his student days, Kiichiro now surprised his old friends by abruptly broaching his plans for automobile production. In their discussions, Kiichiro gained much invaluable information.

Kiichiro made careful note of the movements afoot in business and government. He jotted down ideas as they came to him, constantly weighing them against one another while evaluating the technological capabilities of his plants. From the mountains of notes he left, one can gather how his plans gradually coalesced. Kiichiro realized that however good a vehicle might be, it would be of little value if it were too expensive to buy and uneconomical to run and also that it would not sell unless it were cheaper than foreign models; he decided it would be necessary to


consider the extent of the loss per unit that would be required to produce such a vehicle and the time it would take before the public bought the vehicle at a price that offset the cost. His main concern then became how long Toyoda Automatic Loom Works would be able to support such an effort.

Most of those who knew of Kiichiro's plan to go into automobile production believed he was acting rashly, and not a few told him to his face that the auto business was not worth the trouble. But Kiichiro was no longer interested in debating whether or not to build automobiles; to him, it had rather become a question of what kind of build and how many should be built to make such an enterprise work. His conclusion was to mass-produce a passenger car for the general public.

To make a success of his venture, Kiichiro decided, it was absolutely necessary to mass-produce a car of the size most in demand, a 3,000-cc passenger car: "Instead of avoiding competition with Ford and Chevrolet, we will develop and mass-produce a car that incorporates the strong points of both and that can rival foreign cars in performance and price. Although we will base our method of production on the American mass production system, it will not be an exact imitation but will reflect the particular conditions in Japan."

Kiichiro's ideas had jelled. In the summer of 1933, his staff completed 10 prototype 60-cc engines for use in motorcycles. By this time, the Japanese economy was emerging from the chaos that followed the Great Depression of 1929, and the various Toyoda enterprises, spearheaded by Toyoda Spinning & Weaving and Toyoda Automatic Loom Works, were performing well.

In September 1933, feeling that it was the ideal time to embark on automobile production, Kiichiro revealed his plans to Risaburo and sought his approval. Since Sakichi had passed on to Risaburo the responsibility of managing all the Toyoda enterprises, Risaburo had to exercise extreme caution in entering a


business whose future was far from clear. But in the end, swayed by the firmness of Kiichiro's convictions, Risaburo agreed that if Toyoda were to enter the automobile business, now was the time.

An Automobile Department was established. Kiichiro immediately closed off part of a warehouse at the plant and began work on the design and construction of a prototype. He filled the Automobile Department with the most talented people in the company and invited specialists from outside as well. Takatoshi Kan, who had experience with engine casting at another company, joined the group in November 1933. Years later, he recalled how Kiichiro invited him to participate in the project: "Kiichiro told me that he was about to realize his long-held dream of producing automobiles but that he was having a hard time finding experienced engineers. He asked if I would work with him. I didn't really know that much about automobiles, but I was very excited by the idea of domestically producing a car for the public, so I agreed to join Toyoda and help out as best I could."

Kiichiro also recruited Benzo Fukada, who had been chief engineer for a steel manufacturer. "The auto industry is an integrated industry," he told Fukada, "and it requires a thorough knowledge of steel in particular. I'd like you to bring whoever you want with you and make whatever plans you like. I'll leave everything in your hands." Fukada accepted Kiichiro's offer enthusiastically and set about planning the construction of an in-house steel mill that could produce the special steel needed for motor vehicles. Kiichiro hired Fukada because the quality of the special steel then being produced in Japan was too poor for use in automobiles.

Kiichiro directed Kan to design an automobile pilot plant that would accommodate a future shift to mass production. He also contacted Risaburo Ohshima, who was in England wrapping up the agreement with Platt Brothers and directed him to go to


Germany to purchase machine tools for the new plant.

In December 1933, Kiichiro asked Risaburo Toyoda to convene an emergency board of directors meeting. At the meeting, held on December 30, Kiichiro submitted his plan to move into auto production and asked the board to call a general stockholders meeting to obtain approval. According to his later recollections, Kiichiro believed, "When embarking on any new business venture, the most economical approach is to tackle it straight away." He was thinking of immediate construction of the automobile pilot plant and steel mill. Aware that even Mitsui and Mitsubishi had abandoned their efforts to enter the industry, some directors opposed the idea, but Kiichiro argued his case convincingly. Eventually, he persuaded the board to approve the establishment of the Automobile Department retroactive to September 1, 1933.

At the extraordinary stockholders meeting held on January 29, 1934, Toyoda Automatic Loom Works voted to increase its capital to 3 million yen and to add automobile manufacture and steelmaking to the businesses listed in its articles of incorporation. With its decision to join the auto industry now official, the company immediately began construction of a pilot plant and a steel mill within the Toyoda Automatic Loom Works compound.

The group of complete novices engaged in the prototype construction of their first automobile, however, found the going extremely rough. Although the men were confident with casting because of their experience using an electric furnace and molding machine to manufacture looms, components with complex shapes, such as engine cylinder blocks and heads, forced them to rethink every aspect of the process down to the type of sand used in the mold. The use of a core to create a hollow space in the casting presented a particular challenge, and the staff found themselves in an ongoing struggle to determine the right type and amount of oil to mix with the sand. It took a good half a year to cast the first


cylinder block, and continuous trial and error by the most skilled staff members to determine the proper machining allowances.

Kiichiro's staff finally completed their first prototype engine in September 1934. Christened the Type A, it was a 3,389-cc inline six-cylinder engine. But try as they might, they could not improve its horsepower. Kan sequestered himself in the plant for a week to work on the shape of the cylinder head combustion chamber before the target of 65 hp was finally achieved in March of the following year.

When it came to test production of the frame and body, materials were a problem. Domestically produced sheet steel, which cracked when it was stamped, proved utterly useless. The Toyoda staff made repeated requests to the steelmakers to improve their product, but the country did not yet have the technology to produce steel sheet of uniform quality, and little improvement resulted. If they were going to use stamping presses for mass production, then at the very least they would have to import sheet steel for the body.

The first prototype automobile was finished in May 1935 -- the Model A1 passenger car with a Type A engine. Its streamlined body was at the forefront of style for its day. In the United States, it had only been recently that streamlined bodies had begun to be used on the De Soto and other car models and there was no guarantee that the public would respond favorably to such a design. After listening to the opinions of many people and studying the structural dynamics, however, Kiichiro concluded that streamlining would become the norm for passenger cars of the future.

After producing three Model A1s, Kiichiro and the other members of the Automobile Department conducted almost daily road tests. Meanwhile, however, the environment of the auto industry was changing rapidly, and Kiichiro's dream of producing a passenger car was forced to undergo a major change in direction.

Chapter 2: Founding of Toyota


Inception of Japan's Motor Industry

Japan's economy grew spectacularly in the 1930s. The rate of increase of industrial production between 1931 and 1936 was 161% for steel and 139% for chemicals, greatly surpassing the 56% for textiles during the same period. Between 1936 and 1941, machinery production showed a high growth rate of 152%, and the economic structure shifted toward heavy industry and chemicals.

The automobile industry also moved into the spotlight. As a result of the worsening of the international balance of payments and changes in the international situation, the policy of promoting the growth of the domestic automobile industry developed rapidly from 1935. In May 1936, the Law Concerning the Manufacture of Motor Vehicles was promulgated to promote the establishment, in a single stroke, of Japan's automobile industry. The law instituted a system under which manufacturers of over 3,000 units annually had to be licensed by the government, and it also aimed for the total domestic production of vehicle parts.

This in effect put an end to the plans of Ford-Japan to build an integrated production plant, capable of everything from steel making to parts manufacture and final assembly, on land it had purchased in Yokohama. Moreover, with the increase of import tax on automobile parts and the plunge of Japan's currency, which began in 1937, Ford and GM lost their competitiveness and ultimately halted motor vehicle production activities in Japan.

The companies licensed under the provisions of the Law Concerning the Manufacture of Motor Vehicles were Toyoda Automatic Loom Works and Nissan Motor Company. The reason for licensing only two companies was to avoid the chaos that


would result were numerous competitors to enter the field. These particular two were chosen because of their different management methods and capital structures, a situation which was congruent with the policy the Ministry of Commerce and Industry sought to pursue.

Of the two, Nissan had been manufacturing parts for Ford-Japan and GM-Japan from the days of its predecessor, Tobata Imono Co. After becoming established as an independent automobile company in 1933, Nissan purchased second-hand equipment from Graham-Paige Motors Corporation of the United States, brought in foreign engineers to establish a mass production plant and in other ways aggressively absorbed American-style mass production technology.

The government also granted a license in 1941 to Tokyo Motor Industry Co., Ltd., a company born of the merger of Ishikawajima Automobile Manufacturing and other companies that had taken part in the Ministry of Commerce and Industry's program to design and build a vehicle with standardized specifications. Tokyo Motor Industry was able to acquire authorization under the Law Concerning the Manufacture of Motor Vehicles because of its development of a diesel engine, and it changed its name in 1941 to Diesel Motor Industry Co., Ltd. and began producing mainly diesel-powered trucks.

Starting in 1936, the year the Law Concerning the Manufacture of Motor Vehicles was passed, the government gradually tightened its control over industry as international relations became more strained. A series of laws was passed, such as the Temporary Funds Adjustment Act of September 1937, to place controls on the economy by restricting the flow of both goods and capital; then, in 1938, the National Mobilization Law was enacted, and the country found itself placed under full wartime economic controls.


After war with China broke out in 1937, the war front gradually widened to the point where confrontation with Great Britain and the United States became inevitable. The United States curtailed exports to Japan of petroleum and steel, and Japan responded by moving to secure supplies of these important strategic raw materials by extending the battlefront further. This eventually led to the bombing of Pearl Harbor by Japanese planes on December 7, 1941, the beginning of the Second World War in the Pacific.

As the war progressed, the weaknesses of Japan's war economy started to become apparent. The government strove to increase production in five major industries: steel, coal, light metals, shipbuilding and aircraft manufacturing; however, output dropped instead of rising. In particular, military production was badly affected by the lack of raw materials as Japan eventually became unable to secure its sea-lanes.

Wartime economic controls placed various restrictions on the automobile industry. In August 1938, the Minister of Commerce and Industry issued a notification that forbade as a general rule the production of passenger cars other than for military use, and consequently vehicle production focused on trucks. Control measures were successively introduced: In May 1939, car pricing was controlled; in March 1941, official prices were established; in April, production of bus chassis was prohibited; in May, replacement parts were rationed; and in June, official prices were set for truck bodies. This culminated in the establishment in December 1941 of the Motorcar Control Commission in line with the Major Industries Control Ordinance.

Based on the same ordinance, the Japan Automobile Distribution Corporation was established in July 1942, and regional automobile distribution companies were set up in each prefecture to consolidate sales of automobiles and parts under government control. Furthermore, the parts industry was placed under


government control with the formation in 1943 of the Japan Automobile Parts Industry Control Union.

Under wartime controls, the production of trucks and buses increased, with a peak of 42,813 units manufactured in 1941. In the same year, Nissan produced only 1,066 and Toyota only 208 passenger cars.

Line-off of the First Passenger Car

In May 1935, Toyoda Automatic Loom Works completed its first Model A1 passenger car, which was powered by a Type A engine. Just before this, Kiichiro Toyoda had learned that the Bill Concerning the Manufacture of Motor Vehicles would place great emphasis on the production of trucks. Although Toyoda Automatic Loom Works had been carrying out trial manufacture aimed at passenger car production, Kiichiro realized that a shift in planning was needed. He thus instructed Risaburo Ohshima to set about developing trucks. In March 1935, Toyoda Automatic Loom Works initiated the trial manufacture of trucks. It was decided that the engine developed for the passenger car would be used and that the frame, like the Ford truck frame, would be principally designed for poor roads.

Meanwhile, the Bill Concerning the Manufacture of Motor Vehicles was moving quickly toward becoming law. Toyoda Automatic Loom Works had not yet begun full-scale production of passenger cars or trucks, so it had to speed up its efforts to prepare for manufacturing trucks. Consequently, a special general meeting of shareholders was held on July 9, where it was decided to start full-scale production of motor vehicles and to double the company's capital.

On August 20, after the Cabinet decided upon the outline of the vehicle manufacture bill, Toyoda Automatic Loom Works increased its capital to 6 million yen, and on August 25 a prototype


of the Model G1 truck was completed after less than six months' work. The body was handwrought, without using molds. Ohshima also introduced certain unique features into the body design, such as drawing upon the inspiration of a Noh mask in the design of the radiator grille.

Unfortunately, when the Model G1 truck was given a trial run on mountain roads, many defects became evident. The propeller shaft broke, for example, and the steering system and transmission both failed. In anticipation of possible problems, Toyoda Automatic Loom Works arranged for a service team to accompany the truck, but even so the results were extremely poor, and it was clear that much work had still to be carried out on the Model G1 truck.

Improvements were made and further trials quickly completed as Toyoda Automatic Loom Works moved to start production and sales as soon as possible. It knew that once the Law Concerning the Manufacture of Motor Vehicles came into effect, authorization would be given only to a few manufacturers; if Toyoda Automatic Loom Works were not selected, it would be unable to carry out the automobile manufacture in which it had already invested so much effort. It was necessary to make as many trucks as possible before the selections began.

Once the prospects for producing the vehicle had become certain, Toyoda Automatic Loom Works on November 21, 1935 held an exhibition in Tokyo to launch the Model G1 truck and, thereby, its full-scale entry into the automobile industry. At the launch, Kiichiro explained his enthusiasm for automobile manufacture and spoke about his aspirations: There were already large vehicle assembly plants in Japan operated by foreign makers, and it would be quite difficult for a wholly domestic automobile industry to develop in competition with them. Nevertheless, he was determined to overcome the many difficulties the company faced and to expand the automobile markets that had been


pioneered by Ford-Japan and GM-Japan.

One of the things that Kiichiro learned when he visited the United States and saw the automobile industry there was that the key to success or failure of mass production lay in marketing. Ford-Japan and GM-Japan had already established sales networks in Japan; Toyoda Automatic Loom Works, therefore, had to establish a sales network to rival those of Ford and GM, even though it had no experience whatsoever in selling motor vehicles. It was around this time that Kiichiro was introduced to Shotaro Kamiya.

Kamiya began his business career with Mitsui and worked for some time at its Seattle Branch Office. He later left Mitsui and established his own steel wholesale business in London. Subsequently, he returned to Japan and joined GM-Japan. He brought with him experience in international business and automobile sales. Kiichiro, who was introduced to Kamiya by Tojiro Okamoto, manager of Toyoda Spinning & Weaving Co., Ltd., immediately invited Kamiya to join his company, saying that he would make Kamiya responsible for sales. Without hesitation, Kamiya decided to join Toyoda Automatic Loom Works, and he entered the company in October 1935. At GM-Japan, Kamiya was manager of the Tokyo Office and had held important posts, including manager of the sales and advertising department. From his observations of developments in government ministries, particularly the Ministry of Commerce and Industry, he was convinced that the sales prospects for a wholly Japanese-manufactured vehicle were good, so he decided that he would start anew at Toyoda Automatic Loom Works.

When announced, the Model G1 truck was priced at 3,200 yen, 200 yen less than the models of Ford and GM. This price, though, was well below production cost, and profits could only be made after mass production was under way. The low price reflected Kamiya's belief that the first priority of Toyoda Auto


matic Loom Works was to put the truck on the market at an affordable price.

Kamiya started making preparations for the introduction of a mass sales system. Initially, some opined that a system of directly managed branches should be established, but Kamiya contended that it was essential for those who sold the automobiles to have the trust of the local people as well as a thorough knowledge of the locality. This view held sway and it was decided to set up one dealership in every prefecture, each with several outlets and funded by local capital. Kamiya moved to reinforce the staff of the Headquarters Sales Department by inviting some of the men who had worked under him at GM-Japan to join him at Toyoda Automatic Loom Works. Among them was Seisi Kato, later to become president and chairman of Toyota Motor Sales Co., Ltd.

Dealers were selected in line with Kamiya's policy: "My experience has taught me that when setting up a new dealership, it is important to choose experienced people whenever possible, because such individuals know how difficult it is to sell automobiles and because they have knowledge of the vehicles themselves." In November 1935, Hinode Motors of Nagoya became Toyoda Automatic Loom Works' first dealer. Noboru Yamaguchi, the general manager of Hinode Motors, had been a close friend of Kamiya from his days at GM-Japan. New dealerships were gradually set up throughout the country following the establishment in January 1936 of the second dealer, Tokyo Toyoda Motor Sales Co., Ltd., in the major market of Tokyo. By the end of 1938, a sales network consisting of one dealer in each prefecture had been established.

However, in 1935, only 20 Model G1 trucks were produced; their quality, moreover, was far from satisfactory. When trucks were taken to be exhibited at a show in Tokyo, they had to be


repaired on the way and were only just able to complete the journey. In December, too, when Hinode Motors in Nagoya held a launch, the truck broke down on the way from the factory. The situation was such that Risaburo Toyoda, the president of Toyoda Automatic Loom Works, is actually said to have asked, "Will our trucks ever run?"

Initially, the trucks were sold only to customers who were sympathetic to the idea of fostering a domestic automobile industry and who lived in areas where the trucks could be repaired quickly in the event of any problems. And, indeed, breakdowns did occur.

The problems were mostly caused by parts made by Japanese subcontractors. Poor-quality materials and differences in manufacturing methods were resulting in fragile vehicles. Kiichiro personally inspected the trucks, crawling underneath in an effort to track down the cause of the difficulties. He gave various instructions for changes to be made in the materials and in the manufacturing methods. When a new part was perfected, he would smash the entire stock of the old part in front of all employees from the management down so as to express his resolve never again to build a product of inferior quality. The unceasing efforts of Toyoda's engineers gradually yielded improvements in quality. The improved trucks incorporated many new design features, such as hydraulic brakes, full-floating rear wheels and a rugged frame, so that once the initial problems were solved the truck's reputation improved steadily.

In January 1936, at a launch held together with the opening ceremony of Tokyo Toyoda Motor Sales, a bus chassis equipped with the same Type A engine was announced in addition to the Model G1 truck. Called the Model DA, it had high ground clearance despite a low floor and was sturdy enough to withstand driving on poor roads. The Model DA became widely popular,


and its Type A engine gained a good reputation for its low fuel consumption.

Truck production thus got under way, and so in February Kiichiro once again started work on the project he most wanted to bring to fruition, a prototype passenger car. Stamping dies for the car were finally completed, and the prototype Model AA passenger car emerged. It had somewhat softer body lines than those of the Model A1.

With the completion of the prototype, the company announced its intention to produce passenger cars for the general public. Kiichiro was aware of the importance of a brand name, so in July the company ran a contest for suggestions for a new Toyoda logo. There were over 20,000 entries. The winning entry consisted of katakana characters in a design that imparted a sense of speed. In the logo, "Toyoda" became "Toyota" because as a design it was esthetically superior and because the number of strokes needed to write it was eight, which in Japan is a felicitous number, suggestive of increasing prosperity. It also sounded better.

In October, the Model AA was renamed the Kokusan Toyota Goh, meaning "the domestically produced Toyota." It became the first automobile to use the Toyota name and proudly displayed the new logo, which is still used today as a trademark and as the corporate emblem of the Toyota Motor Corporation.

In September 1936, Toyoda Automatic Loom Works sponsored an exhibition in Tokyo to commemorate the completion of Japan's first home-produced car for the masses. The company exhibited a number of its models, including the Model AA passenger car, the Model GA truck, an improved version of the Model G1 truck, the Model AB Phaeton, which was an open-top version of the Model AA, and the Model DA bus chassis.

This show, which turned out to be an overall exhibition of Toyota's automobiles, attracted many visitors. Around noon on September 14, 1936, the first day of the exhibition, Toyoda


Automatic Loom Works was notified that it had been chosen as one of the companies authorized to produce automobiles under the Law Concerning the Manufacture of Motor Vehicles. That day indeed became one worthy of designation as a landmark day in Toyota's history.

Founding of Toyota Motor Company

Construction of the Kariya Assembly Plant moved ahead rapidly: 50,000 m2 of land was acquired near the Toyoda Automatic Loom Works, and an assembly plant with a monthly production capacity of 150 trucks was completed in May 1936. This, together with the previously constructed steelworks and casting plant, constituted a complete automobile plant at Kariya. Parallel to these developments, aiming toward full-scale automobile production, in December 1935 Kiichiro purchased about 2 million m2 of land in Koromo-cho, some 30 km east of Nagoya. At that time, the site was virgin property covered with red pine and various other trees. It was later developed and became the hub of the Toyota Group. Subsequently, Koromo-cho underwent great changes and was eventually renamed Toyota City.

Soon after entering the automobile-manufacturing business, Kiichiro was already thinking about spinning off the Automobile Department into a separate company and the construction of a new plant that would permit mass production. This became a financially viable proposition since Toyota was now authorized to produce motor vehicles under the Law Concerning the Manufacture of Motor Vehicles. In March 1937, a meeting of the Toyoda Automatic Loom Works' board of directors was held and it was decided to establish a new company and construct the Koromo Plant.

Toyota Motor Co., Ltd. (TMC) was established on August


28, 1937 with a capital of 12 million yen. Risaburo Toyoda became president, and Kiichiro Toyoda was appointed executive vice president; Risaburo Ohshima was named managing director, and Takatoshi Kan and Shotaro Kamiya were made directors. The capital came mostly from these new officers and members of the Toyoda family; the rest was borrowed from external sources.

Initially, TMC consisted of seven departments, i.e., the Administration Department, Sales Department, Manufacturing Department, Engineering Department, Technical Department, Total Vehicle Engineering Administration Department, and Research Department; and there were three offices, in Tokyo, Osaka and Nagoya. In creating this organization, Kiichiro decided to make it simple and conducive to coordinated control. In his words: "An automobile is made up of several thousand parts. If even one of these parts is missing, a complete automobile cannot be built. Unless there is complete control, it is impossible to make a single automobile, even though there may be parts in abundance. A large-scale business such as this can be controlled only by making it as simple as possible." As an example, Kiichiro advocated a policy of "building low-priced, high-quality vehicles" through the all-out efforts of the Manufacturing Department and Engineering Department working in close cooperation, and the respective managers of each department were given simultaneous managerial control of the other department. The Total Vehicle Engineering Administration Department was placed under the direct control of Kiichiro. Its function was to rectify unsatisfactory areas in the company, ranging from defects in the corporate structure to filling potholes in the on-site roads, improving the cafeteria menu and, of course, improving products in coordination with other departments.

The Research Department, which was headed by Kiichiro himself, was viewed with importance from the outset. Kiichiro felt that although establishing technical ties with overseas makers


and adopting their technology and plant facilities would enable him to manufacture motor vehicles, it would not be conducive to fostering the Japanese automobile industry. Instead, he saw a need to promote the development of basic technology in order to produce an automobile which was suitable for conditions in Japan. The importance placed on the Research Department clearly reflected Kiichiro's thinking.

Meanwhile, Eiji Toyoda (present chairman), who had just joined the company, and others completed preparations for a research laboratory in Shibaura, Tokyo. Upon its completion, first-class researchers from various fields were invited to join and serve as advisers so their knowledge could be used to establish a research organization. These men included Kazuo Kumabe, an expert on automobile engineering and assistant professor at Tokyo Imperial University, Tokushichi Mishima, an authority on material engineering and a professor at Tokyo Imperial University, and Masao Naruse, a specialist on gears and a professor at Tohoku Imperial University. All these individuals had provided valuable advice over the years in connection with Toyota's automobile development work.

At the laboratory, the technical staff conducted basic studies in an unrestrained atmosphere in areas such as analyzing and making drawings of a front-wheel-drive vehicle called the DKW, which Kumabe brought back from Germany, and of a French-built light aircraft, which Kiichiro had bought. Eiji reflected in later years, "Studying aircraft or even rockets proved very useful in the building of automobiles."

Kiichiro frequently went to Tokyo to visit universities and research institutes in order to acquire new knowledge related to materials, parts and manufacturing technology. Upon acquiring some new piece of knowledge that could be utilized, he immediately wrote a memorandum to his staff, requesting them to change a material or manufacturing method.


In this way, engineering research progressed, employing as many authorities and research organizations as possible. However, a major problem was the ever-increasing manufacturing costs. Kiichiro said, "Nothing can alter the fact that a large number of machines are needed to make good automobiles. If we are going to hesitate about purchasing machines, it would have been better not to have entered the automobile industry in the first place." He proceeded to purchase the latest and most sophisticated machine tools one after another. Unfortunately, however, the overall efficiency was not as good as expected because of differences in the efficiency of different processes. Kiichiro wrote the words "Just in time" on a banner and hung it on the wall. "People talk about having missed a train just by a minute," he said, "but of course it's possible to miss a train just by a second. What I mean by 'just in time' is not simply that it is important to do something on time, but that it is absolutely essential to be precise in terms of quantity and not, for example, produce something on time but in excess, since excess amounts to waste." Storage locations for materials and parts were determined and nothing in excess of one day's supply of parts was allowed to sit idly beside a line. Kiichiro often walked around the plant and made the workers move away from the line anything that was surplus to the requirements of the day's work. In this way, the Just-in-Time System, one of the main pillars of the Toyota Production System, was started.

At the beginning of 1937, Kiichiro performed a detailed cost calculation and revenue and expenditure estimate. He concluded that if Toyota built a fully fledged plant at Koromo and produced about 1,500 automobiles a month, the company should be able to make a profit even after the interest due on loans had been subtracted.

Kiichiro instructed Kan to build a plant at Koromo. He did


so in the most informal manner, simply with the words, "Please construct a plant at Koromo capable of producing 500 passenger cars and 1,500 trucks a month" written on a scrap of paper.

On the other hand, Kiichiro's directives at the design stage of the plant were quite severe. Examples include: "Have the 30 or more factory buildings of various sizes laid out so that their proximities to one another will be conducive to the smooth production of complete automobiles"; "In the plant, place special-purpose machines organically so their layout will be conducive to work flow from one machine to the other"; and "Build machines that will be flexible enough in function to meet any requirement, bearing in mind that they are to be used for 20 or 30 years."

Kiichiro also gave the instruction, "Forget the commonly held notion that warehouses are essential in a plant." These words meant that the concept of the Just-in-Time System was to be fully implemented with the completion of the Koromo Plant.

The entire plant was laid out according to the manufacturing flow from the bringing in of raw materials to the dispatch of the completed automobiles. The budget did not permit the use of a conveyor system throughout, but the plant was laid out so that additional conveyors could be installed at any time. In the machine shop, machine tools were not set up with the machines grouped together by function or type, but in a manner conducive to production flow by arrangement according to the process sequence.

Although the necessary machinery was purchased without hesitation, it was not profitable to use only special-purpose machine tools. Improvements were therefore made, such as making it possible to vary the distance between the spindles of cylinder borers so as to obtain the facility of both special-purpose and general-purpose machine tools.

Being in the automobile industry and involved in the manufacture and assembly of many different parts, the elimination


of warehouses was a tall order for TMC. The warehouse space was, however, kept to a minimum through synchronizing the lines as far as possible and also devising ways to prevent stock from accumulating.

Construction of the Koromo Plant, the present Honsha Plant, began in September 1937, and the entire project was completed by the end of September 1938. By the end of October 1938, the move from the Kariya Plant had been made. On November 3, 1938, a ceremony was held to mark its completion and the switch was thrown to initiate the operation of the Koromo Plant. This day was also designated as the date marking the founding of Toyota Motor Corporation.

Toward All-out Production

With the completion of the Koromo Plant, TMC moved into full-scale production of passenger cars and trucks. The main truck model produced was switched to the Model GB, which was equipped with the newly developed Type B engine. The engine used a five-bearing system and was capable of 75 hp, more than the Chevrolet engine with which it was in competition. In January 1939, the Model GB truck was put on the market, and the resulting brisk sales were aided by the existing economic boom.

Kiichiro constantly toured the plant, promoting the shift to a modern plant operation that would meet the needs of mass production. The Kariya Plant was run under a contract system in which wages for employees were determined on the basis of turnover for each process; it was thus not possible to bring about completely the Just-in-Time System as conceived by Kiichiro. But the system was modified when production was moved to the new plant, and the task of reforming the production method was tackled. Under the new production system, a series number was allocated to every 10 vehicles produced, and these numbers were


used to keep track of everything related to those vehicles right down to the parts from which they were assembled. The progress of manufacturing could thus be monitored by checking the number assigned to the parts in each process at any given time. Flow production was employed, whereby the progress of each phase of manufacture was carried out in synchronization with the final stage; this was aiming toward realization of the Just-in-Time System.

Kiichiro wrote one memo after another in his spare moments in order to instill the new ideas in the minds of the administrators and supervisors. The rules and work procedure sheets which Kiichiro compiled around this time come to a total thickness of 10 cm; they included standards and attitudes to be observed by each department and person in charge, concerning everything from design, production and purchasing of parts, to employee welfare, all written in minute detail.

Kiichiro spoke constantly to the employees on the shop floor, and whenever they had a problem he would show them how to solve it and encourage them to use their own intelligence and initiative. Reflecting on his own career as an engineer, Kiichiro said that an engineer who possessed only academic knowledge was useless. It was important for engineers to be familiar with machines and have a thorough knowledge of them. An example he quoted concerned a new type of machine TMC had imported. When it was first brought into the plant, Toyota's engineers were unable to assemble it after reading the accompanying English instructions; however, one skilled worker who could not read English was able to assemble it readily just by looking at the drawings in the manual and using his intuition.

The reason Kiichiro went around the plant himself, getting covered in oil while helping workers to devise improvements, was because he wanted the people who knew the shop floor best to make the improvements. He would also chide university


graduate engineers to teach them the importance of getting down on the shop floor and doing jobs themselves, saying, "You must be very dexterous; you don't have any cuts on your hands. I'm not so good with mine; look at all these cuts and bruises!" or "There's no need to wash your hands before visiting me or any of the other executives in our offices."

The automobile business, which began as a result of Kiichiro's determination, got well under way, supported by brisk demand, and there was a lively atmosphere at the plant. However, the activities of the company under the wartime economic controls came to be dictated by government demands for sharp production expansions and also by an ever-growing serious lack of raw materials.

In October 1938, the government put forward a four-year plan for promoting the increased production of 15 major items, including automobiles, ships and steel. Together with Nissan, TMC was obliged to produce 20,000 trucks in fiscal 1939. In April 1939, the company increased its capital to 30 million yen and began the execution of an extension plan at the Koromo Plant. TMC enjoyed good business results from the outset, attaining a profit of 800,000 yen in 1938 and 2 million yen in 1939. As a result, Toyobo Co., Ltd., Nippon Life Insurance Co. and C. Itoh & Co. applied to participate in a recapitalization. In this way, the company, which had initially obtained its capital from a very limited number of inside stockholders, finally started to draw on external capital. Using this additional capital, TMC began expanding its annealing plant, special iron foundry and malleable iron foundry.

Because of the shortage of machine tools and the lack of raw materials and coal, production in 1939 was only 11,981 vehicles. Moreover, almost the entire production was trucks; only 107 passenger cars were built.


Truck production could not keep up with the demand, but the real aim of TMC, and above all Kiichiro, was to produce passenger cars. Research into the Model AA passenger car was followed by that into a minicar of about 600-cc displacement, and prototypes were made of small cars, such as the front-wheel-drive Model EA and rear-wheel-drive Model EB. A prototype of the Model AC, an improved version of the Model AA, was also started. However, in 1938, the Ministry of Commerce and Industry banned the production of small vehicles, and TMC was forced to reduce its passenger car production drastically.

Also, by this time, even technological development had come under government control. The specifications of trucks built for wartime conditions were discussed at meetings called by the Ministry of Commerce and Industry, and on each occasion a study was made of parts to eliminate and materials to reduce in quality, with the result that the vehicles produced became progressively less sturdy. The situation was so bad that Kiichiro felt like pulling out of the truck project. But he never gave up his dream of producing passenger cars.

One of his instructions to the Technical Department was "Hold on to the people who make the passenger car bodies." A frequent saying of his was: "If we don't build passenger cars, we won't be able to develop any meaningful technology," and he continued to make prototypes of passenger cars and carry out research into them.

At the beginning of 1940, a launch was held for a 2,200-cc Model AE passenger car, and dealer representatives were invited to test-drive it. The vehicle, named the Shin Nippon Goh, had been developed at the request of the Ministry of Commerce and Industry. As the wartime situation became increasingly severe, however, it was no longer possible to use the limited supplies of raw materials for building passenger cars. Full-scale production of the Shin Nippon Goh was never realized.


At around this time, joint-venture negotiations were under way between Japanese and American automobile manufacturers, though they never materialized. On the one hand, Ford-Japan and GM-Japan were working to secure a share in the Japanese market; on the other, the Japanese makers, TMC and Nissan, were being urged to expand production quickly. Finding that their interests coincided, two joint-venture negotiations were carried out simultaneously, one between GM and TMC and the other between Nissan and Ford. A provisional joint agreement was signed between TMC, Nissan and Ford in December 1939, but because of the steadily deteriorating relationship between Japan and the United States the agreement did not transpire.

The military ordered TMC and Nissan to supply automobiles to mainland China and also to repair them there. Nihon Sangyo Co., Ltd., the parent company of Nissan, moved its headquarters to the northeastern part of China and was renamed Manchurian Heavy Industries Development Corporation. In April 1938, TMC constructed its Tientsin Plant, and in February 1940 the Pei-chin Automobile Company was established with 10 million yen capital. Then, in May 1939, an assembly plant was constructed in Shanghai and production of the Model GB truck commenced. The Shanghai Plant then took steps to begin full-scale production and in February 1942 became independent as the Hua-chung Toyota Automobile Company with 5 million yen capital.

Following the outbreak of war in Europe in September 1939, procurement of raw materials became increasingly difficult. At TMC, rationalization of the production processes and in-house production of machine tools were carried out under Kiichiro's instructions. However, the allotted material quantities were greatly insufficient, and the dearth already far exceeded what could be compensated for by the frugal use of materials and in-house


manufacture. The shortage of raw materials resulted in delays in the supply of parts made by subcontractors and also forced suppliers to rationalize production. In contrast to Europe and the United States, the Japanese automobile parts industry was not yet developed; hence, it was essential for automakers to cooperate closely with suppliers so as to ensure the continuance of the automobile industry. According to the Purchasing Rules, established in 1939, suppliers to parts makers were to be regarded as branch plants of TMC. This meant that once an arrangement with a supplier had been made, close connections were to be maintained, just as if the supplier were part of TMC. Business was to be carried out with the supplier on a permanent basis, as a general rule, and efforts were to be made to strengthen this relationship for the prosperity of both TMC and the supplier. This principle of coexistence and coprosperity was understood by TMC's suppliers, and representatives of the suppliers met and formed a cooperative group, the Kyoryoku Kai.

Under wartime economic controls, the consumption of steel was regulated and rationing imposed. As a result, from around 1938, it became increasingly difficult to obtain steel for automobile production, and even when steel was available it was no longer possible to specify a particular quality or standard. To overcome this, the steelworks of Toyoda Automatic Loom Works was expanded, and in May 1939 construction began on a new steel mill. In March 1940, Toyoda Automatic Loom Works transferred all its equipment and facilities as its investment share in the establishment of Toyoda Steel Works, Ltd., which was set up with a capital of 17 million yen.

TMC, meanwhile, was having difficulty in procuring machine tools and, despite increasing their in-house manufacture, was unable to support production expansion. Although a few good machine toolmakers had begun to develop in Japan, Kiichiro wanted to make special-purpose machines that would have the


high productivity needed to meet the scale and process requirements of TMC's plants. To bring this about, TMC in November 1939 decided to spin off its Machine Tool Department as an independent company and construct a plant in Kariya. The new company, Toyoda Machine Works, Ltd., was set up in May 1941 with a capital of 8 million yen.

War and War's End

In the spirit of "Be at the vanguard of the times through endless creativity, inquisitiveness and pursuit of improvement," one of the Toyoda Precepts, TMC's research laboratory at Shibaura in Tokyo was further expanded: In 1939, the Storage Battery Laboratory was established to develop a storage battery for automobiles in an effort to cope with a worsening fuel situation. The laboratory also began taking over the inspection and testing of externally procured parts, building special vehicle prototypes and carrying out other similar functions; it thus became known as the Shibaura Plant.

In September 1940, the Toyoda Physical and Chemical Research Institute was established at the laboratory with 1 million yen donated by TMC-affiliated companies. Kiichiro became chairman of the board of directors, and Tokushichi Mishima and Kazuo Kumabe, among others, were appointed directors. Today, the Toyoda Physical and Chemical Research Institute continues its work within the Toyota Central Research & Development Laboratories, Inc., true to the spirit in which it was established: "To perform broad research in the physical and chemical sciences, thereby contributing to the national development and providing a lasting commemoration to the achievements of Sakichi Toyoda."

In January 1941, Risaburo Toyoda became chairman of the board at TMC, Kiichiro became president and Hisayoshi Akai, a


director at Mitsui, became executive vice president. Kiichiro commented, "Now that we have come this far, there's no turning back." Kiichiro, who had poured all his efforts into automobile development, was finally in charge of TMC, and the newly emerging TMC had already become the nucleus of the Toyota Group.

The new president set about reforming the organization of the company. He set up the Planning Council as a liaison group between TMC and Toyoda Steel Works, Toyoda Machine Works and Toyoda Automatic Loom Works as the first step toward strengthening the company's planning capabilities. Taizo Ishida, then a managing director of Toyoda Automatic Loom Works, represented this company on the Planning Council. Ishida was later to become president of TMC, and this marked the beginning of his involvement with automobiles.

Automobile production expanded and new companies were set up one after another; in contrast, the textile sector, whence the Toyota Group had originated, was forced to contract. Consistent with the policy to unify companies in the spinning business, Toyoda Spinning & Weaving merged with Toyoda Oshikiri Spinning and Weaving Company, Chuo Spinning & Weaving Company and other smaller companies, and the Chuo Spinning Company was established in March 1942. However, government control of the spinning industry was further tightened, forcing Chuo Spinning Company out of production as well.

In November 1943, Chuo Spinning Company was absorbed into TMC. This signified that the decision had been made to make automobile manufacture the main business of the Toyota Group.

After defeat in the Battle of Midway in June 1942, the war situation for Japan started to deteriorate. It was no longer possible to deliver oil to the country from the South Pacific and even though industrial production was heavily concentrated in war-related industries, overall output kept falling. TMC also gradually


found itself forced to operate within tighter restrictions. In December 1943, with its plants regarded as producers of military supplies, TMC was placed under military supervision. In January 1944, it was designated a supplier company of military goods and placed under the direct authority of the Minister of Munitions.

There was an urgent need at the time for aircraft, and TMC too, complying with the demands of the military, began trial production of aircraft engines at the beginning of 1943. In October, a foundry for light alloys was built, and machinery for manufacturing aircraft engines was concentrated there. At the end of the year, the first aircraft engine came off the production line. Nevertheless, production was hampered by shortages of raw materials. Consequently, by the end of the war, the total production was a mere 151 engines.

Meanwhile, in March 1943, Tokai Hikoki Co., Ltd. was set up with a capital of 12.5 million yen as a joint venture with Kawasaki Aircraft Co., Ltd., which had experience in the manufacture of aircraft engines. The new company constructed a temporary jig and tool plant for manufacturing aircraft engines at Kariya, although the war ended before engine manufacture could begin.

In August 1944, the Ministry of Munitions ordered further simplification of vehicles built for the wartime conditions in order to achieve greater savings in materials and also to increase vehicle production. As a result, the amount of steel used in the driver's cab and the bed of the Model KC trucks was reduced to a bare minimum, and only a single headlamp was installed at the center; it thus became known as the "one-eyed truck." In addition, the radiator grille was replaced by a single horizontal bar on which the headlamp was mounted. The bumper was made narrower than the width of the vehicle and, incredibly, brakes were fitted to the rear wheels only. It was possible though for such a dangerous truck as this to run on the roads since by this time there were


very few vehicles about.

Kiichiro believed that one of the mainstays of the automobile industry was body manufacture. For this reason, he had plans to spin off the body plant as early as 1940, and in May 1945 it was decided to establish Toyota Shatai Kogyo, Ltd., now Toyota Auto Body, Co., Ltd. The first capital payment was made on August 1. Kiichiro became president and the new company was capitalized at 9 million yen.

By this time, the war situation had gone from bad to worse, and it was inevitable that Japan would soon have to fight the decisive battle on its own soil. Then, in August 1945, the atomic bombs were dropped, first on Hiroshima and then on Nagasaki. In a memo written around that time, Kiichiro pointed out that automobile production in the United States was a hundred times greater than that in Japan. He also asked how Japan, with only one hundredth the weapons possessed by the United States, could possibly win such a war. Kiichiro was becoming interested in what the situation in Japan would be like after losing the war, and he read a great deal about conditions in Germany and its recovery following defeat in the First World War.

Finally, at noon on August 15, 1945, Emperor Hirohito went on radio to announce the end of the war. The message was relayed from speakers in the company's plants. There was a great deal of static interference in the broadcast, and those listening were not quite sure what it was all about. One person said, "He's saying that the decisive battle is about to be fought on Japanese soil, so we must all get ready for the final struggle." Without quite knowing what was going on, some employees went back to work and continued repairing the bombed plant.

Eventually, however, word got around that Japan had accepted the Potsdam Declaration, signifying the end of the war. One by one the machines stopped, and the young female workers


broke down and wept in front of their machines. After a while, the school students who had been mobilized for work in the plant lined up in four rows and, tears in their eyes, marched back to their dormitories. Concerned, the head of the Labor Relations Department followed them to their room to find them all crying beneath their bed quilts.

Most of the employees hung their heads and went into a daze, without even shedding tears. However, some simply continued working, not wanting to believe that Japan had lost the war; others took photographs, thinking that this would be the last time they would all be together. Thus, the day that the war ended was met with various emotions.

At the end of the war, TMC was capitalized at 91.5 million yen and had six plants: the Koromo Plant, Kariya Plant, Shibaura Plant and the three aircraft plants it had gained from Chuo Spinning Company. TMC's affiliated companies included Toyoda Automatic Loom Works, Toyoda Steel Works, Toyoda Machine Works, Toyota Sangyo Kaisha, Ltd., Tokai Hikoki and the Toyoda Physical and Chemical Research Institute.

In 1945, a total of 3,275 trucks and buses was produced by TMC, but no passenger cars left its production lines.

Chapter 3: Rebuilding the Company


Starting from Zero

The initial postwar years were extremely difficult ones for Japan. The nation's entire industrial heartland lay in ruins, and industrial output had dropped to one-tenth of prewar levels. In 1946, the first complete postwar year, the economy showed no signs of recovery and inflation worsened. In the initial six months after the war, retail prices approximately tripled.

With defeat, Japan came under the control of the Allies, principally the United States. In September 1945, General Headquarters (GHQ), the military headquarters for the Supreme Commander for the Allied Powers, was established. Initially, the policy of the Occupation was to promote the demilitarization and democratization of Japan's political, economic and social environment.

Besides revising the constitution, redistributing farmland and expelling militarists from public office, as part of its democratic reforms the government under the Occupation dissolved the zaibatsu that had constituted the nucleus of the prewar economy. Almost all important business leaders were purged. The postwar Japanese economy had to start from zero.

The auto industry also had to start anew. At that time, the transportation system centered on the railroads, and the road network was in a bad state of disrepair. Only 112,000 trucks, poorly maintained and running on a variety of alternative fuels, were in service at the end of 1946.

Although the production facilities of automakers had suffered comparatively little damage in the air raids, since 1936 they had been put through extremely hard service, had undergone virtually no improvement and were quickly becoming obsolete.


The auto industry thus had to make its start with run-down, outdated plants and equipment.

In September 1945, auto companies received permission to make vehicles, though only for trucks that were to be used for reconstruction work. Corporate activities, however, were severely restricted in many ways as Occupation authorities included their production facilities in the reparations plan; the automakers were included among the companies designated as restricted to further the dismemberment of the zaibatsu. In addition to restrictive Occupation policies, sources of materials had dried up, making it extremely difficult for them to expand production.

In 1947, however, at the start of the Cold War between the United States and the Soviet Union, an abrupt reversal took place in Occupation policy in the direction of reviving the Japanese economy. In concert with the Marshall Plan for Western Europe, Occupation authorities rapidly implemented a series of economic recovery policies for Japan, including two aid programs -- Government Aid and Relief in Occupied Areas (GARIOA) and Economic Rehabilitation in Occupied Areas (EROA) -- and the reduction of reparations.

This turnabout in Occupation policy was also good news for the auto industry. Directives targeting auto production facilities for reparations and designating automakers as restricted companies were relaxed and the import of basic raw materials such as oil, coal and iron ore was promoted. As part of the economic recovery plan, a priority production system was established, aimed at increasing production in, and channeling funds and materials to, the basic materials sectors of coal and steel. This system soon began to show results, finally brightening the prospects of recovery for the auto industry. In August 1948, a five-year plan to revive the auto industry was formulated, which called for a total annual production of 120,000 vehicles a year by 1953.


As a result of increased government spending, however, inflation steadily accelerated. In December 1948, GHQ laid down its Nine Principles for Economic Stabilization to resurrect the Japanese economy. In February 1949, Joseph Dodge came to Japan as financial adviser and began to advocate budget reduction, and financing to industry halted. The so-called Dodge Line managed to stop inflation, but unemployment and corporate bankruptcies soared. The auto industry also suffered from sluggish sales and a rapid growth in inventory.

In June 1950, the Korean War broke out. Because the Allies' army procured supplies from Japan, Korea's neighbor, the Japanese economy experienced a sudden surge of prosperity. Manufacturing industries, centering on textiles and metals, rebuilt their operations as domestic consumption and investment boomed.

The auto industry was able not only to boost production and strengthen its operational base but also rapidly modernize its facilities and carry out corporate rationalization. Passenger car production, however, still faced an uncertain future. Just as before the war, in the Japanese auto industry, the bulk of the production resources was devoted to trucks. The passenger cars manufactured could not compete in the international market.

Determination to Rebuild

The postwar recovery of TMC began the day after the war ended on August 15, 1945. Knowing that the war was over, the employees were in a listless state, but Executive Vice President Hisayoshi Akai assembled the company management and said, "I am certain that an era of free economy will soon arrive. To help industry get back on its feet in peacetime, we will have to work hard to resume production at once, satisfy domestic demand and


eventually begin exporting again." TMC thus made its declaration that it would continue regular production from the day after peace came.

President Kiichiro Toyoda, sensing that Japan was about to lose the war, was concerned about how the Japanese auto industry would be treated by the victorious powers and how the company could provide a living for its over 10,000 employees, including those of affiliated companies. Leaving the day-to-day management of the plant to Executive Vice President Akai and Eiji Toyoda, who had become a director that May, Kiichiro devoted his time to gathering information that would enable him to judge the future of the Japanese industry.

Two or three days after the war had ended, Director Shotaro Kamiya, who was in charge of sales, appeared at the automobile distribution company in Nagoya. "The war's over. Let's get down to business," he said. He immediately set to work rebuilding the dealer network of TMC, which had been consolidated with those of other automakers into a single distribution company during the war.

In the postwar period of confusion, almost all Japanese felt dispirited. At Toyota, however, the determination to start producing and selling again was fast in coming.

Under the abnormal conditions of the economic chaos and Occupation rule, reviving the company was not an easy task. On September 15, exactly one month after peace was declared, Kiichiro spoke to all employees about the difficult situation the company faced. "The company will be going through some hard times in the days and months ahead. We may not be able to pay your salaries. Your future here is uncertain, so I urge you to reconsider it." Thus, the decision as to whether they should remain with the company was one that he left up to the employees themselves.


Designated as a military supply company during the war, TMC was in danger of having its facilities seized for reparations by the Occupation authorities. Also, many employees left the company as the food supply worsened. Of the 9,600 employees at the Koromo Plant only 3,700 remained by the end of October. Those who were left began the task of rebuilding the company.

Since food was in extremely short supply, the company began cultivating crops on the grounds of the Koromo Plant, and also built a flour mill, bakery and charcoal plant to supply its employees with food and fuel. Facilities at other plants were used to manufacture auto parts and recondition vehicles, to make electric stoves and irons, and even to fashion pots and pans from materials originally intended for airplanes. While there was no prospect of being able to produce motor vehicles, the company had to eke out an existence by making whatever it could.

Some relief came on September 25, when GHQ authorized truck production. TMC's production for September amounted to a mere 82 trucks, well below the peak of 2,066 trucks achieved in December 1941. Nevertheless, everyone was heartened by the resumption of production.

Around this time, Kiichiro wrote a memo entitled "Corporate Reform Policy," in which he outlined the following thoughts concerning the future of the economy, the auto industry and the company:

We have finally come to the point where Japan will have to convert to a free market economy like that of the United States and compete with the rest of the world on an equal basis. We must, therefore, reform our protected and monopolistic companies.

The Japanese auto industry has been fostered and protected in a controlled economy and has never braved the rough


waves of a free market situation. It is like a hothouse plant. Moreover, viewed impartially from a global standpoint, Toyota is far from being a first-class company. Because of Japan's defeat in the war, we should see ourselves as something like a third-class auto company.

We will find it difficult to hold a clear course without foundering in the stormy seas of a free market economy. The ability of this company, which has sustained heavy blows, to make the transition from a controlled to a free market economy will determine its ultimate success or failure.

However, if we can succeed in a free market economy, we will have a bright future ahead of us. Everything depends on our own determination.

Kiichiro immediately acted on his ideas. As concrete steps, he outlined the following policies: Mass production of small vehicles at the Koromo Plant; separation of the foundry, forge shop and other shops into separate accounting units; adoption of the piecework pay system; and establishment of a plant improvement section, responsible for upgrading production efficiency and carrying out rational personnel transfers. The basic company policy was to "make inexpensive, high-quality products able to compete with those of top world companies."

To demonstrate his determination to rebuild the company, Kiichiro also reduced all management up to and including heads of departments by one rank.

In November 1945, Chairman Risaburo Toyoda resigned and the company deleted the manufacture and sale of aircraft from its Articles of Incorporation, thus ridding Toyota of the stigma of its forced wartime activities. Also, Toyota's affiliated companies changed their names: for example, Toyoda Steel Works, Ltd. became Aichi Steel Works, Ltd., and Tokai Hikoki


became Aichi Kogyo Co., Ltd. At the same time, a new system was instituted which abolished the holding of concurrent directorships between affiliated companies. Later, in August 1965, Aichi Kogyo merged with Shinkawa Kogyo Co., Ltd. to become a major parts maker in the Toyota Group, Aisin Seiki Co., Ltd.

Meanwhile, GHQ handed down strict orders to dissolve the zaibatsu and in March 1946 revised the Regulations Affecting Restricted Concerns to include more companies, bringing a total of 393, including the four major zaibatsu, under its provisions. In April, TMC was also designated as a Mitsui-affiliated restricted company because Mitsui held 40,000 of the company's outstanding shares and Toyo Menka Kaisha, Ltd. held 210,000, which meant that 13.7% of TMC's stock was owned by Mitsui affiliates.

In September 1947, Toyoda Sangyo Kaisha Ltd., a member of the Toyota Group, was designated as a holding company and dissolved. Its trading department became an independent company, Toyoda Tsusho Kaisha, Ltd. (present Toyota Tsusho Corporation).

Prior to these events, Executive Vice President Hisayoshi Akai died in December 1945. The loss of such a capable and highly experienced man just when the company was facing severe difficulties came as a serious blow. To fill the gap, directors Shotaro Kamiya and Kohachiro Nishimura were appointed managing directors in that same month, as was Kazuo Kumabe, a technical adviser, the following May, to assist Kiichiro, who was then president.

In December 1945, the National Diet passed the Labor Union Law and, with the encouragement of GHQ, labor unions were organized in companies all over the country. At the end of October, moves were made to form a labor union at TMC, and in January 1946 the Toyota Motor Koromo Labor Union was established. That March, a Management Conference was set up as a forum for discussions between employees and management. In


July, a labor agreement was concluded, and the Management Conference became a powerful force in uniting labor and management in the task of rebuilding the company.

In April 1946, Kiichiro formed a project team called the Reconstruction Department outside the existing managerial structure and placed himself at the head of plant reconstruction efforts. Although it was still too early to determine what the future would hold for the auto industry, TMC moved quickly to transfer all engineers both within and outside the company into the Reconstruction Department, repair war damage, return evacuated production facilities and completely refurbish facilities that had suffered during the war.

With high expectations for future growth, the company also hired 200 new employees. Many of these people had been aircraft engineers. Kiichiro stated, "Japan is being allowed to develop an auto industry. Future competition will be fierce. Now that aircraft production has been discontinued, it is important to put the technical skills our engineers developed in making aircraft to good use in making cars. I don't want to waste Japanese technology."

In May 1946, Kiichiro invited representatives of automobile distributors from each prefecture to the Koromo Plant, an initial step toward quickly rebuilding the Toyota dealer network. In his address to these representatives, Kiichiro called for industry solidarity in developing the Japanese auto industry, "I believe that from this day forward, we will face a desperate struggle for many years to come. I shall keep on struggling till I drop."

Kamiya noted that the wartime distribution system still in effect prevented customer opinion from being heard and hindered the development of the auto industry. Expounding his philosophy of "customer first, dealer second, manufacturer third," he called


for the revival of the prewar dealership system.

Thus, a clear policy was established for sales and production. The speeches of Kiichiro and Kamiya had a large impact: One month later, the Ministry of Transportation dissolved the distribution companies in each prefecture and re-established the individual maker-dealership system that had existed before the war. In addition, the personal ties that Kamiya had cultivated during the war and the inviting of dealers to the Koromo Plant, where vigorous rebuilding was already under way, strengthened dealer confidence in Toyota.

The restoration of the dealer network proceeded smoothly. Besides the prewar Toyota dealers who returned to the company fold, many leading dealers who had once been affiliated with the old Nissan network switched to Toyota, enabling the company to establish a strong dealer network. In November, the Toyota Motor Sales Union was formed. The chairman was Takesaburo Kikuchi, a major figure in the prewar auto sales industry and the chairman of the Nissan Motor Sales Union. The vice chairman was Noboru Yamaguchi, an influential Toyota dealer since the prewar period. In May 1948, the union acquired its present name, the Toyota Dealers Association.

On the production side, the Kyoryoku Kai suppliers association, which in December 1943 had changed its name to Kyoho Kai to signify "joint prosperity" with Toyota, expanded beyond the Nagoya area to the Tokyo and Osaka regions.

Before the war, Kyoryoku Kai suppliers had not been able to satisfy all the company's needs: 45% of all parts had been made in-house. In the postwar period, however, aircraft parts makers switched to the production of auto parts and TMC adopted a policy of having outside specialty suppliers manufacture as many parts as possible to promote their development.

However, because materials were in short supply, monthly


production remained at around 200 units. To procure steel, TMC had to dispatch purchasing staff to the coal mines in the southwest of Japan. The purchasing staff would buy coal, then arrange to transport it in trucks to the nearest port and ship it to steel companies, where it was then used to manufacture the much-needed steel. To procure parts, staff traveled with large knapsacks to parts makers in Tokyo and Osaka, loaded up the required parts and carried them back to the plant.

Inflation continued to rage. Under the Price Control Ordinance, which restricted the prices of automobiles, losses piled up. TMC was able to survive the crisis with loans from the Reconstruction Finance Bank, established in January 1947, but its debts grew to an enormous sum, which proved to be a heavy burden to the company's operation.

In July, TMC established the Management Study Committee to determine ways of overcoming the difficulties. Based on its recommendations, the company implemented various measures to rationalize operating and management work: the planned purchase of materials, the making of cost tables for materials purchased, and the establishment of a cost accounting system. In the plant, the company adopted various systematic measures, including concerted efforts to eliminate waste, improve efficiency and encourage creative suggestions by employees.

Launching of a Small Passenger Car

Immediately after the war, Kiichiro commented, "This will be the era of the small passenger car. I want research on a mass-produced passenger car begun as soon as possible." The mass production of passenger cars had been Kiichiro's dream ever since he joined the auto industry, and he resolved to embark upon the task at once. He laid out a basic plan calling for an engine with a displacement of between 1,000 and 1,500 cc and a


body length of 4.5 m, with fuel consumption to be kept to a minimum. At the time Kiichiro recorded in his notes these thoughts on the development of a small car:

The passenger car that will be appropriate for Japan will be not an American-style large car, but rather a small car. In Japan, there is some experience accumulated in the area of small cars, yet when it comes to development on the basis of the functions which are peculiar to a small car, the record is quite short. As a result, existing small cars suffer from many problems, such as cramped interiors, excessive weight, low horsepower and excessive vibration.

If these problems could be solved, then naturally people would come to evaluate the utility of small cars on the same level as that of large ones. And undoubtedly, along with such advantageous characteristics would come the possibility of exporting small cars.

In November 1945, engineers began designing a four-cylinder 1,000-cc Type S engine, taking hints from such engines as the German Adler.

Kumabe thought that now was the time to begin research and accruing technical prowess, and the young engineers in charge of the design work were burning with enthusiasm to develop a new car, the first in a long time, into which they would incorporate various advanced systems.

In January 1947, TMC engineers completed a prototype Model SA passenger car with a Type S engine, a displacement of 995 cc and maximum power of 27 hp. This streamlined two-door car was built to meet the demands of individual users.

In March, a prototype of the Model SB small truck was built using the same engine, and in April preparations for mass production began. Although the production of passenger cars was


still not allowed, the company showed the Model SA to the Ministry of Commerce and Industry and continued to petition the ministry for permission to begin production. In June, GHQ requested the production of 50 large passenger cars and gave permission to all Japanese automakers to make an annual total of 300 passenger cars of 1,500 cc or less. GHQ specially commissioned TMC to make the large passenger cars, which it intended to use to transport members of foreign trade missions in Japan. Using parts still in stock from during the war, TMC assembled 50 Model AC passenger cars by the end of July 1947.

In September, the company decided to adopt the nickname "Toyopet" for its small-sized vehicles. In October, Toyota launched the small passenger car Model SA, which marked the beginning of the long-awaited production of passenger cars.

Demand, though, for the Model SA was not as great as anticipated. Furthermore, production did not go as smoothly as was expected, and the car was unable to turn a profit. The car included systems that were advanced for the time, such as a double wishbone front suspension system; however, because production technology for making ball joints with the required degree of precision and research into spring friction were not sufficiently advanced, the car encountered various problems after its launch.

At that time, there was a great need for taxis. To meet this demand, Nissan launched the Datsun, which met with great acclaim. In May 1948, TMC produced a prototype of the Model SC, a four-door sedan that used a truck frame. However, this Model SC prototype, too, used independent front suspension and other new mechanisms that made it mechanically unstable.

The Model SB small truck, on the other hand, was designed for stability and durability and offered a comfortable ride. It was popular and sold well, even at premium prices. The Model SB underwent customization by both dealers and customers to make


station wagons and four-door sedans. To satisfy this demand, Toyota commissioned Kanto Denki Jidosha Seizo K.K. to build a passenger car body for the Model SB truck chassis, because the company, which also had experience building electric vehicles, had many aircraft engineers and outstanding body production technology.

In 1950, Kanto Denki Jidosha Seizo changed its name to Kanto Auto Works, Ltd. As a member of the Toyota Group, it has developed and manufactured many passenger cars and commercial vehicles. Meanwhile, TMC used the experience it had gained with the Model SA as a base for research and accumulating technical expertise in the development of passenger car suspension systems and bodies.

TMC also changed its truck line and in March 1947 began to manufacture the new Model BM truck. Production of the Model BM truck and the Model SB small truck increased steadily. With GHQ's imposition of a new tight money policy in November 1948, however, there was apprehension that TMC would have difficulty raising funds, but despite all efforts the company's profitability did not improve.

TMC was thus in serious financial straits when it launched the Model SB small truck. Because financing was hard to obtain, the company was unable to move into full production of the truck and was obliged to demand a 100,000-yen advance for each order, half the 200,000-yen sticker price.

As inflation soared, the financial situation became tighter. Since TMC had to rely on debt to survive this crisis, loans piled up until they amounted to 782 million yen at the end of November 1948, eight times the company's capital. To carry out further rationalization, the Management Study Committee was reorganized to form the Management Rationalization Committee, which included union representatives. The committee began to work aggressively


to boost efficiency and cut material costs and other expenses.

Despite TMC showing an increase in vehicle sales during this period, pretax profits, which were 6.46 million yen for the reporting period ending August 1946, only amounted to 10.98 million yen for the entire period from then until the end of November 1949.

Labor Dispute and the Founding of Toyota Motor Sales Company

In 1949, the government's deflationary policy was strengthened under the guidance of GHQ financial adviser Dodge. The auto industry, which was finally facing prospects of recovery, was hit hard by the twin blows of a cutoff in Reconstruction Finance Bank loans and the sudden drop in demand caused by the Dodge recession.

This deflation occurred just as TMC was promoting corporate restructuring in accordance with Occupation policy by shedding its non-auto divisions and reforming its capital structure through increased capitalization. The company finally doubled its capital in May 1951. In December 1949, it spun off its electrical equipment and enameled ironware divisions, which were then established as independent companies -- Nippondenso Co., Ltd. and Aichi Horo Co. The former was launched as an automotive electrical equipment maker with a capitalization of 15 million yen and 1,445 employees. A spin-off was then made by TMC in May 1950 of its weaving and spinning division, and Minsei Spinning Co., Ltd. was established with a capitalization of 105 million yen. Benefiting from the boom that the spinning industry was then undergoing, the company steadily expanded its operations. In 1967, it became Toyoda Spinning & Weaving Co., Ltd., which had also been the name of the parent of the Toyota Group.

The recession had a major impact on automobile production. In October 1948, in response to the five-year plan for economic


recovery proposed by the Economic Stabilization Board, the Ministry of Commerce and Industry -- in May 1949 to become the Ministry of International Trade and Industry (MITI) -- issued its own basic automobile production plan. In line with this scheme, automakers formulated their own production plans and began increasing output.

Whereas production in 1947 had totaled 3,900 vehicles, TMC issued production plans calling for 15,840 units in fiscal 1949 and 21,400 in fiscal 1950. To meet these goals, which were higher than any previous level, the company began remodeling its plant at the end of 1948. However, the tight money policy made it harder to raise funds, and TMC had to reduce drastically investments in plant and equipment. Even though monthly production had almost reached the 1,000-unit mark by the summer of 1949, the plan to increase production had to be abandoned midway through its first year.

Other automakers in the same predicament were forced to rationalize by laying off workers. In October 1949, Isuzu Motors issued notice of dismissal to 1,271 employees and Nissan gave the same announcement to 2,000 employees. The unions at both companies immediately called strikes.

TMC held to its policy of no dismissals and continued labor-management discussions regarding pay cuts, but the company began to delay the payment of wages. In addition, TMC had more trouble collecting payments on vehicles sold and fell behind in repaying its loans and paying for materials. In November, TMC recorded a deficit of 35 million yen in its operating balance and faced the possibility of this figure rising to 200 million in December. The company was confronted with a financial crisis.

TMC employees realized the seriousness of the situation and, after negotiations with the management in the Management Conference, agreed to accept a 10% cut in wages. In return, the


company promised not to dismiss employees and sent the union a memorandum to this effect. This promise was even included in the labor agreement.

However, even wage cuts were not sufficient to eliminate the huge deficit. Because the danger to TMC was a serious problem for the entire business community in the Nagoya area, in December 1949 a group of 24 banks, led by the Nagoya Branch of the Bank of Japan, were asked to form a consortium to provide financial aid to TMC.

As a condition for providing the financing, the consortium called for an "examination of the radical reconstruction plan of TMC." A new reconstruction plan drawn up by the banks was presented in January 1950. Financing was offered under strict conditions, including the creation of an independent sales company, the assignment of a key role to the sales company in determining production targets, and the dismissal of surplus labor: the bank group judged that the TMC management was not giving sufficient attention to sales planning and was failing to make necessary personnel cuts.

As Kiichiro put it, "It is my conviction that we should sell what we produce." Nevertheless he accepted the consortium's conditions and decided to establish a sales company. In explaining his reasons to the Management Conference, he said, "Those who have worked hard for us for many years should be put in charge of managing the sales company. If by doing this we can save ourselves from financial disaster, it will be a step forward for the auto industry."

TMC thus decided to create an independent sales company and in April 1950 founded Toyota Motor Sales Co., Ltd. (TMS), capitalized at 80 million yen. Its executive officers were President Shotaro Kamiya, Managing Director Shiro Ohnishi and Director Shikanosuke Hanasaki.


In July 1950, TMS took 353 employees and began operations in the sales sphere. The new firm assumed all of the domestic marketing functions for Toyota, including the provision of financing for installment sales, and soon began handling overseas marketing as well. The market-oriented perspective of TMS served over the years as a constructive counterpoint to TMC's concentration on technology and production, and their ongoing exchange of opinions and ideas yielded sound overall operating policies that constitute Toyota's unique management base.

Unfortunately, reductions in the work force at TMC nevertheless became unavoidable. Wages were still being delayed into 1950. In March 1950, soon after becoming independent, Nippondenso announced personnel cuts, which immediately precipitated a strike. In April, the TMC labor union formed a struggle committee and began collective bargaining. During the negotiations, the company asked for 1,600 voluntary retirements.

Kiichiro apologized to the union representatives for his mistaken judgment and, asking for their understanding, said:

I had hoped that we might find a good solution, but things haven't turned out as I thought they would. We have only two ways out of this dilemma: Dissolve the company or ask some of our employees to leave. I really am most sorry. It breaks my heart that we have had to come to this. Thinking of all our many affiliates, it would not be easy to break up the company. We, the management, bear a heavy responsibility for having brought the company to these straits. I ask for your help and cooperation and await your fair judgment.

Executive Vice President Kumabe asked the union for cooperation in carrying out voluntary retirements, saying, "For the past four years, I have worked to maintain the wonderful spirit of unity that has existed between labor and management


since Toyota's founding. Although I have regarded it as my highest moral obligation to avoid personnel cuts, I am now firmly convinced that we have no other alternative but to request voluntary retirements."

The union, however, charged with safeguarding the livelihood of its members, could not agree to personnel cuts since it was not clear whether retirement payments would be made. Also, at the end of the previous year, the union had agreed to accept pay cuts on the condition, stated in the company memorandum, that no personnel reductions would be made. The positions of both sides were clearly defined; the dispute dragged on.

The union asked for a provisional court injunction confirming the labor agreement, which stated, "The company must obtain the prior agreement, which stated, "The company must obtain the prior agreement of the union when it makes unavoidable reductions in personnel." If the court handed down the provisional injunction, the company would not be able to request voluntary retirements, thereby creating an enormous problem. Frequent discussions were held by company officials worried about the effect the injunction might have, and efforts were made to seek a way out of the predicament. It was then discovered that the labor agreement had not been made out in accordance with the prescribed form. The Labor Union Law at that time stipulated that a labor agreement became valid only when it bore the personal signatures of representatives of both labor and management. The TMC labor agreement bore the seal of the company, but no executive's personal signature. Upon realizing this, some company officials felt that their worries were over, for if the labor agreement were invalid, they had won the dispute. Director Eiji Toyoda, however, rejected such an attitude:

When we made this agreement, we put the company seal on it, intending to execute it to the letter. No matter what the law says, we must respect the substance of the agreement


that we have concluded. Using the single pretext of the signature to render the entire agreement invalid would be a deception and betrayal of the company union members and employees. Even if we were to win the dispute by such a means, we would lose the trust of our employees, and our treachery would later come back to haunt us. If the union were to suggest that the company had put its seal to the agreement intending to deceive the union from the very start, how would we reply? I am completely opposed to the idea.

Eiji Toyoda was later to become Chairman of Toyota Motor Corporation, and his belief in the importance of maintaining a relationship of trust with the employees would make possible the improvement of labor-management relations and the building of a relationship of mutual trust after the dispute was over.

As the dispute dragged on, monthly output fell from more than 1,000 units at the beginning of 1950 to 619 in April and 304 in May. The company was accumulating huge losses daily. The bank consortium signaled that it would cut the financial flow. Toyota dealers, facing a management crisis caused by the suspension of vehicle deliveries, called for an immediate solution to the dispute.

The crisis finally came to a head. Kiichiro announced his resignation and made it known that his decision was final. In June, President Kiichiro Toyoda, Executive Vice President Kumabe and Managing Director Kohachiro Nishimura, who was in charge of financial affairs, resigned.

At around this time, employees began leaving the company voluntarily. Soon, 1,760 employees, a greater number than that requested by the company, applied for retirement. The focus of collective bargaining between labor and management now shifted


to finding new jobs for the voluntary retirees and other problems related to the aftermath of the dispute. After four days of continuous negotiations, labor and management signed a memorandum accepting the company's reconstruction plan and the two-month dispute was brought to a close. The final number of voluntary retirees was 2,146, and the number of employees remaining 5,994. Both labor and management felt strongly that one such experience of seeing the people they had worked with having to leave the company was quite sufficient.

In July 1950, Taizo Ishida replaced Kiichiro Toyoda as president of TMC. Fukio Nakagawa was appointed senior managing director, and Shuji Ohno, Eiji Toyoda and Shoichi Saito were made managing directors. Ishida had been president of Toyoda Automatic Loom Works; he had displayed his skill in rebuilding the company after the war and in settling labor disputes. His managerial ability was highly regarded. Ishida accepted this highly responsible post with the intention that Kiichiro be reappointed president when business improved.

Five-Year Plan for Modernizing Production Facilities

In April 1950, regulations fixing prices and limiting the distribution of automobiles were abolished, and in June restrictions on raw and sheet steel were lifted. The production and sale of automobiles thus entered an era of all-out free competition. In July, the United States military requested Japanese automakers to submit bids for an order of 1,320 trucks for use in Korea. Although this was the first job for the Export Department of TMS, which had just started operations, it succeeded in winning an order for 1,000 trucks. After this, a series of orders came from the armed forces of the United States. To meet the demand, TMC adopted a policy of expanding its facilities while hiring as few new em


ployees as possible and having one person operate several machines. It had only been two months since the large-scale personnel cuts and any increase in the work force would have been a heavy burden on both labor and management.

The recovery of the Japanese economy and the revival of domestic auto sales brought production back up to 1,000 units in August. Inventory was rapidly used up and output was unable to meet demand, even with employees on overtime and the plant producing at full capacity.

After recording losses of 76.5 million yen for the period ending in March 1950, TMC broke even for the period ending in September and registered a pretax profit of 249.3 million yen for the period ending March 1951, making possible the payment of the first postwar dividend.

Although the special procurement ended in March 1951 with an order for 1,350 units, TMC had reaped a rich harvest and learned much during this period. TMC had been able to take advantage of this opportunity because it had recorganized its plant and rationalized production. President Ishida, who had previously said, "We must never forget that these special procurements are the result of unfortunate events in a neighboring land," commented on them as follows:

Just when we were on the point of bankruptcy, we were able to survive because of special procurements from the United States military. Some people might call this luck; but I would say that luck isn't something that just falls into your lap. Only those who are out trying hard every day can make use of the luck they have. So, no matter how many bad breaks you may have, it is important to keep up the will to win and continue working hard. When luck comes your way, you can't sit back and relax, or it will be gone.


Luck is something you have to grab through effort when it comes your way.

Manufacturing special procurement vehicles enabled TMC to learn effective quality control methods. Given the production technology of the time, tremendous efforts were needed to guarantee the quality and meet the delivery dates demanded by the United States military. The strict inspections carried out by the military gave TMC a chance to develop its highly advanced and standardized inspection technology. Production and inspection processes at the Koromo Plant were not the only beneficiaries: Suppliers also learned parts inspection methods. Making good use of this experience, the company was able to raise the quality control to today's high level.

This experience also benefited the development of the Model BJ, which was designed with a longer wheelbase and body and more horsepower than the American Jeep. This vehicle later evolved into the Toyota Land Cruiser.

Yet another fruit of this experience was the keen awareness that it was imperative for the company to make truly international, competitively priced vehicles. For example, the Model BX large truck, launched in August 1951, had a design that compared favorably with that of trucks produced in the United States. Also, a method was devised for smoothly bringing the new model on line without leaving surplus parts from the old. This method later became the basis for starting the production of new models and conducting model changes.

Beginning immediately after the war, when Kiichiro realized that an age of free competition would arrive, the technological gap that existed between the auto industry in Japan and the United States was a constant source of concern to him. In June 1950, President Kamiya of TMS went to the Unites States to


resume the tie-up talks with Ford that had been broken off before the war.

Kamiya pressed ahead with the negotiations until Ford was almost ready to sign the agreement. Even the engineers to be dispatched from Ford to Toyota had been selected. The actual signing, however, never took place: With the outbreak of the Korean War, the United States government imposed restrictions on overseas investment and the dispatching of engineers abroad. Kamiya's trip was not, however, wasted; he was able to determine that auto companies in the United States did not have the excess production capacity for sustained exports. He also spent some time observing the state of American industry, particularly the consumer finance system.

Although business ties with Ford were not realized, the friendly relationship between Toyota and Ford continued. For example, Managing Directors Eiji Toyoda and Shoichi Saito both visited Ford's River Rouge Plant, Eiji from July and Saito from October 1950. There they studied the facilities needed for mass production, production technology, and methods of production control and plant management. Eiji Toyoda, who had read all the related literature and had much experience at Toyota worksites, surprised his hosts with the keen questions he asked about all aspects of production. Although a clear gap existed in production scale between Japanese and American automakers, overwhelmingly in favor of the latter, Eiji Toyoda became convinced while in the United States that TMC was fully capable of catching up technically with the Americans.

Based on reports by Eiji Toyoda and Saito, TMC formulated a five-year plan for modernizing its production equipment in February 1951. This plan was designed to increase production capacity in a single stroke to 3,000 units a month by modernizing production facilities and production control. At the same time, it called for the full-scale introduction of a flow assembly system.


The plan not only concerned itself with replacing obsolete facilities, it also tackled a wide range of areas, from the improvement of the work environment to the modernization of office work management.

A system was implemented for making Standardized Work Charts at the production site and for ensuring that each floor employee precisely carried out assigned tasks. Since these Standardized Work Charts clearly stated the procedure for making the needed items at fixed times, the standard duration for every job and the standard in-process stock for every machine, each person knew exactly what work was to be done at all times. with these Standardized Work Charts hanging in front of them, it was possible for every employee to perform the assigned job with precision; in addition, the charts served as a basis for making additional improvements.

Modernization and greater efficiency were promoted not just on the production line but everywhere in the company.

In 1953, the company introduced IBM statistical accounting machines as a first step toward streamlining clerical work. Prior to this, however, it had consolidated and standardized its documents and journals, reorganized its filing system and carried out other improvements related to clerical work.

In May 1951, the company had established the Toyota Creative Ideas and Suggestions System as a means of supporting its company-wide improvement activities. Although based on a suggestion system employed by Ford, it placed emphasis on opinions from the factory and the sales floor and systemized the practice that had been customary since the time of company founder Kiichiro of conducting spontaneous on-site inspections and simultaneously inviting suggestions for improvements. As the years passed, Toyota's suggestion system became steadily more productive. Teams were formed to come up with ideas for


improvements, the suggestions themselves became more substantial and all employees were encouraged to review their jobs constantly and implement improvements. It thus became a very effective arrangement. In February 1953, an in-house contest was held to pick a company slogan. The winner was "Good thinking, good products."

In October 1951, just after TMC started to renovate its facilities, the Model SF passenger car was launched, followed in March 1952 by the Model SG small truck. Both were improved versions mounted with the conventional Type S engine. Even as these vehicles were being launched, work was moving forward on a new engine. In 1953, the 1453-cc 48-hp Type R engine was developed, and in September the Model RH passenger car, nicknamed the "Toyopet Super," was launched.

In May 1953, the product development organization was further strengthened by the creation of a Chief Engineers' Office in the Engineering Department. Under this arrangement, a chief engineer for each model assumed total responsibility for his product: He not only carried out the planning, but also anchored the production planning and preparations for the market launch of the new model, as well as the making of improvements after it was marketed. The chief engineers of that era, Takeo Chiku, Tatsu Inagawa, Tozo Yabuta and Kenya Nakamura, were each men of independent conviction who exhibited strong leadership.

The demand for the new models developed around this time was vigorous, and sales were strong.

TMS promoted the introduction of the monthly installment system, which had been a company goal since before the war. Shotaro Kamiya later commented, "It's no exaggeration to say that TMS's monthly installment system was a test case for postwar auto sales and finance." Indeed, it was through stimulating latent


demand that installment sales established a mass sales market to support mass production.

TMS also strengthened its Service Department. In 1948, it resumed the nationwide Toyota service conferences to improve service technology, and in 1951 it organized a system of designated service centers and expanded its after-sales service network throughout the country.

Shortly after it had begun the development of its passenger cars, the company was rocked by the sudden, close deaths of two of its founders. On March 27, Kiichiro Toyoda died at the age of 57. On June 3 of the same year, Risaburo Toyoda passed away at the age of 68. The lives of both men had been dedicated to the establishment of the domestic automobile industry. They had clearly seen the potential of modern technology, promoted the growth of many affiliated companies and trained numerous talented and devoted employees. Neither of them ever allowed his own self-interest to interfere with business.

Kiichiro's death was a particularly severe blow. After resigning from the presidency during the labor dispute, he underwent treatment for high blood pressure and also spent time engaging in his beloved research. President Ishida had asked him to resume his old job, and there were hopes that he might soon rejoin the management team, but these were dashed by his untimely, death.

The story of Kiichiro's life is inseparable from that of the development of the Japanese auto industry. Beginning with the test production of the small 4-hp engine, he had completed an automobile engine, produced the car prototype Model A1, built the Model AA passenger car, founded TMC, been active as a leader of industry and, after leaving the company, conducted research on small passenger cars and automatic transmissions.

His interest were not limited to the automotive field,


though it is because of this that he is best known. In the period of confusion just after the war, faced with the need to safeguard the livelihoods of his many employees, he had studied the commercialization of many ideas related to basic necessities. Besides directing the development of a new sewing machine, he studied the cultivation of loaches, the mass production of chikuwa (fish cake) and even the making of pottery. Seeing Japan's burnt-out cities, he had the idea of building large numbers of fireproof homes. In March 1946, he established a research and development section at the Koromo Plant for studying the mass production of housing. In June 1950, he founded a company to produce prefabricated houses.

His eldest son, Shoichiro, current president of Toyota Motor Corporation who joined the company as a director in July 1952, had the following recollection of his father: "My father was always dreaming. His last dream was to make a helicopter. He had the idea of building large numbers of fireproof homes out of precast concrete, with people getting from place to place in their own private helicopters and utilizing the flat roofs of these buildings as landing pads. He dreamed of making this kind of world a reality in the near future."

Despite losing its founder and first president in such quick succession, TMC and TMS began achieving good business results. From the period ending March 1951, TMC registered a rapid rise in profits and maintained an 11%-15% proportion of profit to total capital until the period ending November 1954. TMC also doubled its capital in May 1951, June 1952 and April 1953, an increase from 201 million year to 1,672 million yen in only two years. With the establishment of TMS and its handling of financing for installment sales, TMC was now financially as well as technologically able to upgrade dynamically its plant and equipment to improve productivity. After beginning to make such


investments, TMC began actively to apply excessive depreciation, which exceeded the accelerated depreciation set forth in the Enterprise Rationalization Promotion Law, and its net worth rose from 25.2% for the period ended September 1950 to 60.1% for the period ended November 1954.

Investment in plant and facilities accelerated in 1953, principally because development of a new passenger car model had begun. Masaya Hanai, general manager of the Accounting Department and later chairman of the board, likened engineers to "children in a toy shop, pestering their parents to buy them this and that." But President Ishida told Hanai that if money was available it should be invested in facilities. "Let's use machines to raise our productivity," he said. Hanai and his staff took Ishida's words to heart and made untiring efforts to raise funds.

Meanwhile, Gentaro Tsuji (later vice chairman of the board), realizing that steps ought to be taken toward systematic reduction of costs, introduces and established a managerial accounting program. Through such procedures as analysis and control of budgeting on the basis of regular profit planning, the company began to conduct through, detailed cost management. The results were significant improvement during the ensuing years both in profitability and in corporate assets.

In 1956, a loan of 2.35 million dollars was obtained from the International Bank for Reconstruction and Development, i.e., the World Bank. TMC was able to obtain the loan because its assets were so sound. Following the financial crisis of 1950, the company's financial structure had changed completely within only a few years.

On the other hand, TMS had started with a capital of 80 million yen, but, buoyed by the steady growth in sales, it increased its capital to 200 million yen in October 1952 and 500 million yen in July 1953.


Toyota's annual motor vehicle production reached 14,000 units in 1952, putting it at the forefront of the Japanese auto industry. Subsequently, production of passenger cars and small trucks showed continued growth, reaching 23,000 units in 1954, which represented a major step forward for Toyota in its efforts to attain a monthly production level of 3,000 units.

Chapter 4: Modernization of Management


Japan's High Economic Growth

During the decade from 1955 to 1964, Japan's GNP rose continually at annual rates of between 6% and 14%. This period, called the first period of high economic growth, was filled with tremendous vitality. The economic growth was supported by investment in plant and equipment, which grew each year by some 20%-40%.

Needless to say, this growth was not always stable. The decade was marked by three growth peaks and two slumps. The general boom was thwarted more than once by a worsened balance of international payments, but the economy continued to achieve a high level of dynamic growth.

The growth curve, which began moving upward in 1955, was forced downward again in June 1957 with a worsened balance of payments caused by increased imports and insufficient foreign reserves. That development forced the government to adopt a tight money policy, which dampened the favorable economic growth. The white paper on the economy published in 1956, however, declared, "The postwar period is over," meaning that for Japan the reconstruction period had ended and a transition was taking place toward high economic growth. In fact, during the first peak, the economy expanded in scale at the same time that prices remained stable.

The second peak, from 1959 to 1961, overshadowed the first and was marked by an unprecedented investment boom, about which it was said, "Investment breeds investment." The third peak started in 1963. Favorable economic conditions then continued for another two years before a downturn, starting in 1965, marked the end of the nation's first high-growth economic period.


In the middle of this growth period, in 1960, the government announced plans to liberalize trade and double the national income. It also announced as policy goals the internationalization of the nation's economy and the promotion of a high rate of economic growth. There were calls for modernizing the economy in order to catch up with the Federal Republic of Germany, which had quickly recovered after the war, and also with the world's economic leader, the United States.

The introduction of new technologies from overseas brought about technical innovations in many areas of industry, including, among others, iron and steel, shipbuilding, automobiles, chemical fertilizers and oil refining. New products such as synthetic fibers, plastics, tape recorders, televisions, transistor radios and electronic calculators rapidly made their appearance, and new markets were aggressively developed for them. Trade liberalization provided further impetus to the rush toward innovation, and steel, radios, cameras, automobiles and other products of industries that had achieved a high degree of technological innovation replaced textiles, ceramics and toys.

The motorization of Japan began with the growth of the small-truck market rather than the passenger car market. Along with the increased demand for hauling goods and merchandise, shopkeepers and owners of medium-size and smaller businesses started to switch from using small, three-wheeled trucks, which had been widely used as delivery vehicles in the immediate postwar period, to using small four-wheeled trucks, which offered excellent maneuverability. As a result, the production of small trucks rose rapidly, increasing 10-fold from 22,000 units in 1955 to 224,000 units in 1960. Passenger car production also increased during the same period, from 20,000 to 165,000 units a year. Japan's automakers were already moving to develop the passenger car market and prepare the foundation for the boom in passenger


cars that was to come in the next period.

In 1955, MITI revealed its concept of a "people's car." The aim of MITI was to achieve the early development of the Japanese automobile industry by promoting the development of a passenger car that could be mass-produced, much like the Volkswagen of the Federal Republic of Germany and the Renault of France.

At the time, the Japanese automobile industry was oriented toward absorbing new technology through licensed production agreements with foreign makers, such as between Nissan and Austin, Isuzu and Rootes Motors, Hino Diesel Kogyo (present Hino Motors) and Renault, and Shin-Mitsubishi Heavy Industries and Willys-Overland. Fuji Precision Machinery and Fuji Heavy Industries also entered the industry, and Toyo Kogyo, Daihatsu, Honda and other makers of small, three-wheeled trucks and motorcycles were planning to enter the market for four-wheeled vehicles. It was expected that this would bring about fierce competition in the industry, and thus MITI's concept of limiting production of the "people's car" to one model was opposed by the automakers. Contrary to the original intent, the concept served to push each automaker toward developing passenger cars.

Each maker set out to develop a small passenger car, an effort which resulted in the marketing of the 500-cc Mitsubishi 500 in 1960 and the 700-cc Toyota Publica in 1961. Several minicars of 360 cc also appeared, including the Subaru 360 from Fuji Heavy Industries and the Mazda R360 Coupé from Toyo Kogyo. Gradually, then, passenger car production started to increase, from 165,000 units in 1960 to 696,000 units in 1965, a fourfold growth in five years.

The next major problem for the automobile industry was trade liberalization. In 1955, Japan joined the General Agreement on Tariffs and Trade (GATT), returned to the international


economic stage and advanced gradually toward liberalizing its trade. By 1960, however, the nation had achieved a liberalization level of only 40% of the items stipulated by GATT. In January 1960, at a time when the United States was running a deficit in its trade balance, the countries of Western Europe were liberalizing their currencies and Japan was expanding its export trade, the Japanese government made a positive move toward liberalization of trade and exchange as a result of strong demands from Europe and the United States.

This move, however, brought about large repercussions in Japanese industry. There was concern that liberalization would compel Japanese manufacturers to fight desperately in order to compete with the resulting influx of superior foreign goods, so that in effect the domestic market would be controlled by goods from abroad, forcing many industries into difficult straits. It was felt, moreover, that liberalization would particularly affect the automobile industry; some even believed that no more than two Japanese automakers would be able to survive following the liberalization of imports of completely built-up foreign vehicles. At any rate, all the automakers quickly began devising measures for coping with liberalization.

Next, in 1961, as a further means of responding to liberalization, MITI devised the concept of forming three groups of passenger car manufacturers in Japan. The idea was to divide the existing passenger automakers into three groups and have each group specialize in one of three types of automobile: mass production cars, special-purpose vehicles and minicars. It was thought that such a restructuring of the industry would lead to lower production costs and stronger international competitiveness. When the concept was presented to the automakers, each one immediately began to make plans for new plant construction in an effort to seize an advantageous position within MITI's framework. Although the concept was never realized, the domestic


competitiveness of Japan's automobile industry rose rapidly as a result of the race to invest in plant and equipment that it precipitated. Passenger car imports were liberalized in October 1965.

It should be noted that during this period the Japanese government implemented broad-based measures for promoting the development of the automobile industry. Between 1951 and 1952, in particular, various measures, such as the finance system of the Japan Development Bank, tax exemptions on imported machinery, a shortening of the depreciation period based on the law on enterprise rationalization promotion, and tax reductions, were implemented in rapid succession in order to foster the growth of Japanese automakers, which were lagging far behind their European and American counterparts.

A law providing temporary relief for the machine industry, enacted in June 1956, made it possible for the auto parts industry to obtain long-term, low-interest loans. As a result, the modernization of their production facilities proceeded rapidly, providing indirect but large benefits for the automotive industry. The quality and reliability of parts improved, thus helping to reinforce the foundation of the automobile industry as a comprehensive assembly industry. This law was of great significance in that it was instrumental in bringing about the modernization of the general machine industry as well as the automobile parts industry; it also enabled Japanese automakers to procure the necessary machinery domestically and to modify it quickly to suit their own requirements.

Marketing the Crown

On January 1, 1955, a ceremony was held at the Koromo Plant to celebrate the completion and first shipment from the factory of the Crown and Master. The Crown, mounted with a


Type R 1500-cc engine and having a double-wishbone independent suspension at the front and a three-ply, leaf-spring suspension at the rear, was a new, high-performance model that far exceeded the standards of previous domestic passenger cars. The Master had the same Type R engine as the Crown, but because it was a vehicle for use as a taxi it had a traditional I-beam front axle.

The development of these new models had begun three years earlier, when TMC was consolidating its policy of producing "purely domestic-made cars," despite the fact that other domestic automakers were forming technical ties with foreign automobile manufacturers. TMC carried out research and made prototypes even during the period after the war when passenger car production was prohibited, and at that time it had already completed a prototype model of the Crown. Moreover, because the company had already formulated plans to introduce plant and equipment for mass production of passenger cars, there had been little reason to seek, as had other automakers, licensing agreements with foreign automakers.

In this way, TMC reaffirmed its policy of placing emphasis on in-house technology, which had been a company tradition since the days of Sakichi Toyoda and had been clearly established by his son, Kiichiro. At the same time, there was an urgent need to develop a new vehicle that could compete with the knockdown vehicles being developed under licensing agreements with foreign automakers. President Ishida described the determination of Toyota to move ahead alone, "Toyota has decided to tread a difficult path, but I think this year we will see a new evaluation of domestically produced automobiles." He urged all Toyota employees to make greater efforts.

At around this time, TMC was putting into order its research and development system. This work included the construction of the Toyota Technical Center, a comprehensive research facility scheduled for completion in 1954. Particular effort was


devoted to research into passenger cars, and eventually the efforts made to improve riding comfort, reduce noise and vibration, and develop devices to make driving operations easier began to yield results. Toyota also actively engaged in joint research with universities and research organizations when tackling unfamiliar fields. The technical advice Toyota received from experts helped to provide clear theoretical direction to its engineers, and positive results appeared in the development of the Crown and later passenger cars. These experts included academics at the University of Tokyo, such as Associate Professor Atsushi Watari, who was responsible for the theory of the three-ply leaf spring, Professor Osamu Hirao, an authority in mechanical engineering, and Associate Professor Tomoo Ishihara, an expert on the torque converter.

In 1955, the year the Crown was marketed, there was a rush of new models in Japan. Nissan had revamped the Austin and the Datsun, Isuzu the Hillman, and Fuji Precision Machinery the Prince. Thus, the race was on to develop the passenger car market. Among all these new passenger cars, the Crown achieved a very favorable reputation, and TMC responded to the demand for a luxury version by introducing the Crown Deluxe at the end of the year. Aided by the 1955 upturn in the economy, monthly production of the Crown increased from 500 units in March 1956 to 1,000 units in October; additional demand was met by transferring the production capacity of the Master, production of which was halted in November, to the Crown.

At that time, TMS was enjoying steadily increasing sales, brought about mainly as a result of a bold sales expansion policy. In December 1955, a top-level conference was held between TMC President Taizo Ishida and TMS President Shotaro Kamiya to discuss a marketing policy for increasing sales of the Model SKB truck, which had been marketed in 1954. The Model SKB truck


was a 1-ton cab-over type vehicle, which had been developed as the truck equivalent of a "people's car." Unfortunately, however, it had not been selling well because it was relatively more expensive than small three-wheeled trucks and because the business situation was poor when it was marketed. At the conference, the two leaders agreed to reduce the price of the Model SKB truck by about 12%. TMS also agreed to create a new national sales channel to handle mainly the Model SKB truck and a small passenger car scheduled to be marketed in the future, thus creating multiple dealer networks.

Setting up multiple dealer networks, however, posed a great threat to the vested interests of the existing dealers, and they opposed the idea. In the end, however, they had to agree to it, since it was apparent that they alone were incapable of expanding marketing forces to the degree required by TMS. In April 1956, eight new dealers, called Toyopet Dealers, opened for business. By June 1957, there were 50 Toyopet Dealers across the country, and the combined number of Toyopet and Toyota Dealers reached 100.

Meanwhile, TMC made efforts to reduce costs, and in 1956 the company was twice able to reduce the price of the Model SKB truck, virtually eliminating the price difference between it and the small three-wheeled trucks. Promotional and advertising efforts were concentrated on the Model SKB truck, and the general public was invited to propose a nickname for the vehicle. From among the over 200,000 suggestions received, the name "Toyoace" was finally selected. The new dealers, too, developed and carried out many promotional plans, such as creating Toyoace clubs among the smaller trucking companies, which were the main target for the Toyoace; they also opened exhibitions at wholesale food markets and farmers' cooperatives and handed out sales brochures near busy railway stations. The combined efforts led to a rapid increase in Toyoace sales, which topped 2,000 units per


month in April 1957 and accounted for over one-third of the total number of Toyota vehicles sold.

The number of Toyota vehicles sold rose at a fast pace -- from 22,000 units in 1955 to 71,000 units in 1957; over 70% of these vehicles were trucks. The Toyoace exactly fitted the needs of the Japanese automobile market of the time. In fact, it even spurred other makers to develop cab-over trucks. It also led to the disappearance of small, three-wheeled trucks from Japanese roads in favor of small, four-wheeled models. The Toyoace thereafter enjoyed long-lasting popularity and became one of the leading small trucks in Japan.

In July 1957, the Corona was marketed through the national network of Toyopet Dealers. The Crown had sold successfully both as a car for individuals and as a taxi; however, it was a 1,500-cc six-passenger car, which in the categorization of Japanese taxis placed it in the medium-sized class and thereby subjected it to a higher fare than a 1,000-cc vehicle, which was in the small category. At the time, the demand for the small taxis with their lower fares was on the increase. Observing this, TMS strongly urged TMC to develop and market a small car quickly. The result was the Corona.

Because of the background to its development, the Corona was mounted with the Type S engine, which was already in production, and was designed utilizing as many features as possible of its predecessors; the drive system resembled that of the Crown, for example, and the body that of the Master. Moreover, it was built using a unitary body and other new structures and was assembled using innovations that brought about cost savings. These measures made it possible to market the Corona at less than 80% of the price of other small passenger cars then on the market, and initial sales approached the sales volume of Nissan's Datsun.

Sales began to fall, however, when taxi companies expressed


dissatisfaction with the durability and power output of the Corona engine. When Nissan's Bluebird appeared on the market in August 1959, the popularity of the Corona gradually faded. Toyota's leading position in the nation's passenger car market, which had been maintained by virtue of the popularity of the Crown, was in the fourth quarter of that year usurped by Nissan. In October, the performance of the Corona was raised by mounting it with the newly developed 997-cc 45-hp Type P engine; but even with the improved engine, it was not an easy task for the Corona to overcome the quickly established popularity of Nissan's Bluebird.

In April 1960, the Corona underwent a model change. The new model was boldly designed with entirely new styling and a number of new mechanisms. Unfortunately, however, the new model was not received as well as had been expected, in spite of its price being about 3% lower than that of the previous Corona. The model change had been made hurriedly, and design changes aimed at reducing costs were being carried out right up until the time the car was put on sale. This resulted in problems such as difficulties in fitting the doors properly and with the suspension, which was of an advanced design and too weak. Breakdowns were especially frequent with Coronas that were being used as taxis. All of these factors contributed to a poor reputation for the vehicle.

TMC moved to improve the Corona. The problems that had occurred were closely examined and dealers were consulted for feedback and opinions. In March 1961, the design of the rear suspension was changed, and the engine was replaced by a 1453-cc 62-hp Type R engine.

Around this time, TMC greatly strengthened its research and development organization, chiefly by establishing the Toyota Central Research & Development Laboratories, Inc. in November 1960 in Nagoya. The laboratories constituted an overall organiza


tion in which the various members of the Toyota Group could conduct research and development in basic technology. With the establishment of the laboratories, TMC's long-term research and development organization was now in operation. In September 1961, a research laboratory for researching new materials, particularly glass wool, was opened in a corner of the former plant of Toyoda Spinning & Weaving in Nagoya. At the Head Office, of course, the designing rooms, facilities for building prototypes and testing facilities of the engineering departments were greatly enlarged. At the test course, special roads were built one after another, enabling running tests to be performed under a variety of road surface conditions. Running tests and improvements were carried out repeatedly on the Corona, and finally, in March 1962, an improved Corona with a strengthened chassis and completely reliable performance and quality was marketed.

Introduction of the Kanban System

Production at TMC moved ahead steadily, helped by the continuous appearance of new models on the market and favorable economic conditions. In April 1956, TMC achieved the long-awaited production volume of 3,000 units per month, which rose in October to a record 5,000 units. Based on this achievement, TMC set out to introduce new facilities in its plants and to renew existing facilities, aiming at a monthly production volume of 10,000 units. The most up-to-date, high-performance machines and facilities were introduced in every production process. President Ishida's policy of investing all available capital in machinery was thus being fully executed.

Investment for modernization of facilities in the early 1950s tended to be done by studying foreign makers' catalogues and ordering machinery and facilities as required. It was such a common practice that it became known as "catalogue engineering."


However, there was an increasing tendency for makers to develop their own production technology in order to meet their own needs and to fit the particular conditions in Japan more precisely. In 1958, TMC renamed its Machine Tools Department the Production Engineering Department, assigned many young, outstanding engineers to production worksites, set about developing and purchasing machinery and facilities, and made an extensive effort to have the operators thoroughly acclimate themselves to the new facilities.

The latest machinery, including profiling and automatic multiaxis lathes, was installed in the machine shop, and the sight of the carbide tools, cutting at high speeds, throwing off sparks, certainly fueled the impression that a new era of production had begun. Despite the use of high-speed machines, however, work still had to be stopped every time a cutting tool needed to be replaced or reground. This problem was overcome by using American disposable tips. However, observing this, Senior Managing Director Eiji Toyoda questioned whether it would not be possible, somehow, for the tips to be reused. This prompted modifications being made to the tip holder and a method of regrinding tips was developed, with the result that it became possible for the disposable tips to be used again. This is one example of Toyota's policy of not simply purchasing new machinery for production but of also modifying existing units to meet a particular need.

The body shop developed its own arc-welding machines for mass production of the Crown. Unfortunately, however, there was a problem with the precision of the stamping work in the preceding process, and the consequent touch-up work lowered productivity. In an attempt to overcome this, it was decided to develop technology for making stamping dies in-house. First, TMC ordered copy diesinking machines, such as the Keller machine, and set about making master models. It was not possible


to obtain mahogany as used in the United States, so plaster was utilized instead. It was found, however, that the plaster was wholly unsuitable for mold-making because as it hardened it swelled, and also the final hardness was inadequate. The person in charge of development was obliged, therefore, to return to the basic step of studying the plaster itself. The composition of the plaster, the temperature of the water in which it was mixed, the method of mixing and so forth were all studied, and gradually a method of making a usable plaster mold was devised. Ultimately, a complete system of mold-making technology evolved, and a die shop for in-house fabrication of press dies was set up in the Koromo Plant, enabling TMC to cope with subsequent production increases.

In 1956, TMC installed the first transfer machine it had developed jointly with Toyoda Machine Works, and in 1960 it put into operation a transfer machine it had built in-house. The take-off point for developing such machines was the continuous study of machine tool technology in great detail, as well as research into floor layout and groupings of machines, leading to numerous modifications.

By thus installing high-performance machines which matched the requirements of the production line, TMC built up a mass production system that brought about a rapid and clear improvement in productivity.

This dramatic increase in productivity was achieved not merely as a result of installing the latest machines; it came about precisely because of the repeated modifications that TMC had made to the production system in its plant. TMC had already started to carry out such modifications in the immediate postwar period when there were still misgivings as to whether the automobile industry in Japan would develop.

Taiichi Ohno, who became manager of Final Assembly in


the Manufacturing Department of TMC in 1945, was surprised at the inefficiency of automobile production in those days. In any one month, an assembly plant would be idle for perhaps 20 days, waiting for parts to arrive, and would perform assembly work during the remaining 10 days. Under such inefficient production methods, it was impossible for Japanese plants, whose production lots were far smaller, to compete with their counterparts in the United States. One particular bottleneck was the machine shop, where engine machining and assembly were carried out. On the engine cylinder block line, for example, Graham-Paige was using 18 workers, whereas with the same machinery and equipment Nissan had 30 and TMC 100 workers. Clearly, there was a huge difference in efficiency. The production method that Kiichiro had aspired to with his Just-in-Time System when TMC was established broke down when the company was placed under the control of the military during the war.

Even though labor was cheap in Japan, this situation resulted in a great difference in cost. To improve efficiency, Ohno decided to develop a system of multi-machine handling, where each employee would be responsible for operating more than one machine. He also devised a mechanism whereby machine tools in the machine shop would automatically stop in the event of trouble and also at the end of the machining process. This meant that once an employee had set up a workpiece on one machine, he was able to move on to another. Ohno got part of the idea for this system from the device Sakichi Toyoda had invented many years earlier, where a loom would stop automatically when a thread broke. By 1949, the multi-machine handling system had developed considerably, and productivity improved as a result. Looking back, Ohno explained, "An employee was then able to handle up to three machines without difficulty and productivity tripled within a very short period."

In 1950, an andon board was used for the first time. The


board displayed various code numbers and letters to inform floor employees of how line operations were proceeding and when and where problems occurred. Also, cords were suspended above the production lines that could be pulled to stop the line if complications arose. The combination of these and other innovations was called jidoka, which signifies the self-regulation of the entire process. Jidoka gradually resulted in the building of quality into each process.

Under this system, however, with each employee being responsible for a group of machines of the same type, e.g., drilling or milling machines, certain problems arose, such as excessive production by one kind of machine and a huge build-up of in-process parts waiting to be processed by another. To help resolve this type of problem, one employee was put in charge of handling more than one process in the order of the workflow. This system was called multi-process handling. The system immediately showed the futility of producing more parts at intermediate processes than could be finished at the final process.

Following the introduction of the multi-process system, the production processes advanced considerably in the direction of "flow" production, in which production control took place automatically. The need then arose to smoothen the flow between the processes supervised by the various employees and also between shops. At this time, Ohno was attracted by supermarkets, which had already become widespread in the United States. He wondered whether parts could be supplied from a preceding process to the subsequent process in the same way that items were supplied by a supermarket to customers -- at the right time and in the required amounts. Rather than sending parts on to the next stage as soon as they were completed, as had been done previously, the employee at the later process would go to the preceding process when he needed the parts and pick up only the number he required. In turn, at the earlier process, only enough parts


would be produced to replenish what the later process had used. This would eliminate waste and approach the Just-in-Time System of Toyota's founder, Kiichiro.

This system was first adopted by the machine shop in 1954, then later it was applied between the machine and assembly shops. Initially, there were frequent shortages of parts and also frequent line stoppages because the floor employees were not accustomed to the system. However, Taiichi Ohno did not worry about the line stops, emphasizing instead the importance of locating the cause each time a parts shortage or line stoppage occurred. As a result, it became clear to the person in charge of each process that there was a keen need to adjust the production speed of the process and also that the layout of the production processes had to be improved. Also, as a means of transferring information between processes, the Kanban System, using various-sized cards, was developed. These kanban showed the number of parts as well as the parts numbers of the items that needed to be replaced. After the Kanban System was put into effect, the routine of later processes obtaining items from preceding processes started functioning more smoothly. To realize the Just-in-Time System, kanban took on many forms other than those used for collecting parts.

The two main pillars of production, the Just-in-Time System and jidoka, were continually improved afterward at the plants. Groups were formed at each worksite, and members energetically discussed ways of rationalizing their operations. Out of those discussions emerged many new working methods.

This new production system became established after much trial and error, and in 1963 it was put into operation in all Toyota plants. Subsequently, it was also introduced to the parts makers and materials suppliers. Finally, in 1970, the entire system -- with all the innovations that had been added to it over the years -- came to be called the "Toyota Production System."


This rationalization of production could not have been achieved without mutual trust between labor and management. Even after the labor dispute at TMC in 1950, confrontations between labor and management occurred a number of times. But there was already an established trend for the two sides to discuss problems with one another and to resolve them gradually. On the part of the labor union as well, when the national automobile industry union was dissolved in December 1954, the Toyota union was renamed the Toyota Motor Workers' Union; it clarified its new policy, stating that stability in the livelihood of the employees and the development of the automobile industry and of Toyota were inseparable. At that time, Masao Yamamoto, director and general manager of the Personnel Affairs Department, attended meetings and social gatherings of employees almost nightly to talk things over with them. He also participated in events such as softball matches on holidays. Of course, serious discussions took place repeatedly between the company and the union at the joint labor-management conference, which was the arena for formal talks between management and employees. All of this went to create an atmosphere of trust between the two parties. In February 1962, the concept of striving to maintain corporate prosperity and improve working conditions through mutual trust between the labor and management and improved productivity was established between the company and the union, and the Labor-Management Declaration was signed.

Construction of the Motomachi Plant

In July 1958, TMC purchased a new 1,600,000-m plant site, located 2.5 km from the Head Office. Here it was decided to construct a passenger car plant exclusively for producing the Crown, which was selling well, and the Corona, which was scheduled to undergo a model change. Shoichiro Toyoda, then a


director of TMC, was put in charge of the plant's construction. Upon accepting President Ishida's instructions to build a plant that would not be outmoded for at least 10 years, Shoichiro Toyoda set about constructing an ideal plant, taking for reference features of automobile plants he had visited in Europe and the United States the previous year.

The resulting Motomachi Plant was an integrated production plant, comprising an assembly shop with a capacity of 5,000 cars per month and body, painting, stamping and machine shops. Up until then, TMC's investment in plant and equipment had generally been for modernizing production facilities at each process. In contrast, the Motomachi Plant was designed from the outset as an integrated plant to mass-produce passenger cars, thus enabling high efficiency to be maintained throughout the entire production process. It was Japan's first plant designed exclusively for producing passenger cars and was furnished with the most up-to-date facilities, including various types of conveyors with a total length of 4 km, high-performance equipment and machinery, and a centralized production line control system using television cameras.

Observing Toyota's progress, the municipal authorities of the city of Koromo drew up plans to become an automobile industry city centered around TMC. Toyota for its part recognized the need for unifying its production with affiliated industries and began recommending that its suppliers move to Koromo. In line with these developments, Koromo was renamed Toyota City.

Liberalization of automobile imports into Japan was scheduled to begin in the spring of 1963. Although the first construction stage of the Motomachi Plant was completed in August 1959, Toyota's production volume for the year only barely exceeded 100,000 units. There were also considerable differences in costs still between Japanese automakers and those


in the Federal Republic of Germany, the United States and other industrially advanced countries. In light of the situation, TMC considered the possibility of an agreement with Ford; TMC drew up and, in March 1960, proposed a plan for setting up a joint-venture company to start mass production of a newly developed small car.

Ford initially expressed enthusiasm for the plan, since it was also considering ways to enter the fast-growing Japanese automobile market; however, the two companies could not agree to specific conditions for ties and their talks ended without reaching agreement.

Meanwhile, in August 1960, Toyota expanded the body shop and added stamping and machine shops at the Motomachi Plant, thereby completing the second stage of the plant's construction.

In these ways, TMC moved ahead of other automakers in setting up a system for mass-producing passenger cars. The company also drew up a plan in July 1960 for investing in new plant and equipment that would enable it to produce 30,000 units per month. This scheme also involved steadily bolstering facilities at its Honsha Plant and expanding the plants of suppliers manufacturing exclusively for TMC. In line with that plan, affiliated companies increased their production facilities. New plants were completed over a short period of time; the Sagamihara Plant of Central Motor Co. and the Fukaura Plant of Kanto Auto Works, both of which began operations in 1960, the former in February and the latter in June; and the Fujimatsu Plant of Toyota Auto Body, opened in January 1964.

Developing the Market for Small Passenger Cars

Since 1954, TMC had been moving to develop a small passenger car for the future small car market in Japan. TMC's


development team gathered information from around the world and in the following year prepared a plan which conformed with TMC's development policy of producing a car as low in price as possible. It was decided that the vehicle would have a frontengine front-drive (FF) configuration, be mounted with an air-cooled two-cylinder 700-cc engine and have an overall weigh of 580 kg.

In 1955, MITI's concept of a "people's car" was announced, and so TMC hurriedly set about constructing a prototype of a new, small, passenger car. Because the engine and the car's mechanisms were completely new, however, development took more time than originally anticipated. The performance of the constant velocity joint in the drive system, an important part in FF vehicles, was poor, and there were problems related to vibration and durability which could not easily be solved. While this development work was under way, TMC engineers were also involved in a great deal of other work, including the completion of model changes to the Crown and Corona. As a result, development of the new passenger car took six years. During the course of this work, the drive system was changed to rear-wheel rather than front-wheel drive. The new car finally made its debut at the All-Japan Motor Show (now the Tokyo Motor Show) held in October 1960 and was called the Publica. The export model was called the Toyota 700.

The development of the Publica met with continuous difficulties, owing partly to the fact that there was little room for flexibility in terms of dimensions, weigh and price in the design of the car. On the other hand, this encouraged TMC to try out new techniques in the construction of all parts of the vehicle and to address the various problems individually, the result of which was an accumulation of considerable expertise.

Due to limitations of weight, cost and space, the engine was a two-cylinder, air-cooled type, which made it a very difficult


project to handle. The restrictions on dimensions were quite severe, being of the order of millimeters, and it was also necessary to overcome problems of vibration and noise in addition to large temperature fluctuations. At the prototype state, various techniques, such as chrome-plating of the aluminum cylinders, were tried in an effort to overcome these problems. New experience was gained, as in the development of a novel valve mechanism with hydraulic lifters; this was undertaken when formtolerance specifications to determine the nominal roundness of parts were introduced in order to obtain the desired accuracy for the lifter.

In the design of the chassis, the policy was to perfect from the outset one that would hold up under the heaviest use by conducting running tests that would push the chassis to its very limits. This policy was adopted so that engineers could concentrate on developing a chassis that was as sturdy, lightweight and low in cost as possible without their ideas being hindered by conventional standards or past experience. Running tests were carried out over a total distance of 1 million kilometers, and a new suspension mechanism that was both light and durable was the final result.

When the Publica was marketed in June 1961, sales were sluggish despite TMS having developed an entirely new marketing channel for the model. Although the initial sales forecast was for 10,000 units per month, average monthly sales even in 1962 were only at about 1,600 units. The poor performance can partly be attributed to a lack of sales capabilities, but Toyota also realized that it had placed too much emphasis on utility and economy in the car design.

Thus, in July 1963, a deluxe model was added to the Publica line, resulting in rapid expansion of Publica sales. Combined with the van model added to the line a year earlier, in June 1962,


the deluxe version finally pushed sales of the Publica series above 7,000 units per month in December 1963.

Based on its experience with the Publica, Toyota learned that even if a vehicle is slightly more expensive, many customers will buy it if it offers greater luxury. Middle-class Japanese, whose income was gradually rising during the period of high economic growth, could really only afford a small car, but even with limited spending power they still wanted to buy a vehicle that would fulfill their aspirations and increase their quality of life.

During this same period, TMC was in the process of developing a diesel engine, and in March 1957 it marketed the Model DA60 diesel truck. The Type D engine, which inherited the accumulated fruits of technical research that had continued since before the war, was a 5,890-cc 110-hp, high-torque, fuel-efficient lightweight engine. In July 1957, TMS began marketing two diesel buses, the Model DB70 and Model DB75, and thereafter most of the buses built by Toyota were equipped with diesel engines.

In this way, TMS began marketing large diesel trucks and buses. Because the users in this market tended to remain loyal to the same maker, however, it was not easy for TMS to increase its market share. In 1966, therefore, Toyota established business ties with Hino Motors and Hino Motor Sales, whose specialty was large diesel trucks and buses, and eventually consigned this business to them.

At around this same time, TMS was adopting new sales methods, introducing "scientific marketing" more and depending less on traditional sales methods based on experience and intuition. In February 1956, the company set up a market research unit, the Research Office, to develop demand-forecasting tech-


niques and prepare marketing plans on the basis of the forecasts. In 1957, TMS conducted its first full-scale market survey.

In the same year, TMS reduced the price of all its small passenger cars and also set up a list price system. Until then, there were various sales practices, such as premium sales, which worked to the disadvantage of the consumer. The company now aimed to establish an orderly marketing system by making public the manufacturer's suggested retail list prices for each dealer. The list prices consisted of the ex-factory prices plus the distribution costs, including the cost of transportation.

Moreover, around this time, a sales method which Tokyo Toyopet Motor Sales had been using on an experimental basis spread to all dealers throughout the country and became the decisive factor in bringing about volume sales. Tokyo Toyopet Motor Sales was founded in March 1953 with a capital of 30 million yen, under the direct management of TMS. The company successfully implemented a series of up-to-date sales methods, such as the employment of university graduates for its sales force and the adoption of a sales territory system.

President Kamiya of TMS believed that long-term investment was necessary in marketing, as in manufacturing, and in May 1957 TMS founded the Chubu Nippon Drivers' School in Nagoya; this represented a huge investment equivalent to as much as two-fifths of TMS's total capital. Compared with the United States and the countries of Europe, however, it is more difficult to obtain a driving license in Japan, and would-be-drivers usually take lessons at driving schools for two to three months. The Chubu Nippon Drivers' School served as a model for other driving schools and contributed not only to promoting motorization in Japan but also to a major increase in the sales of Toyota motor vehicles.

In addition, in 1958, TMS opened the Toyota Sales College within Chubu Nippon Drivers' School to teach the new Toyota


sales method to Toyota salespeople from all over Japan. The college was the predecessor of the present Nisshin Educational & Training Center.

TMS gradually intensified its advertising efforts. It actively sponsored many events, one of which was the London-Tokyo 50,000-km Tour with the Crown, which was organized by the Asahi Shimbun Publishing Company and took place from April to December 1956. It was also around this time that TMS started vigorous sales promotion activities, such as setting up Crown Clubs and other owners' associations and directing concerted sales promotion efforts aimed at the mass media.

The Torture Campaign that was launched subsequent to the model change of the Corona in 1962 made full use of the mass medium of television and was quite revolutionary. As mentioned above, when the Corona was first marketed a series of problems occurred that gave the vehicle the reputation for being frail. After improvements were made to the Corona, mainly be strengthening the chassis, the car was advertised in dynamic television commercials, showing it driving off a high ramp or continuing to run after falling off a cliff. As a result, the image of the Corona improved and sales steadily grew.

At that time, the dealership system was still at the trial-and-error stage. However, the experience gained here was later found to be valuable in expanding the dealer network. When setting up Publica dealers, TMS looked for a sales system that would be closer to the customer. This resulted in the adoption of a policy of multiple sales outlets run by mini-dealers and also to the use of the open territory system. In addition, the company introduced a cash-on-delivery system of selling cars to the dealers. However, soon after the Publica came out, it became clear that the new systems were not suitable of the Japanese market situation at the time. Mini-dealers with insufficient financial assets found


it difficult to expand sales. Also, the adoption of the open territory system served only to intensify competition among Publica dealers themselves, which in turn led to worsening of their business performance.

Furthermore, the government's tightening of its money policy at the time the Publica came out made it more difficult for dealers to obtain necessary funds. Since consumers at that time had little ready cash and were unable to procure funds to purchase an automobile, the success of an automobile dealer was often held to depend on the ability to provide credit to customers. The shortage of available capital was serious, and in early 1962 it became necessary to change the mini-dealer system.

TMS increased its capital on three occasions between 1960 and 1961 to 12 billion yen so as to expand its ability to procure funds. In addition, TMS began making automobile loans in cooperation with financial institutions such as credit unions and banks. The aggressive marketing policies and powerful financing capabilities of TMS gave strong support to TMC's efforts to improve its technological capabilities and raise the competitiveness of its products.

In October 1962, just about the time when the Publica was struggling hardest, Toyota introduced a new-model Crown. With slightly larger body dimensions, this car had beautiful, modern styling and provided good driving comfort, luxury and drivability worthy of a high-class passenger car. Construction had just begun of the Meishin Expressway between Nagoya and Kobe, Japan's first expressway, and the engineers at TMC provided the new Crown with outstanding stability at high speeds in readiness for the expressway age. Great efforts were made to diminish vibration and noise. A special X frame was used to ensure minimum vibration in the rubber connection between the monocoque


body and frame, and the X frame also served to maximize space in the passenger compartment.

Before the new Crown was marketed, there were media reports to the effect that the X frame was defective and that the Ministry of Transport was performing an inspection. The reports, however, were erroneous, and there were no cases whatsoever of trouble even after the new Crown was marketed. But the experience made Toyota aware of the importance of reporting its activities, and the company set up a public relations section.

Following these developments, the new Crown created a sensation from the outset. The number of Crown registrations came to 3,000 units in November 1962, two months after it went on the market; in 1963, registrations exceeded 6,000 units, even though additional competitive models such as the Nissan Cedric were being marketed at the time.

Brisk sales of the Crown were also facilitated by the prestige advertising carried out, beginning in October 1963. This advertising campaign aimed to establish the reputation of the Crown and also improve Toyota's corporate image. It emphasized the character, tradition and high-class image of the Crown and opened up a new area in automobile advertising in Japan.

Introduction of Total Quality Control

In June 1961, TMC decided to adopt the system of total quality control (TQC). Passenger car production came into full swing after the introduction of the Crown, and the scale of the company's operations had grown considerably. Demands emerged for pushing a step ahead of quality control and introducing TQC to modernize management operations, in such ways as strengthening the interaction among departments.

The Union of Japanese Scientists and Engineers had developed a unique system of TQC, basing it on the methods of


statistical quality control that had been developed in the United States, but modifying them to meet Japanese circumstances. In applying TQC methods, a number of groups are formed within a company, and each group strives to control and improve quality. Ultimately, all employees in all departments participate to achieve broad-based quality control, which is not limited to product quality but includes facets of production and management, such as unit cost, quantity and delivery schedules.

TMC began by drawing up a master plan to promote TQC. The plan called for introducing TQC methods throughout the company in three stages: from June 1961 to December 1962, from January 1963 to August 1964, and from September 1964 onward. When Toyota was preparing to instruct its employees in TQC methods, it received guidance from various authorities in quality control, such as Professors Tetsuichi Asaka and Kaoru Ishikawa of the University of Tokyo.

The goal TMC set for the first stage was attaining international levels of product quality and pricing; as the initial step toward achieving this goal, TMC introduced a move to cut by 50% at all worksites the number of defects in the processing of materials, claims from customers, and the need for touching-up after painting, welding and other processes. As a result, the importance of making high-quality, low-cost products gradually became appreciated anew by the employees, and positive TQC results were obtained relatively quickly in the plants.

Compared with the plants, however, the administrative departments in TMC lagged somewhat behind in efforts toward modernization. Thus, attention turned to introducing TQC into basic corporate policy in the second stage, beginning in January 1963. To this end, three policy goals were set up: (1) establishing a system of mass production and bringing about low prices; (2) aiming for a still higher level of product quality; and (3) developing Toyota into a global concern.


Next, TMC set about putting the administrative setup into order and abolished the system whereby directors were in charge of specific company sectors. The business of the company was divided into 12 functional groups, including new product development, quality-based design, production preparations and production control, so as to bolster communications and cooperation between the different areas.

Despite all-out efforts throughout the company, TQC progressed slowly, and problems remained even after several audits had been carried out. One problem was that statistical methods were not being fully utilized; another was that TQC was not spreading at a uniform pace in all areas.

Thus, in 1964, TMC set up the internal QC Promotion Headquarters as the third stage. Executive Vice President Eiji Toyoda was put in charge of this, with Managing Directors Shoichiro Toyoda and Hanji Umehara appointed as his deputies. Moves immediately began to reinforce the quality control promotion setup and ensure the through execution of quality control activities.

These activities marked the beginning of a company-wide effort at TMC to win the Deming Application Prize for quality control. This prize was established by the Union of Japanese Scientists and Engineers to commemorate the achievements of Dr. W. Edwards Deming, who contributed much toward promoting and spreading quality control in Japan. It is awarded to the company recognized as having made the most outstanding improvements through the application of total quality control. In the shops at TMC, specific quality control goals were set for each process, and efforts were made with certain work processes to improve the control systems so as to eliminate unevenness in product quality. Individual quality control circles, with team leaders at the center, studied ways of determining the cause of


defects when they occurred and devised countermeasures to prevent reoccurrence. In addition, quality control teams were formed at all levels to promote company-wide participation, conduct cost accounting as strictly as possible and reduce costs wherever this was practical.

Through these activities, the awareness that "quality is built into each process" was instilled in the mind of every employee; in addition, the system whereby defective parts were simply discarded was changed in favor of one in which the parts were not allowed to reach subsequent processes.

In May 1965, TMC was nominated for the Deming Application Prize, and a "Quality Control Situation Report," which included the quality control situation at TMS, was submitted to the Deming Prize Committee. The committee carried out a detailed review of the actual situation, starting in August. The specific example used by TMC was the course of events leading from development to initial production of the New Corona.

The New Corona was redesigned to withstand the rigors of fast driving conditions on highways and developed to be accepted as an internationally competitive product. It was marketed in September 1964. During the development phase, technical improvements were carried out to raise the durability of the vehicle and make it easier to handle. The work proceeded within the framework of the company-wide cooperative relationship required by TQC, including building quality into each process, smooth commencement of production and cost reductions. When it was marketed, it was run back and forth between Nagoya and Osaka on the newly opened Meishin Expressway in what was called the 100,000-km continuous high-speed driving test. The test was publicized widely as proving the high-speed performance and durability of the New Corona. As a result, the New Corona started selling well as soon as it went on the market. In January 1965, the


monthly sales volume reached 5,888 units, enabling the New Corona to replace Nissan's Bluebird as the best-selling passenger car in Japan.

In October 1965, TMC won the Deming Application Prize. That year also marked the 15th Anniversary of the Deming Prize. On receiving the prize, Toyota pledged that it would continue, based on the experience it had slowly built up, to follow its motto of "Good thinking, good products" through continuous and untiring efforts.

At the time, the top management of TMC consisted of Chairman Taizo Ishida, President Fukio Nakagawa, Executive Vice Presidents Eiji Toyoda and Shuji Ohno, and Senior Managing Director Shoichi Saito. The top management at TMS comprised President Shotaro Kamiya, Executive Vice President Shiro Ohnishi and Senior Managing Directors Seisi Kato and Tadashi Kando.

Both TMC and TMS were making steady profits, and they increased their capital drastically. During the years of increased production from the 1950s onward, TMC established a company-wide cost management system and moved to reduce costs by setting cost-reduction targets by model and sector. From the 1960s, cost-planning activities took firm root at the important vehicle planning and design stages. TMC set target selling prices and target costs for the development of new models and the introduction of model changes, and utilized value engineering and other methods to reduce costs, which gradually resulted in major cost savings.

The cost management system operated so well that members of the Deming Application Prize Committee examining the overall situation at TMC gave it special applause. TMC's cost-reduction efforts, coupled with the salutary effects of increased production tied to the enlarged domestic market, contributed greatly to improved business results.

Thanks to these efforts, both companies had grown into


top-level corporations: TMC had after-tax profits for the period ending May 1965 of 6.12 billion yen and was capitalized at 38.25 billion yen, and TMS had after-tax profits for the period ending March of the same year of 1.702 billion yen and was capitalized at 12 billion yen.

Early Export Activities

Japan's motorization finally began taking firm root in the mid-1950s. It was around the same time that Japan's automakers began moving to export their products.

It was realized at Toyota that in order to develop an automobile industry based on mass production, it was necessary to be continuously aware of the international market. Thus, when TMS, which handled marketing, was established in 1950, it immediately set up the Export Department and aimed to pioneer overseas markets. Although their number was small, TMC also assigned export staff to work with TMS and provide liaison to other departments within TMC. The first areas TMS chose for developing export channels were Southeast Asia, because of its geographical proximity, and Latin America and the Caribbean, because Toyota happened to receive some inquiries from there.

At the time, however, Toyota had no means of knowing for certain what the economic situation and competition were like in the target countries, or even whether there were restrictions on imports; in a sense, TMS began exporting almost blindfolded. The first priority was given to sending staff overseas to look for and appoint distributors. Even that, however, was no easy matter because of the severe restrictions on overseas travel itself and also on the amount of money which a person could then take out of Japan. Moreover, soon after TMS began exporting, some of the target countries had already begun requiring local content or manufacture. The development of the overseas market thus


involved a great deal of trial and error and continuous hardship.

The first substantial export order for TMS came in February 1952 from Brazil, an order for 100 Model FXL large trucks. Toyota had recognized Brazil as a market with great potential. The country has a huge land area with bountiful natural resources, and it was enjoying both political and economic stability. Accordingly, in November 1955, TMS sent its first staff for stationing overseas to São Paulo, where they set about conducting various marketing activities, including a market survey and the appointing of distributors. The main vehicle to be marketed in Brazil was the four-wheel-drive (4WD) Land Cruiser. The Land Cruiser was mounted with a powerful engine and had a rugged chassis, making it both powerful and able to withstand bad roads. Moreover, it was in competition with only two vehicles -- the American Jeep and the British Land Rover.

From about the mid-1950s, TMS carried out aggressive sales activities centered on the Land Cruiser in other Latin American countries. It concluded a series of distributorship agreements, beginning with Distribuidora de Automoviles, S.A. of El Salvador as early as 1953, then with Purdy Motor S.A. of Costa Rica in 1957, with Compania Anonima Tocars of Venezuela in 1962, and with Gomez Hermanos, Inc. of Puerto Rico in 1965. Along with this, TMS moved its representative from São Paulo to Bogotá, Columbia, in 1956.

Toward the end of the 1950s, the export volume to Venezuela and Cuba grew considerably; however, it was difficult to obtain a stable market position in those countries on account of changes of government. In any event, the fact that TMS had exported to many countries, regardless of the small export volume, was highly significant because it was the key to subsequent development. At the beginning of the 1960s, TMS expanded its exports to include other countries in Latin America and the Caribbean. The main


export destinations were Colombia, Puerto Rico, Peru, Bolivia, El Salvador, Costa Rica and the Dominican Republic.

In 1956, the Brazilian government announced a local content policy, and Toyota was no longer able to export completely built-up vehicles to the country. Toyota amended its policy based on the results of market surveys it had conducted up to that point and decided to cooperate with the Brazilian government in its local content program. Centering on TMC, a local company was established through which Toyota would work in order to develop the automobile market in Brazil. The new company, Toyota do Brasil S.A., Indústria e Comércio, was set up in January 1958 and started assembling the Land Cruiser in May 1959. In December 1961, the company bean local production of the Land Cruiser, called the Bandeirante in Brazil.

Unfortunately, however, production did not go as well as expected. At that time, there were few parts makers in São Paulo and the surrounding area that could supply the necessary parts, leaving no other course but to rely on small parts makers located in remote areas. As a result, costs were high, quality lower than desired and delivery tended to fall behind schedule. In addition, government price controls were in operation, causing the company to go into deficit. Capital also ran short and borrowings increased, sending Toyota do Brasil into a situation of chronically large deficits.

In view of this situation, there wee repeated cries from within TMC to close down the Brazilian company. However, because it was believed that Brazil was an important test case for local production, energetic efforts were made to continue the business. Reconstruction measures were formulated, and the scale of operations was reduced from almost 200 units a month to 50 units. Efforts to build a financial system that would enable full-scale local production included value-added analysis, a clear


grasp of the profit and loss break-even point, and preparing a system for making monthly financial reports.

At about the same time, Toyota was confronted with similar teething troubles attendant to other overseas activities, this time in Mexico, another large country in Latin America that appeared to have a promising market. Just as in Brazil, Toyota was prohibited from exporting completely built-up vehicles to Mexico, and so, centering on TMS, it started knockdown export of the Crown in 1960. Because of problems related to the large number of parts involved in the manufacture of passenger cars, the Crown was frequently assembled with incorrect or missing parts. Even three months after the commencement of local assembly, not a single complete car had been assembled. Then, just when assembly finally appeared to be under way, other troubles arose, involving difficulties in TMS's relationship with its local partner and the government's decision to increase the local content. All this eventually forced TMS to abandon the market in 1964.

Toyota's experiences in Brazil and Mexico were valuable and gave the company a new awareness of the importance of properly preparing its knockdown system and also of selecting local partners. In an effort to stamp out the problem of incorrect or missing parts, TMC set up work areas in its main plants for packing knockdown parts and also established an organization exclusively for knockdown production.

This work yielded results, and subsequently knockdown exports were started to one country after another. In August 1962, a contract for knockdown export was concluded with Compania Anonima Tocars of Venezuela, and assembly began the following year. Local assembly was started by Domingo Basso S.A. of Uruguay in 1963 and by Ensambladora Centroamericana de Costa Rica S.A. (ECASA) of Costa Rica in 1965.

Toyota's first exports to Southeast Asia were made at quite


an early stage, partly because of the proximity to Japan. In 1949, one year before Toyota separated into TMC and TMS, the company nominated Ho Tai Company Ltd. (present Ho Tai Motor Co., Ltd.) of Taiwan as its first postwar overseas distributor. This came about because that year Lieh Ho Huang, the company's chairman, visited Japan and approached Toyota with a view to acquiring import and distribution rights in order to import replacement parts for the Model KC large truck.

Toyota, still suffering from the slump resulting from the Dodge Line, was in critical financial straits and welcomed Lieh Ho Huang's approach. A distributorship agreement was immediately signed.

At that time, Taiwan needed a means of transportation in order to rebuild its economy after the war. It was temporarily able to meet this demand by importing truck tires and spare parts for repairing trucks that had been in use since before the war. However, Taiwan was short of foreign currency, and the importation of completely built-up vehicles was controlled by a permit system; an import permit was not easy to obtain.

Under these circumstances, Ho Tai began importing buses, for which foreign currency was given preferential assignment. The company also managed to obtain a limited import permit for passenger cars, and it succeeded in importing the Crown and other vehicles. As a result, the start was favorable in postwar Taiwan, with Toyota vehicles being used for both its buses and its taxis.

In Thailand, although TMS received a single order for 117 fire engines and delivered them in 1954, it was thereafter unable to find a suitable distributor that would handle Toyota vehicles exclusively in that country, where most vehicles sold were from Europe and the United States. TMS, therefore, opened a directly managed office in Bangkok in February 1957, and Toyota became


the first in the Japanese auto industry to have its own directly managed overseas sales outlet.

The Japanese staff who were sent, usually without their families, to Thailand were faced with many hardships. They were kept busy collecting payments for vehicles sold in addition to having to make frequent trips out into the country, even at night, to repair vehicles, all the while trying to overcome the language barrier. There were also unexpected incidents, such as coups d'état, to contend with. At any rate, as a result of setting up a sales office in Thailand, TMS was able to expand its monthly sales volume from about 10 units to between 50 and 60.

In 1962, the Thai government introduced a policy to promote the country's industrialization and applied a reduction of 50% to duties on vehicles produced at local knockdown assembly plants. Hence TMC and TMS each provided 50% equity to set up Toyota Motor Thailand Co., Ltd. (TMT), in October 1962 and subsequently began to build an assembly plant.

Bangkok, the capital of Thailand, is located along the meandering Chao Phraya River. TMT acquired land to construct a factory in an area on the outskirts of the city that had been newly designated as an industrial park. The construction work, however, was fraught with difficulties, partly owing to the foundation piles sinking under their own weight.

Although designated as an industrial park, the land was in quite an isolated area, leading to problems in providing transportation, communication and food for the employees. By far the worst problem that the unacclimated Toyota staff had to contend with was the heat. To improve ventilation in the factory, windows and other openings wee enlarged; however, this only encouraged snakes to enter the building in search of shade, and birds also flew in, causing much damage to the motor vehicles' paintwork.

Toyota gradually solved these unexpected problems and finally, in February knockdown assembly of


trucks and the Tiara passenger car, the export version of the Corona.

Commencement of Exports to the United States and Other Regions

Exports to the United States started as a result of a business trip to that country which President Kamiya of TMS made in 1955. Kamiya saw that the number of small cars such as Volkswagens on American roads was increasing, and he realized how that indicated changes in the structure of the American demand for cars.

The market for small cars in the United States had already grown almost to 100,000 units a year; all of those cars were from Europe. With the success of the Land Cruiser, Toyota had already gained much confidence in exporting, but the notion of making exports of passenger cars to the United States seemed like a dream. President Kamiya felt, however, that sooner or later, because of the rapid influx of European cars into the American market, the United States government was certain to adopt some kind of import restrictions. If that happened, and if Japanese automakers had no record of exporting vehicles to the country, there was a possibility that Japanese motor vehicles would be permanently shut out of the American market. Despite serious shortcomings in Toyota's products in terms of performance, reliability and price with respect to the American consumer, Kamiya earnestly insisted that exports to the Unites States should be started.

There was much opposition within TMC and even TMS to the idea of exporting to the United States. However, when President Ishida of TMC traveled there in 1956, visiting the World Bank, the Department of Commerce and other places in Washington D.C., it was recommended that Toyota consider exporting small cars to that country, since American automakers were not


producing such cars. Ishida had much experience in exporting automatic looms, and what he learned gave him the confidence to export to the United States. He felt that if Toyota approached exporting to the United States with the determination of Sakichi Toyoda and the dedication of former President Kiichiro Toyoda, the day would come when not only automatic looms but also automobiles could be exported by Toyota and compete at international price levels. Thus, exports of passenger cars to the United States began.

In August 1957, two Toyota Crown sample cars left the port of Yokohama bound for the United States. When they were unloaded at Los Angeles, they became the first Japanese passenger cars to be exported to the American mainland.

In October, the managing director of TMS, Seisi Kato, and other top Toyota managers founded Toyota Motor Sales, U.S.A., Inc. (TMS, U.S.A.) as a California-based corporation, initially capitalized at 1 million dollars, with half of the capital invested by TMC and the other half by TMS. President Shotaro Kamiya of TMS became the new company's president and Tokutaro Kobayashi was appointed as its executive vice president. The company's office was located on a large boulevard in Beverly Hills, and the initial staff of 13 included 11 Japanese seconded from TMS, one Japanese hired locally and one second-generation Japanese-American. To launch such a totally new type of undertaking, these staff members were extremely busy with such tasks as paving the way for the Crown's market debut in the United States and gathering an inventory of spare parts to provide comprehensive after-sales service.

One of the most difficult problems was obtaining type approval certification for the vehicles to be marketed. California's certification requirements were quite strict, and Toyota was obliged to make a variety of changes as a result , such as with the headlights, tail lights, rear reflectors and turn indicators. The turn


indicators, for example, did not easily pass the blink durability test. At the time, semaphore turn indicators were still in use in Japan, and installing the blinking type was a new experience for TMC.

Moves also began to establish a sales network. After studying American tax laws concerning imports and sales, TMS, U.S.A. decided to set itself up as an importer, with distributors acting as wholesalers, and dealers as retailers. In February 1958, the company established Toyota Motor Distributors, Inc. as a directly operated distributor serving the west coast. The president and executive vice president of this company were Japanese, but Americans were found to fill almost all the other positions. In January 1959, TMS, U.S.A. established another directly managed distributor, Toyota Motor Distributors of New Jersey, Inc. to handle the east coast.

Meanwhile, TMS, U.S.A. began organizing its dealerships in February 1958 by establishing Hollywood Toyota Motor, Inc., in California; it also started negotiating franchise contracts, so that by the end of 1960 it had 85 dealerships. Toyota was also expanding in Hawaii, where in March 1958 it signed an importer and distributor agreement with Service Motor Company, now Servco Pacific Inc.

Although the Crown, first marketed in July 1958, was a hit in Japan, its design was not suited for American highways. The car tended to vibrate badly at speeds over 100 kph; it also tended to overheat when driven over mountains and on long, straight, desert stretches, as between Los Angeles and Las Vegas. The Tiara models exported to the United States, beginning in June 1960, were more suitable than the earlier Crown, but still many problems occurred.

As a result, in December 1960, TMS decided to half passenger car exports to the United States. In Japan, TMC had found that designing cars to suit the local conditions is a critically important


factor. Through is setback in the United States, TMC had incisively learned that it was vital to gain experience by conducting repeated tests under those local conditions.

With the compact car boom of the Big Three and major price cuts of imported cars, TMS, U.S.A. suffered sluggish sales and had to reduce its personnel. The company was forced to move from its Beverly Hills office to a rented building in Hollywood. It was further obliged to close its offices in Chicago and San Francisco and leave only a skeleton staff at the New Jersey office.

While continuing to develop a United States dealer network for its somewhat successful Land Cruiser, Toyota set to work planning a comeback.

This failure caused the Export Department of TMS, which was still working on a trial-and-error basis, to lose confidence, and the total export volume for 1961 stagnated at just under 12,000 vehicles, less than that of Nissan.

The top management of TMC and TMS had many discussions, which led to a revamping of their organizations in 1962. In February 1962, TMS received assistance from TMC in the form of manpower, and in addition it made a wide search for talented people from trading companies or with experience in trade to staff its newly established Export Headquarters. Executive Vice President Shiro Ohnishi headed Export Headquarters, assisted by Senior Managing Director On Nakae and Managing Director Nobuji Araki. The headquarters was divided into five departments according to export destination: North America, Latin America and the Caribbean, the Far East, Oceania and Asia, and the Middle East and Africa. It also included the Overseas Planning and Administration Department to handle general export matters, and the Overseas Engineering Department, which was responsible for after-sales service and setting up local assembly factories for knockdown vehicles.


In line with a policy that called for returning to square one and resurveying the markets, each department carried out a reappraisal of the regions that fell under its responsibility in order to obtain a grasp of the market situation.

As a result of this re-examination of the market, one export destination that suddenly sprang into prominence was Australia.

In Australia, a highly motorized country on a par with North American and European countries, passenger cars composed 80% of the vehicle market. Exports of Toyota vehicles to Australia also began with the Land Cruiser. Exports started on a continuous basis after TMS signed a distributor agreement with Thiess Sales Pty., Ltd. in July 1959, and sales of the Land Cruiser and trucks began. The owner of Thiess Sales, Sir Leslie Thiess, was engaged primarily in large-scale civil engineering projects and construction. He was most impressed with the tough performance of the Land Cruiser, which was being used at dam construction sites; accordingly, he had Thiess Sales, which had been handling truck replacement parts and other products, acquire the distributor rights from TMS for the Land Cruiser.

At that time, some Australians still harbored feelings related to their Second World War experience, and the general reputation of Japanese products had yet to be established. Toyota's export setup was still in its infancy, and Thiess Sales was sometimes forced to dismantle a new vehicle in order to obtain spare parts. Despite the efforts of Thiess Sales, which continued to sell the Land Cruiser by drawing off the profits from its main business, monthly sales remained at about 50 units.

In 1961, TMS approached Thiess Sales with the proposal that the Australian company market the Tiara, the passenger car that Toyota most wanted to export. Unfortunately, however, the man who was then manager of Thiess Sales refused to handle Toyota's passenger cars on the grounds that the established


automakers, such as GM Holden's Automotive Ltd. Ford and AMC, already had a firm foothold in the market.

TMS was thus obliged to search for another distributor. Fortunately, Toyota heard that Australian Motor Industries Ltd. (AMI), which was assembling and marketing the Triumph and American Motor Corporation's Rambler, was interested in assembling small cars. Kenneth R. Hougham of AMI, who had been sent by British Leyland Motor Corp. Ltd. to rebuild the company, focused his attention on Japanese cars, which were successfully competing against Volkswagen and selling in increasing numbers in Canada. The attraction of the Tiara was that it was in the same class as the Volkswagen yet was designed on an entirely different concept.

A distributorship agreement was hence concluded between TMS and AMI, and in April 1963 AMI commenced assembly and marketing of the Tiara.

Thiess Sales, stimulated by AMI's aggressive policy, expanded its sales outlets and brought in more salespeople in a bid to increase sales of commercial vehicles such as the Land Cruiser and the Stout. As a result, the combined total of Toyota passenger cars and commercial vehicles sold in Australia in 1963 reached 4,300 units, suddenly making Australia Toyota's largest export market.

Exports to the Middle East and Africa also gradually got under way. The first Toyota vehicle sent to the Middle East was a single Model SA passenger car that was presented to the king of Egypt in 1947. That car was in fact Toyota's first postwar export. Unfortunately, however, subsequent exports did not proceed very smoothly and continued to be rather sporadic until 1954.

There were still many countries in the Middle East that did not have diplomatic relations with Japan, and the Japanese were not familiar with the languages, religions, customs and other


particulars of Middle Eastern countries. After the Second World War, many countries in the Middle East acquired independence and had just begun establishing themselves as nations; many of them were troubled by political instability. Under such circumstances, the TMS staff responsible for opening up sales routes met with many difficulties, including complicated entry and departure procedures and the lack of cash even for sending telegrams owing to restriction on carrying foreign currency out of Japan.

In those days, the image of Japanese products also was poor. Japanese exports consisted mainly of miscellaneous merchandise, and the overall impression was one of cheap, low-quality items. Furthermore, because automobile markets were cornered mainly by European and American makes, a deeply rooted preconception prevailed that only the Unites States and Europe were able to make good cars. This constituted a major hurdle before entry into the market could be gained.

Despite these difficulties, however, members of TMS's export and service staff traveled to the area with introductions from Japanese trading companies and the Japan Export Trade Organization (JETRO); in this way, TMS was able to make contact with individuals related to the local automobile business.

These efforts finally paid off in 1955 when a distributorship agreement was concluded with Abdul-Latif Jameel Co., Ltd., a company that operated a gasoline station in Jiddah, Saudi Arabia, and 23 Land Cruisers were exported to that country for the first time.

In 1956, distributorship agreements were concluded with Mohammed Naser Al-Sayer & Sons Est. of Kuwait, Ismail Bilbeisi & Co. of Jordan and Al-Futtaim Motors of Dubai. Exports to the Middle East, mainly of Land Cruisers, increased steadily from 30 units per year in 1955 to 450 units per year in 1958.

In the deserts of the Middle East, the Land Cruiser served


to further the efforts of peoples engaged in building up their nations, and it gradually acquired a reputation as powerful and reliable 4WD vehicle.

Passenger cars were introduced to the Middle East market in 1957; in that year, the first Crown was shipped to Kuwait. The Crown was exported to Saudi Arabia in 1959, followed by the Tiara in 1960. Initially, entry to the passenger car market was extremely difficult. However, TMS made special efforts to keep the retail sales price reasonable and also to ensure satisfactory after-sales service. Aided by these efforts, exports of Toyota vehicles to the Middle East exceeded 1,500 units per year for the first time in 1964, and the number of Middle East countries to which vehicles were exported increased from a mere three, centered on Saudi Arabia, in 1955, to 21 in 1964.

Toyota's entry into Africa started in April 1957, when a total of 12 Crowns and Land Cruisers were exported to Ethiopia. The export staff of TMS began in Africa with the belief that everything would develop well if they could just sell at least one vehicle per country and then be certain to provide more reliable after-sales service than other companies. Starting with Kenya, they spent six months traveling from country to country. Sales activities were extremely difficult, partly because, in an area where many different languages were spoken, the only catalogue was an English-language brochure of the Land Cruiser. Also, the staff had to drive a sample vehicle from country to country, even crossing a desert.

In 1957, Ghana became independent, followed by Guinea in 1958; then, in 1960, which was known as "African Year," a total of 17 countries, including Senegal, Cameroon and the Cote d'Ivoire, gained independence and began establishing themselves as nations. Though the number of Toyota distributors set up was small, they were significantly affected by Africanization, the


efforts by the new nations to break away from foreign control of their economies and industries. Nevertheless, by 1964, Toyota's exports to 18 countries had reached a total of 7,600 units per year.

Exports to the Republic of South Africa also started. This country was the arena of fierce competition between the world's automakers. Toyota motor vehicles were first imported into South Africa by Dr. Albert J.J. Wessels, who had an extensive textile business in the country. It was Wessels who first approached TMS, visiting its Tokyo Office to make enquiries about the importation of Toyota motor vehicles. A distributor agreement was concluded, and in January 1962 Toyopet Commercials (Pty.) Ltd. was established. Toyopet Commercials consigned assembly operations to Motor Assemblies Ltd, and preparation were thus completed to export knockdown kits just before a ban was scheduled to go into effect in April on the importation of completely built-up vehicles.

The Stout, the first small truck to be locally assembled, in June 1962, sold well in farming villages and was used for such tasks as transporting corn. Many of these trucks also ran on the highways. In Japan, the truck would have run at no more than about 60 kph, but in South Africa it was running continuously at 100 kph; thus, abnormal vibration levels and other problems began to occur frequently. Accordingly, the chief engineer of TMC's Engineering Department flew to South Africa, quickly had 300 propeller shafts air-freighted out and carried out repairs. He then had the Stout mounted with a 1,900-cc engine to replace the previous 1,500-cc engine.

These all-out efforts made by Toyota to develop a vehicle suitable for local conditions, together with its attitude to after-sales service, won it a good reputation; these efforts and the reputation also served Toyota favorably when it later sought distributors in Europe. Its experience in South Africa, too, a country with adverse conditions, such as dust, poor roads,


overladen vehicles, improper maintenance and high temperatures, speeds and altitudes, was invaluable in terms of knowing how to make technical improvements on vehicles and provide adequate after-sales service.

As a result of Toyota's aggressive efforts to develop markets in countries all over the world, total exports reached 24,000 units in 1963, which was a little more than double the figure for the previous year. In 1963, TMC also set up an Export Department and strove to build up a system of cooperation with TMS by, for example, establishing and periodically holding meetings of the Joint Export Conference. Three years later, in 1966, Toyota's total export volume was 105,000 units per year. Toyota was finally ahead of Nissan and had become the top Japanese automaker in the three categories of production, domestic sales and exports.

Chapter 5: Growing into a Major Business


Japan's Second Period of High Growth

Japan's second period of high economic growth lasted from 1966 to 1971. During this period, companies invested aggressively in plant and equipment, and in a short time their productivity and technology reached high levels, even in international terms. In the Japanese steel industry, for instance, per capita production of crude steel in 1968 was close to double the comparable figure for the United States. In the automobile industry, value-added productivity at companies such as Toyota and Nissan was beginning to equal that at GM and Ford. In addition, many other Japanese industries, including the industrial machinery, electrical and chemical industries, were approaching their American counterparts in productivity and were bolstering their international competitiveness.

On the other hand, the demand for durable consumer goods expanded steadily. Private ownership of passenger cars increased rapidly, as did the purchase of color television sets and air conditioners for the home. Annual production of passenger cars topped 2 million units in 1968, surpassing the annual production of trucks for the first time. Passenger car sales continued to increase rapidly afterward, sustained by strong demand, until in 1973 their annual production reached 4.47 million units. The aggregate number of registered passenger cars on Japan's roads increased from 5 million units in 1968 to 14.5 million units in 1973.

The expansion of the domestic market, combined with an increase in exports, resulted in an economy of scale for the automakers. The increased production, in short, led to lower production costs per unit, and the automakers repeatedly lowered the


prices of passenger cars. The lower prices promoted motorization among white-collar workers.

Against this backdrop of the expanding economy, progress was also made in the liberalization of capital. Restrictions of foreign direct investment in Japanese industries were relaxed from 1967, and the automobile industry was liberalized in 1971.

In preparation for foreign participation in the automobile industry, moves began early on to restructure the industry in order to bolster its international competitiveness. In August 1966, Nissan merged with and absorbed Prince, and in 1968 it entered into business ties with Fuji Heavy Industries.

Toyota moved forward from late 1963 in negotiations for business ties with Hino, and after long quadrilateral talks, Hino Motors, Ltd., Hino Motor Sales, Ltd., TMC and TMS reached an agreement in October 1966. The agreement stipulated an end to production of the Contessa, Hino's small passenger car, and the consignment to Hino of production of the Publica Van and development and production of the Hilux, a small truck. In addition, Toyota and Hino reorganized their dealer networks on a coordinated basis.

In November 1967, after the business ties with Hino began to yield positive results, Toyota and Daihatsu also agreed on business ties. Daihatsu mostly produced minicars with an engine displacement of 360 cc or less. With Daihatsu and Hino in its camp, TMC emerged as an integrated automaker, with a complete range of motor vehicles from minicars to heavy trucks in its product line-up. The formation of a group of affiliated companies through the tie-ups enabled each maker to maintain its individuality while enjoying the many advantages arising from such cooperative activities as production consignment and exchanges of technology and personnel.

Capital ties between Japanese and foreign automakers were later realized. Mitsubishi Heavy Industries and Chrysler


established Mitsubishi Motors Corporation as a joint venture in 1969, and GM and Isuzu Motors agreed on business ties in 1971. Toyo Kogyo began to negotiate business links with Ford in 1969.

With the entrance of the Big Three into the Japanese automobile industry, the industry's regrouping temporarily came to a close.

In pace with the rapid growth of the domestic market and the installation of mass production facilities, Japanese-made autos acquired greater competitiveness in the international market, and exports of passenger cars increased rapidly. In 1965, the total was 100,000 units; in 1970, exports of passenger cars jumped to 726,000 units, and they leaped again in 1973 to 1,451,000 units.

The speed at which the use of motor vehicles spread throughout Japan affected Japanese society in various ways. Urban sprawl, for example, became pronounced, and the Japanese became more mobile. Along with the popularization of television, motor vehicles brought an urban-type consumer pattern to rural areas. Automobiles changed the way the Japanese spent their leisure time and how they behaved as consumers.

The progress in motorization, however, was not matched by a similar growth in social capital. This disparity led to new problems, including a rise in the number of deaths and injuries from traffic accidents, traffic congestion and air pollution caused by exhaust emissions from motor vehicles.

Moreover, the world economy experienced major turbulence from the late 1960s to the early 1970s. After the gold market in London was closed in March 1968, and the United States government temporarily suspended in August 1971 the convertibility of the dollar into gold and imposed a 10% surcharge on all imports, the world economy entered a period of transition. The instability


in the world's monetary system that started in August 1971 and the final decision, made in February 1973 by the governments of the leading nations, to adopt floating exchange rates rocked the IMF system to its foundation.

The IMF system had been the preeminent element in international finance and trade since the end of the Second World War, but it had become clear that the system needed a through overhauling. At the same time, the advanced nations were suffering from a combination of rising prices and a stagnant economy (stagflation). Inflation in the advanced nations and growing nationalism among the nations supplying natural resources combined to send the prices of primary commodities spiraling upward. In retrospect, these were clear signs pointing to the coming of the oil crisis.

Establishing Systems for Volume Production and Marketing

Amid the rising tide of motorization in Japan, the Corolla, which TMS marketed in November 1966, was a case of successful product planning. In those days, the market in Japan for the Crown and other large cars was showing little growth, while the markets for medium-size cars, represented by the Corona, and 1,000-cc small cars were expanding at a crisp pace. In 1965, the market for large cars decreased to 84% of the 1964 figure; the markets for medium-size and small cars, however, increased by 43% and 48%, respectively. The message was clear: Domination of the Japanese automobile market had shifted away from business and corporate customers. The demand for automobiles among white-collar workers was emerging as the major power in the market. In the small-car market, in particular, Daihatsu, Honda, Mitsubishi and Toyo Kogyo announced new models, catching up fast with Toyota's Publica. Toyota, at this juncture, chose to counter the competition's offensive not by carrying out a model


change of the Publica but by introducing to the market a totally new, higher-grade automobile. Ever since it marketed the Publica, Toyota had struggled as a pioneer in developing the small-car market in Japan. Now, it was convinced that in the mass market there was a demand for automobiles with greater luxury and comfort.

Thus began the development of the Corolla, a new small car. The development concept behind the Corolla was to produce a vehicle which in terms of performance and quality would be superior to all competitive cars and yet, at the same time, would be sufficiently low in price and maintenance costs to be affordable to drivers of small cars. The chief engineer in charge of the development project recalled the objectives of the Corolla: "It was aimed at the general user. It had to be a comfortable car as well as a car that people could be proud of. We wanted it to be the type of auto that people would want to continue driving for a long time."

In line with the development concept, TMC engineers struggled to give the Corolla a dynamic and elegant appearance. They adopted curved glass for the door windows to create greater interior space; to provide the car with a sporty and more responsive running performance, a four-speed floor shift was utilized instead of the three-speed column shift, then at the peak of its popularity. Engineers developed shock absorbers in-house that had outstanding durability and used a strut-type front suspension because of the advantages it provided, such as lighter weight, lower cost and smaller space requirements. They also developed a new engine for the Corolla -- the Type K. Though at first it was planned to give the engine a displacement of 1,000 cc, it was later decided to enlarge this to 1,100 cc, in line with making the Corolla superior to competitive cars in all respects. In the meantime, value engineering (VE) was stressed at all stages of production, including parts suppliers, and tremendous efforts were made to


reduce the production costs, so that the Corolla could be put on the market within the price range of small cars.

A new plant was built at Takaoka in September 1966 for producing the Corolla. The total area was 1,360,000 m2 and the plant was located 8 km from the Head Office. The latest equipment was introduced in many sections, including welding presses, automated welding and painting, and conveyor lines in the assembly plant. A computerized on-line control system, the first of its kind to be used by Toyota, managed all the manufacturing processes at the plant. This on-line system was connected not only with the Kamigo Plant, which produced the engines for the Corolla, but also with the vendors who supplied seats and wheels. The system helped to synchronize production and shorten the lead-time for delivery of engines and other parts. As a result, TMC established a production system with an unprecedented capacity of 20,000 units a month in the Takaoka Plant alone. Even many within the company had difficulty in believing such a figure, since the company's total production had previously been 40,000 units a month.

Toyota planned to market the Corolla through the existing Publica sales channel. For that purpose, it reinforced the channel by adding 18 new dealers during the six months prior to the marketing of the Corolla.

In advertising the Corolla, the decision was made to develop one of the largest advertising campaigns ever seen in Japan. Toyota used television to the full and employed the slogan "The extra 100 cc gives extra comfort" to catch the attention of potential customers.

As a result of this bold planning, when the Corolla was marketed in November 1966, it immediately became a best-selling car in its class, outselling the Nissan Sunny, which had been marketed six months earlier, and other competitive cars. In fact, production was unable to keep up with the explosive demand for


the Corolla, and a new stamping shop and a second assembly shop were added to the Takaoka Plant in 1967.

In 1968, after the Corolla had established itself firmly among general users, the fastback Corolla Sprinter was marketed. The Sprinter's sporty design was received very well by the market. The new model was handled by a new sales channel, the Auto Dealers, which successfully increased its sales.

As a result, TMS built up the most powerful sales network in Japan with 237 dealers across the country as of the end of 1968. There were 49 Toyota, 52 Toyopet, 11 Diesel, 80 Publica (later renamed Corolla Dealers) and 45 Auto dealers. In the same year, the annual production of TMC topped 1 million units.

The success of the Corolla gave an impetus to product development at TMC. For example, in the market for large passenger cars, the Crown was suffering from sluggish growth because it was traditionally targeted at the business and corporate market. TMS, therefore, planned to enlarge the market by exploring demand among individuals. The Crown was Toyota's high-grade car and its line-up offered 260 different types, including a six-cylinder 2,000-cc model, as well as numerous options. This was the largest number of selections offered by any model of auto in Japan. TMS advertised the wide selections available and sought new customers among private individuals. In addition, at the time of the Crown's model change in September 1967, TMC added to the line-up the new Crown Owner Deluxe, which combined luxury with a reasonable price. At the same time, TMS staged the "White Crown" campaign to correct the image of the Crown being a black car used by corporations. Next, in 1968, the Crown Hardtop was marketed. The Crown, in this way, steadily penetrated the individual customer market.

In 1968, Toyota marketed the Corona Mark II. From the


beginning, the line-up of the Corona Mark II offered 52 types in 12 models. The models included sedan, hardtop, van and wagon types. Two kinds of engine, 1,600 and 1,900 cc, were made available. The Mark II was originally planned as a new Corona model, since the Corona was enjoying tremendous success in many countries around the world. However, when all the requests submitted by distributors in many countries concerning performance, comfort, safety and other features were taken into consideration, the new car turned out to be larger than the Corona. Toyota then decided to market the Mark II as a new line separate from the Corona.

To make the Mark II an outstanding international product, TMC conducted exhaustive running tests, such as continuous high-speed running tests on the test course at the Higashifuji Automobile Performance Testing Center and endurance tests on rough tracks and mountain roads. The safety, maneuverability and dependability of the Mark II were proven during these tests. TMS also organized an advertising campaign, "Corona Mark II around the world speed run," to prove the outstanding performance of the Mark II. These various efforts were effective, and sales of the Mark II expanded until it became a strategic product in the Toyota line-up, midway between the Crown and Corona.

While conducting research and analysis of the market for small passenger cars, Toyota became aware that the development of a sporty car, different from any existing car, would create a new market, mostly among young people. That led to the development of a specialty car, the Celica.

A car for young people had to satisfy two conflicting factors -- high performance and low price. Since it was difficult to estimate the size of the market, Toyota chose to develop another model, the Carina, a sporty sedan, which would share the engine and other major components with the Celica. In other


words, as the solution to the problem of reducing production costs by volume production, TMC decided to produce on one line at one plant two different models, completely different in appearance but sharing most of their components. That called for a good deal of ingenuity both in design and production. Four types of engine were developed simultaneously: 1,400-cc, 1,600-cc, 1,600-cc twin-carburetor, and 1,600-cc DOHC engines. The main design objectives were high-speed performance, good acceleration, silent operation at high rotations per minute, compliance with emission standards, maintenance-free quality, compactness, light weight and high productivity.

Toyota marketed the Celica and Carina in December 1970. The Celica was so designed that customers could choose the engine, the exterior and the interior from among 28 different combinations. In addition, the Celica offered many options, and these made it altogether a specialty car tailored to the taste of the individual customer. Toyota named this approach to marketing the "Full-Choice System." It was made possible by the on-line, daily order system, which transmitted customer orders to the plant and rearranged production schedules from day to day.

The Celica, with its fresh styling, gave birth to a new market for specialty cars. The Carina, too, marketed simultaneously with the Celica, had 26 types in its line-up and created a new small-car market of its own, mainly among young white-collar workers.

In May 1967, Toyota marketed the Toyota 2000GT, developed as a genuine sports car and mounted with Toyota's first DOHC engine. In October 1966, prior to marketing, Toyota carried out high-speed endurance tests of the Toyota 2000GT, recognized officially by the Federation Internationale de l'Automobile (FIA). In the tests, the 2000GT proved its high performance by establishing a number of world records.

While the demand for passenger cars continued to diversify,


demand for trucks, too, especially small trucks, shifted toward vehicles with good running performance and more comfortable interiors. TMC used the powerful engineering capabilities it had accumulated since the development of the Toyoace to market a series of small trucks--the Hiace, Miniace and Hilux. As a result, Toyota's share of the small-truck market, which stood at 34.5% in 1965, increased to 39.6% in 1970.

For the year 1972, TMC's annual production reached 2 million units. This was the year that production of the Corolla reached 640,000 units, enabling it to join the ranks of the world's high-volume production models.

Keeping pace with the diversification of its products, TMC made energetic investments in plant and equipment, and it began operating a number of new state-of-the-art plants. Its investments in the plants were always ahead of the expansion in demand, and they proved to be the main factor allowing Toyota to consolidate its superior position in the domestic market.

The Kamigo Plant became operational in November 1965, i.e., one year before the opening of the Takaoka Plant. TMC began constructing the Kamigo Plant after economic studies into the scale of operations demonstrated that it was more profitable to build a new engine plant as a separate entity to the assembly plant. This was the first plant in Japan for the exclusive production of engines, and automated equipment was used extensively. Low-frequency melting equipment and shell-molding machines were used in the foundry, and transfer machines connected by automatic conveyors enabled continuous processing in the machining shop.

In July 1968, the Miyoshi Plant was completed exclusively for the machining of chassis-related parts and small parts for passenger cars.

Another new plant, the Tsutsumi Plant, was constructed


for production of the Celica and Carina. This was the third passenger car plant, following the ones at Motomachi and Takaoka. TMC placed the Tsutsumi Plant at the core of its plan to produce 2 million vehicles a year. It included a machine shop that mainly produced transmissions and many processes not found at the earlier plants, such as the in-house production of seats and the forming and processing of plastic products used to reduce the overall weight of the cars being produced.

In the body shop, a gate-line system was adopted to enable production of the Celica and Carina on one line. By means of this system, the line was able to produce the two models, with their different bodies but common underbody, in any production ratio. The Tsutsumi Plant was completed in December 1970.

In the meantime, the foundry at the Honsha Plant was becoming obsolete. In May 1971, TMC began building the Myochi Plant to replace the old foundry. In designing the new plant, special attention was paid to preserving the local surroundings, such as by making the plant buildings airtight and soundproof to prevent the noise from disturbing local residents. The cost of preventing environmental pollution at the plant accounted for as much as 20% of the total investment in plant and equipment. The Myochi Plant began operating in June 1973. The plant boasted many of the latest production technologies, including a new type of line for processing molding sand, a large melting furnace and special equipment for downstream casting. The start of operations at the Myochi Plant immediately led to enhanced reliability and productivity of molded parts.

As new plants were built in the general vicinity of Toyota City one after another, hiring the necessary work force became a pressing concern. The rapid growth in the economy gave rise to a shortage of labor in Japan. The shortage was especially acute among blue-collar workers: The opening/application ratio shot


up from 2.7 jobs to each worker seeking employment in 1962 to 7.1 jobs in 1970.

To secure a sufficiency of seasonal workers, TMC stationed recruiters in all major regions of the country. The company had to devise many ways to cope with the manpower shortage, such as negotiating with the labor union to set up rules for sending employees from one plant to assist at another.

Another major problem was creating a system for training and making the best utilization of human resources. One step TMC took in 1969 was the introduction of a self-reporting system, allowing all employees to submit reports regularly about their jobs and to state any wishes they might have about rotating to other job areas.

TMC also established the Education and Training Department at the Head Office. TMC's policy on fostering and educating its work force is summarized concisely in the words of then President Eiji Toyoda: "It is people who make things. So we must first make people before we make things." The Education and Training Department developed a series of special training courses for all levels of personnel; gradually, a full curriculum was established, ranging from orientation courses for new employees to management courses for department heads. The company also expanded the Toyota Trade School, which was founded before the Second World War for training middle-rank skilled shop employees. In February 1970, its name was changed to the Toyota Technical High School.

As TMC's production capacity grew rapidly, the parts makers, too, had to make tremendous efforts to bring about improvements in the areas of product quality, costs and delivery. As TMC continued to demand ever higher standards, it soon became apparent that the existing system for inspecting incoming items was no longer capable of functioning adequately. TMC


solved the problem by creating a new cooperative relationship with the parts makers, providing them with technical guidance and making them responsible for maintaining the quality of their products.

In addition, TMC gave positive support to parts makers in order to strengthen their managerial structure. First, the suppliers were often financially unstable because they tended to depend too much on loans. The general manager of TMC's Purchasing Department led efforts to persuade the suppliers to settle their loans, promising them TMC's financial support when they needed money. TMC also guided the suppliers in altering their policy of spending heavily on advance investments. Instead, TMC advised them to find new sources of profits by improving their productivity. When requested, TMC also participated with equity in the suppliers, thus contributing in terms of both capital and human resources to strengthen the cooperative relationship with the suppliers and to bolster their managerial structure.

As products became more diversified at an accelerating rate, TMS found it necessary to augment the support it provided to the dealers. Making TMC's production planning more responsive to the latest market trends and offering better service to customers, including shorter delivery times, called for automation of the procedures involved. As the first step in that direction, TMS in 1966 launched the 10-day order system by using the telex machines installed in all dealers' offices and introducing some of the latest in computer hardware. With the system, Toyota received orders from dealers every 10 days. If a dealer did not have in stock a particular type of vehicle that had been ordered, Toyota was able to deliver the vehicle to the customer in 16 days at the earliest and 30 days at the latest. Previously, a customer had to wait at least one month, since TMC received only monthly orders from dealers. As the number of available options was


beginning to increase rapidly from around this time, the 10-day order system proved to be a great blessing to both TMC and the dealers in cutting down their inventories.

Automation was urgently needed also in the area of replacement parts, where demand was increasing at a phenomenal pace. TMS, therefore, promoted the introduction of computers among the dealers for parts management and developed a customer information management system to offer a more comprehensive service to customers.

Moreover, parts distributors operated jointly by TMS and respective local dealers were established in order to centralize the distribution of parts. The country was divided into territories and, starting with the Tokyo company founded in 1966, 11 such parts distributors had been set up across the country by 1975.

In this way, parts were supplied more smoothly, and repair services were carried out promptly and thoroughly. Because customer service is so important in the marketing of automobiles, the shortening of delivery times and the improvement of aftersales service were of great significance.

Around that time, a major international issue for Japan was liberalization of capital. Liberalizing capital meant that companies of different nationalities would compete against each other on equal terms. Automakers in Japan in those days had still not accumulated sufficient capital of their own, and they viewed as a major threat the entrance into the Japanese automobile market of the financially powerful Big Three.

TMC worked hard to stabilize its managerial foundation. Its rapid production increases led to much improved earning power, and after-tax profits increased from 6.118 billion yen for the period ending in May 1965 to 36.258 billion yen for that ending in May 1973. Moreover, for the period ending in May


1972, TMC replaced Matsushita Electric Industrial Co., Ltd. as the top company in terms of profits in Japan.

With the help of its high earning potential, TMC inaugurated a policy of financing, in principle, all its plant and equipment investments by internal funds. As a result, the company's long-term debts shrank from 17.769 billion yen at the end of May 1965 to 393 million yen at the end of May 1973.

In the meantime, TMC's capitalization also increased from 38.25 billion to 48.76 billion yen at the end of June 1973. Most major businesses in Japan at the time depended more on loans than on their own equity capital, because loans cost less. TMC, however, issued stocks at market price whenever conditions were favorable and used the premium to pay back its borrowings. As a result of TMC's active investment in plant and facilities during the high-growth period, its net-worth proportion recovered to 48.6% by November 1973, an unusually high level for a Japanese corporation of the day, from its low of 41% during the period ended November 1971. The building of such a healthy financial structure before the oil crisis proved to be of great value to TMC's subsequent management.

TMS, too, continued achieving increasingly favorable results: After-tax profits rose to 9.343 billion yen for the period ended September 1973 from 1.739 billion yen for the period ended September 1965. Capital, which was 12.3 billion yen in May 1970, had reached 15.939 billion yen in October 1973.

Search for New Business Opportunities

In the mid-1960s, some signs began to appear of a slackening in the high-paced expansion of the Japanese economy. TMS, therefore, set up the "Project 70s Committee" in 1968 to search for new business fields. The committee examined many ventures, such as drive-in restaurants, which some dealers were already


running, supermarkets, trailer camps and marinas. The committee finally undertook the import and marketing of some products, including air conditioners made by General Electric Co. It also launched a car rental business -- Toyota Rent-A-Car, today called Toyota Rent-A-Lease -- in 1966, which showed a promising start, growing in 1967 into a national network of 33 companies.

At about the same time, a number of directors of companies in the Toyota Group who had engineering backgrounds began seriously considering branching out into new business fields. The discussions led to some of the group companies starting up new businesses in the production of recreational vehicles, motor boats and sailing boats.

From the various schemes that developed, the housing business finally came to be viewed as the most promising possibility for Toyota. In February 1969, TMC and TMS jointly formed a project team, under the leadership of Senior Managing Director Shoichiro Toyoda of TMC, to make preparations for entering the housing industry. The team defined the basic objective of the new business as offering to the public high-quality houses at low prices by means of industrializing many of the house-building processes. As to the type of house that should be developed, the team chose "unitized" houses, which would increase the ratio of parts made in the plant and ensure a more uniform quality.

A plant was built on the premises of TMC's Engineering Department. In August 1969, the plant produced a test unit, with a floor space of 2.5 m square and a height of 2.78 m. Then, in the following month, it completed the first test house, a single-story building with an area of 93.75 m2.

In 1971, the plant produced a prototype two-story house. The team had three of the test houses built in Toyota City, and three families moved into the houses to monitor them under real living conditions. The families soon found many defects with the houses; in turn, the development team found that building


houses was quite different from building autos and had its own set of problems.

In 1972, the team test-produced a unitized office made of the same building materials employed for the houses. The team supplied the unitized offices to dealers for their used-car sales outlets and to car-rental companies. In the process, the team gained a great deal of knowledge in new fields, such as production, transfer and construction systems, which would be indispensable in the housing business.

It was in 1953 that Toyota began seriously considering industrial vehicles. While on a tour of the United States, Eiji Toyoda, then senior managing director at TMC, was much impressed with labor-saving forklifts. Upon his return to Japan, he advised Toyoda Automatic Loom Works (TAL) to produce a prototype forklift. In 1955, TAL produced a 1-ton forklift powered by a Type S engine. The truck did very well in performance tests.

In January 1956, it was agreed that TMS would market the forklift made by TAL. In March of the same year, TMS announced the 1-ton forklift under the brand of Toyota Forklift.

TMS and Toyota dealers across the country together launched a powerful campaign to open up a new market in trucking and other areas. The personnel in charge of sales, as well as the salespeople themselves, took every opportunity to visit customers. The technical people involved in developing the forklifts also visited potential customers and undertook design changes in order to meet particular needs and specifications.

Thanks to those efforts on the part of so many staff members, Toyota management became convinced that industrial vehicles represented a viable business area. In July 1960, TAL set up a forklift assembly line at its Kyowa Plant in Aichi Prefecture. TAL also expanded the product line-up to include 11 types of forklifts, as well as towing tractors and shovel loaders. In August


of the same year, TMS began appointing Toyota forklift dealers exclusively for handling industrial vehicles. As a result of these energetic efforts by TAL and TMS to put the production and sales systems into order, Toyota sold 2,400 units in 1961, thus quickly becoming number one in the domestic market.

The marketing of industrial vehicles in overseas markets quickly followed. The first export was a 1-ton forklift shipped to Thailand in 1958, as a sample, for use at a parts warehouse of the branch office of TMS in Bangkok. The export of industrial vehicles, however, proved more difficult than expected. Partly because they were distributed through Toyota's overseas networks for automobiles, industrial vehicles were marketed in a half-hearted fashion. In 1961, for example, TMS exported only 22 forklifts to Latin America and the Caribbean, and Southeast Asia and Oceania.

TMS soon realized that it would have to assign independent distributors to market its forklifts overseas. Thereafter, TMS began to build up a network of distributors, signing its first contract with Motor & Industrial Transport Corporation (Pty.) Ltd. of South Africa in 1965. It subsequently signed contracts with Zwaans, B.V. (now Nederlandse Industrie-en Bouwmachine Maatschappij B.V.) of the Netherlands in 1966 and Tomen Transportgeräte GmbH of the Federal Republic of Germany in 1967.

At the same time, TMS began directing its marketing efforts toward fleet users. At that time, it was believed in the forklift industry that the one who controlled the ports controlled everything. Indeed, demand for forklifts was very high at seaports, where great quantities of cargo were handled every day. Singapore, in particular, was the target of intensive marketing by makers of industrial vehicles around the world, since ships from all nations regularly called there; a maker that succeeded in selling its forklifts in Singapore would win great prestige and


receive much publicity. In 1966, the Singapore Port Authority announced an international tender for a large number of forklifts. Twenty-four makers, including the eminent Conveyancer, took part in the tender. The specifications set by the port authority were based on a 3-ton forklift produced by Conveyancer. Toyota was considered to be at a disadvantage because it would have to modify its 2.5-ton forklift. TMS, however, negotiated with TAL and Marubeni Corp., the Japanese general trading company acting on its behalf, and won the tender on the first bid by offering a bold price.

The port authority later added the requirement that makers submit their forklifts to performance tests. The Toyota Forklift proved to be the best among the forklifts in the tests, not only in performance but also in terms of operability and durability. The contract TMS won was for 188 forklifts.

After the success in Singapore, TMS began to receive inquiries from distributors all over the world wishing to sign distributor contracts for forklifts. At TMS, too, industrial vehicles attracted much attention, with the result that an Industrial Vehicle Staff was set up in the Overseas Parts Department.

In September 1970, TAL opened the Takahama Plant in Aichi Prefecture, which was the largest plant in the world exclusively producing industrial vehicles. In 1973, TMS set up the Overseas Industrial Vehicle Department, further strengthening the marketing structure for industrial vehicles.

In this way, exports of industrial vehicles increased from 670 units in 1967 to 7,700 units in 1973; the countries of destination also increased to 66 in 1973 from 37 in 1967.

Coping with Recalls and Engine Emission Problems

In August 1969, the Japanese government announced a plan for a new automobile tax. The gist of the plan was that the


existing mandatory two-year inspection for motor vehicles would become a one-year inspection, at which time all owners would have to pay an average tax of 50,000 yen. The proceeds from the tax were to be allocated to the construction of roads and railways. Although Japan was certainly in need of funds to build a better infrastructure, the new plan put an excessive burden on the automobile industry. The Japan Automobile Manufacturers Association, Inc. (JAMA) and other auto industry associations lobbied against the tax bill. Since TMC people were serving as vice chairman and members of the Taxation Committee of JAMA, they directly supported the JAMA secretariat in such ways as coordinating actions among member companies and holding negotiations with external organizations. The new tax gave rise to extensive controversy, involving the authorities concerned as well as business and political circles. The outcome, however, was that the new automobile tax based on weight became law in December 1971.

In June 1969, the recalling of defective vehicles became a major issue. It started when news reached Japan that some Japanese and European automakers in the United States were quietly recalling defective vehicles and repairing them. Immediately afterward, charges were made that Japanese automakers were carrying out the same practice in Japan. Years earlier in the United States, the actions of Ralph Nader and other consumer activists had spurred increased vehicle-safety consciousness, which eventually led to the establishment of a recall system in January 1968. Toyota and Nissan were the first to be accused of secret recalling, Toyota for the corrosion of brake pipes in the Corona and Nissan for fuel leaking in the Bluebird. Other automakers were also accused of secretly recalling their vehicles for one reason or another.

Naturally, the automobile industry offered counter-argu


ments. Japanese automakers, it was pointed out, did not consider it necessary to make public announcements of defects found in motor vehicles because there existed in Japan the system of six-month check-ups besides the thorough mechanical inspections every two years; the system of regular checking and the detailed customer retention records kept by dealers made it possible for Japanese automakers to contact customers immediately if a major defect were discovered. Despite these arguments, however, under instructions from the Ministry of Transportation, automakers became obliged to make public announcements of defects in their products and to recall them immediately if necessary.

Thus, the system of recalling defective vehicles started in Japan. This incident renewed the awareness of Toyota and the other Japanese automakers concerning the importance of safety and product quality, as well as concerning their heavy corporate social responsibility.

Eiji Toyoda, who had assumed the presidency of TMC in October 1967, asked all TMC employees to learn personally from the salutary experience of the recall issue. President Kamiya of TMS called for a return to the customer first policy and renewed efforts for regaining customers' trust in Toyota. Furthermore, TMC and TMS held joint meetings and began making the efforts necessary to eliminate the manufacture of defective products. They agreed, among other things, to gather accurate market information, check defects at each production process, improve production process control and carry out stricter inspections.

As a result of the serious response of Japanese automakers to the recall incident, the quality and reliability of Japanese-made vehicles improved greatly in succeeding years.

The next problem to emerge concerned air pollution. In 1970, when it was reported widely that a high concentration of lead had been found in the blood of residents of Ushigome


Yanagi-cho in Tokyo, exhaust emissions from motor vehicles suddenly became the subject of much discussion. Next came news of the appearance of photochemical smog in Tokyo. The word "smog" originated in Los Angeles, but the conditions and the symptoms of smog in Los Angeles were different from in Tokyo, and no specific causes of the smog in Tokyo were identified. For the next several years, however, photochemical smog warnings were often issued in summer. Because automobile exhaust emissions were considered one of the sources of smog, reducing those emissions became a major problem for automakers.

The Environment Agency, which was created in 1971, was eager to reduce the toxic elements in automobile exhaust emissions. In 1973, the agency put standards into effect for controlling emissions from vehicles in use during that year. The agency also planned to enforce from 1975 exhaust emission standards that would be equivalent to those of the Clean Air Act (popularly known as the Muskie Act) in the United States, and it planned to introduce stricter standards in 1976.

The automobile industry requested the Environment Agency to postpone its target dates on the grounds that it was not possible to produce the necessary technology on such short notice. On the other hand, though, an intense race began among makers to develop the technology needed for cleaner engines. The first two makers to announce that they had cleared the standards set by the Environment Agency were Honda, with its CVCC engines, and Toyo Kogyo, with its rotary engines.

Because it was related to the public's health, the setting of standards for controlling automobile exhaust emissions became a national issue. Automakers raised questions about the causal relationship between exhaust emissions and atmospheric pollution, and they questioned the soundness of the standards set by the Environment Agency, pointing out the technical difficulty of meeting such standards. Despite their arguments, however, they


were simply accused of being indifferent to protecting the environment and maintaining public health.

In September 1975, President Eiji Toyoda of TMC was summoned to the National Diet to give a detailed presentation of the projects being undertaken by Japanese automakers toward the development of cleaner engines. After his presentation, he requested that the standards scheduled for enactment in 1976 be postponed. Because he had been serving as chairman of JAMA since 1972, President Toyoda was obliged to exercise caution in his public statements, since not all of Japan's automakers were certain when they would be able to meet the required standards.

TMC took all available opportunity to provide comprehensive data to all parties concerned so as to further the cause of the automobile industry. The position maintained by TMC was as follows: "To be responsible, as business corporations, we must make a clear distinction between achieving targets in the laboratory and achieving them in our products. We require a reasonable period of time for preparation before we can supply products that will meet these standards." The result was that criticisms were leveled against Toyota for being negative toward emission controls.

Through this experience Toyota came to feel keenly the need to strengthen its external affairs departments and make continuous efforts directed toward presenting and clarifying its position to the National Diet, related government departments and agencies, the media and the general public.

TMC was, in fact, far from being negative toward the production of cleaner engines. In 1964, the company set up an emission study group within the Engineering Department to begin basic studies. Then, in 1968, it built a laboratory for studying exhaust emissions at the Higashifuji Automobile Performance Testing Center, and it initiated there technological development


for controlling emissions. Moreover, in 1970, the company instituted an approach whereby a project team, comprised of staff from each engineering department, concentrated on developing company-wide emission control measures. The Development Planning Department, established that same year, was put in charge of preparing a system and moving forward with the project. In 1971, the Higashifuji Technical Center was officially launched, and afterward its experimental facilities were expanded and improved, its staff was bolstered, and development efforts continued.

Since the reduction of exhaust emissions was a new technical field, it involved many problems that defied solutions using traditional approaches. The rates of increase of three types of emission in particular, i.e., carbon monoxide, hydrocarbons and nitrogen oxides, did not change uniformly with changes in the air-fuel ratio in the combustion chamber. Reducing these three pollutants simultaneously in exhaust emissions was extremely difficult. Other problems that had to be solved included a related decrease in power, worsened fuel efficiency and driving performance, the durability of antipollution devices and an increase in production costs. To solve all these problems required the efforts not only of mechanical engineers but also of chemical and electrical engineers and others across a wide technical spectrum. A large number of new engineers were concentrated, in particular, in the departments concerned with engine development.

TMC engineers took up the challenge to develop engines which would not only clear the emission standards completely but also attain a higher level of perfection in all other aspects, including performance and fuel economy. While some engineers examined the process of combustion itself and studied more than 5,000 different catalysts, others undertook the development of new systems, such as gas turbine and rotary engines and electric battery-powered autos. In 1971, TMC finally selected the catalyst


method as the main approach to adopt toward solving the emission problem.

Manufacturing was also related to emission control, and TMC set up a Special Component Manufacturing Planning Office to prepare for commercial production of parts for use in antipollution devices. TMC's policy was to produce the necessary parts in-house until the technologies involved were thoroughly mastered. Since the development of antipollution devices was likely to undergo frequent changes, suppliers would have shouldered great risks if required to produce the parts. TMC production engineers, indeed, faced a good deal of extremely difficult development work as they delved deeper into hitherto unexplored fields. With the catalytic converter, for example, selecting materials for a container that was capable of withstanding sudden, drastic changes in temperature and devising a volume production system for it demanded seemingly endless toil.

With new products, it was not unusual for production to be suspended after only a short period, before the money spent for their development and production could be recovered. But TMC had to proceed with the development of these products despite the risks involved. For the catalytic converter, TMC initially used a substrate consisting of small alumina pellets, to the surface of which rare metals were adhered. Later, however, it switched to a system using a porous monolithic ceramic substrate. Duplication of investment was inevitable, given a development project with such time restrictions.

The government implemented its standards for reducing specific elements in exhaust emissions in stages. In December 1976, the Environment Agency announced that the most stringent standards would be introduced in fiscal 1978. By that time, though, TMC had successfully developed a three-way catalyst


which simultaneously removed the three pollutants that were the target of standards for exhaust emissions, and the company felt it was technically possible to meet the standards.

Removing the three pollutants simultaneously called for the strictest adherence to the stoichiometric air-fuel ratio. The key to the three-way catalyst was an O2 sensor, which detected the concentration of oxygen in the exhaust emissions. In the initial stage of development, the electrodes of the O2 sensor often cracked or separated from their base as a result of the high temperatures to which they were exposed. Their durability was only 5,000-10,000 km. The engineering staff conducted painstaking research in close cooperation with Toyota Central Research & Development Laboratories, Inc. and Nippondenso, ranging from basic research into properties of the elements involved to structural designs capable of withstanding thermal shocks. Subsequently, the various problems were gradually solved. The department, working together with production engineers, finally developed O2 sensors with outstanding performance and durability that would also be reliable when produced in large volumes.

In this way, TMC developed the three-way catalyst and was able to market cars meeting the 1978 emission standards. The standards were also cleared using an improved oxidation catalyst, and success was met in developing a highly innovative system called the lean burn system.

By mobilizing its entire engineering resources, TMC was finally able to produce cars that met all the standards set for controlling exhaust emissions. Achieving this called for enormous efforts on the part of all those involved in the development. However, the accomplishment left a legacy of accumulated technological expertise in many fields which has since proved to be of significant value in greatly improving the various functions in Toyota cars. It also had the effect of raising the reputation of Toyota in the worldwide competition with regard to fuel efficiency


and performance. With the engine, for example, TMC engineers took it completely apart and re-examined each of the component parts. The improvement in the intake and exhaust systems, modification in the design of the combustion chamber, the use of lightweight valves and reduction of friction resistance all contributed in greatly improving the performance of Toyota engines. In addition, the development of electronic devices and sensors, including many exhaust control devices, ignition systems and electronic fuel injection (EFI) systems, and the great efforts expended to improve their reliability resulted in providing Toyota engineers with extensive technological expertise in electronics at all levels, from design to manufacture.

Expansion of Exports to North America

Greatly expanding exports contributed much to Toyota's sales growth from the 1960s to the 1970s. As mentioned earlier, ever since 1962, when TMS established its Export Headquarters and launched its active export policies, Toyota's export volume had grown steadily from year to year, increasing from 63,000 units in 1965 to 720,000 units in 1973. The trigger to this explosive growth was that Toyota had finally begun exporting internationally acceptable passenger cars.

The experience of having to halt the export of passenger cars to the United States when it first entered the market there taught Toyota an important lesson. It learned that, depending on the particular market, motor vehicles which are not internationally competitive in every aspect, including performance, price and brand name, have no chance at all of being accepted. Toyota made the most of this lesson by striving to develop eminently international products. The first result of these efforts was the Model RT-40 New Corona.

The New Corona inaugurated a new age for automobile


exports. When this New Corona was marketed, TMC was barely able to keep up with domestic demand and, in 1966, when TMS began exporting the New Corona in earnest, it was received well all over the world and exports grew quickly.

The United States was the major export market for the New Corona. Success in that market was buoyed by a market survey of Tiara owners. Based on the results of the survey, Toyota equipped its cars bound for the United States with 1,900-cc engines for high-speed driving and offered models with automatic transmissions. With radios and heaters as standard equipment, the New Corona was priced at 1,860 dollars, which compared with a price of 1,600 dollars for the Volkswagen. To boost the New Corona's product appeal further, air conditioning was offered as an option, a feature only found in luxury passenger cars in those days.

During this period, Toyota Motor Sales, U.S.A. moved to put into order a sales network that would cover the entire country and make use of leading local businesses as distributors. For the 14 Midwestern states, a stronghold of the Big Three, it was decided to appoint a private distributor. Among the likely candidates, TMS, U.S.A. focused on the distributor for British Leyland, Ltd. Following negotiations, a distributor's agreement was signed with the company, and in January 1966 Mid-Southern Toyota Distributors, Inc. was established in Chicago.

TMS, U.S.A. also changed its policy for establishing dealerships by adding more dealers in urban areas and shifting the sales emphasis from the Land Cruiser to passenger cars.

Thanks to the New Corona, TMS, U.S.A. was able to create ties with reputable dealers who handled American-made cars, and it made steady progress in appointing more dealers in urban areas. As a result, the total number of dealers increased from 200 in 1964 to 719 in 1967. With this increase, TMS, U.S.A. began launching cooperative advertising campaigns with its dealers and secured new tie-up campaigns with dealer associations. It


also became the first foreign automaker in the United States to carry out systematic television advertising campaigns. Advertising focused on the New Corona and took as its leading slogan, "Get your hands on a Toyota and you'll never let go." This later became "Toyota: We're quality oriented."

Bolstered by accessories not previously seen in small-car imports and by more dealers, advertising campaigns and thoroughgoing after-sales service, American sales of the New Corona began to climb steadily and reached 31,000 units in 1967. Toyota's small pickup trucks, beginning with the Stout, which was introduced in 1964, also proved popular in the United States, especially with landscape companies operated by Americans of Japanese descent.

In September 1966, TMS, U.S.A. streamlined its directly managed distributor companies by merging Toyota Motor Distributor, Inc. with Toyota Motor Distributors of New Jersey, Inc. and set up a number of regional offices for the company. In February 1967, TMS, U.S.A. built a new head office building in Torrance in the suburbs of Los Angeles, moving from the two floors it was renting on Hollywood Boulevard. Additional personnel were hired as the Torrance office became the national headquarters for all operations. Meanwhile, the parts warehouse in Long Beach had also become too small, and a new warehouse and service center were built.

Now that the dealer network had succeeded in mass sales, TMS, U.S.A. realized how urgent its task was to build a system for ensuring the economical, stable and safe transport of large numbers of motor vehicles from Japan to the United States. Its import manager subsequently traveled around the country, making arrangements for car carriers, port-of-entry procedures and facilities, and land transport.

All these moves were successful, and exports to the United States grew from 3,700 units in 1964 to 39,000 units in 1967,


making the United States Toyota's largest export market.

Because the United States had introduced automobile engine emission standards before Japan, TMC had to explore a whole new area of technology. The company put its technical expertise to work, however, and, in March 1967, was granted the first United States government approval for three types of engines with emission control systems scheduled for mounting on 1968 models. In the same month, TMC opened a representative office in New Jersey in order to conduct ongoing and accurate research into market and other conditions in the United States.

In 1969, the Big Three responded to the import offensive by developing subcompact cars that were a size smaller than the traditional compact cars, and they began marketing new models one after another. Toyota, not wanting to revise its policy of avoiding direct competition with the American automakers, changed its major export car to the United States from the New Corona to the even smaller Corolla as of April 1968. In June 1969, Toyota also introduced the Mark II (later renamed the Cressida) and the Hilux, known in the United States as the Toyota pickup truck, to enhance its product line in the United States. Although Toyota was initially concerned that the Corolla's engine displacement and other performance features might not gain popularity in the United States, these fears were allayed as sales of the Corolla grew rapidly.

In September 1968, TMS, U.S.A. recapitalized twofold to 5 million dollars. It also began promoting the selection of reputable and reliable local businesses as distributors to bolster and expand its sales network. In January 1969, its second private distributorship, Southeast Toyota Distributors, Inc., with James M. Moran as president, was established in Miami. TMS, U.S.A. decided on Moran because of his success and renown: He had once been Ford's largest dealer in the United States, and he operated a


Pontiac dealership for GM after having moved to Florida. Then, in August 1969, the third private distributor, Gulf States Toyota Inc., was established in Houston.

With regard to the east coast, TMS, U.S.A. decided to manage only the New York region directly and to rely on experienced local distributors in other areas, partly for their political influence. In April 1970, TMS U.S.A. appointed its fourth private distributor, Mid-Atlantic Toyota Distributors, Inc., in Baltimore; in January 1971, it appointed the fifth, New England Toyota Distributors, Inc., In Boston. Consequently, by the end of 1971, the distributor and dealer network consisted of one directly managed distributor and five private distributors, with a total of 887 dealers under them. TMS, U.S.A. had grown its original west coast operational base and now covered the entire country. Toyota dealers were also expanding in size: The Longo Toyota dealership in California, for example, topped sales of 100 units a month in 1968.

Thanks to the favorable sales results for the New Corona and Corolla, overall sales increased steadily from 130,000 units in 1969 to 208,000 units in 1970 and then 309,000 units in 1971. However, the situation changed in 1971, when the American government sought to protect the weakening dollar by implementing policies that included a tax surcharge on imports. Soon afterward, international exchange rates were shifted to a free-floating system. This led to an appreciation of the yen, which pushed up the prices of Japanese motor vehicle imports in the United States and caused a sharp drop in their price competitiveness.

These developments naturally led to a rapid decrease in Toyota's sales volume in the United States, and after a series of major strikes by longshoremen, the many Toyotas unloaded at American ports caused a surge in excess inventory. TMS, U.S.A. sought to overcome this situation by continuing to strive for


long-term sales growth while implementing various short-term programs to boost sales, such as sales contests and advertising campaigns. Some dealers, however, refused to accept any more vehicles, and TMS President Kamiya, judging the first priority to be the reduction of inventories, decided that the production of motor vehicles destined for the United States would have to be decreased.

At any rate, sales in 1972 were about the same as 1971 at 311,000 units, representing a slowing down in the fast-paced growth trend that had continued since 1966. This became a turning point in the activities of TMS, U.S.A.

In February 1971, Iwao Kodaira became the new executive vice president of TMS, U.S.A. He immediately began moving to strengthen the company's foundation. His first task was to make the company organization more locally oriented. In October 1972, he made sweeping staff changes, promoting two Americans to officer status -- one as vice president and general operations manager and the other as vice president and controller. TMS, U.S.A. also brought many more Americans into responsible positions in line operations, and Japanese were assigned to be coordinators. The role of the coordinators was that of a communication link between the American staff and the Toyota people in Japan, providing effective advice to both sides. In addition, the company established a budget control system to improve financial management and set up a legal department in view of problems that had begun to emerge with regard to Japanese products, such as the dumping controversy concerning Japanese television sets.

Product strategy was also reviewed. Since the yen's appreciation had already caused passenger cars such as the Cressida and Corona to lose their price competitiveness versus American subcompacts, it was decided to expand the variations of the Corolla, the best-selling model, and to add economy


versions the Corolla. At the same time, the company changed the strategic emphasis of its product line from high-grade small cars to sporty cars, such as the Celica, and to multiuse pickup trucks. With regard to pickup trucks, moreover, since market surveys showed they had increasing potential as vehicles for recreational use, the driving comfort was enhanced and air conditioning and power steering were offered. In a sense, they became almost like passenger cars fitted with rear decks. These responses to the detailed demands of customers proved effective, and, beginning with the west coast, sales routes were thereafter expanded to the northern and eastern parts of the country.

TMS, U.S.A. also made efforts to shore up its marketing system by strengthening ties with its distributors and dealers, so that the system did not degenerate into simply being a loose group of sales companies, as can sometimes happen with sales networks. In addition, TMS, U.S.A. set up a schedule of meetings, including a national field meeting attended by representatives from the various Toyota regional offices and private distributor companies, the National Dealer Advisory Council, consisting of the heads of dealer associations across the nation, and region-specific dealers' meetings held by Toyota's distributors.

In February 1973, under the prompting of Toyota, the private distributor Mid-Southern Toyota Distributors, divided itself into three separate companies. Prior to this, the distributor had been responsible for 14 Midwestern states, a territory larger than that of other distributors, and its coverage of the territory had weakened. Each of the three new companies was given territories covering four or five states.

Even before this TMS, U.S.A. had established a zone manage system, dividing its field sales operations into three geographical divisions -- eastern, central and western -- and appointing an American manager for each. These managers worked to improve communications and the quality of service at


Toyota dealerships in their respective regions. As a result, in 1972, dealerships handling Toyota motor vehicles exclusively came to comprise 75% of all Toyota dealerships, and the average annual volume of Toyota vehicles sold per dealership rose to 333 vehicles.

During this period, TMS, U.S.A. introduced strategic dealership incentive programs similar to those in effect in Japan. Because these programs helped dealers remain profitable even during bad times and helped them work more actively toward boosting sales, they turned out to be a critical element in the subsequent development of TMS, U.S.A.

Meanwhile, the after-sales service system was also strengthened. Besides enlarging and bolstering its parts depots in Los Angeles, New York and San Francisco and thereby raising its parts supply capabilities, TMS, U.S.A. also moved to promote the construction of more parts warehouses at its distributors. With assistance from a project team formed by the Parts Department and the Overseas Parts Department of TMS, efforts were made to streamline inventory control procedures and make them more efficient. The Service Department of TMS, U.S.A. also cooperated with the Overseas Technical Department of TMS to provide more extensive training programs for Toyota distributors and dealers in an effort to improve repair service skills and generally to strengthen the after-sales service system in the United States.

Besides the foregoing, TMS, U.S.A. became increasingly involved in a wider range of regional social activities, such as by donating to vehicles to the American National Red Cross, contributing 50,000 dollars to the Los Angeles Philharmonic, paying visits to nursing homes and organizing Little League baseball.

In July 1971, TMS, U.S.A. signed a contract with a California-based steel fabricator, Atlas Fabricators Inc., for partial manufacture and assembly of truck beds for half-ton pickup trucks. Later, TMS, U.S.A. purchased this company as a move toward creating


local job opportunities and in response to increasing sales of pickup trucks. This company is currently named TABC, Inc.,

While TMS, U.S.A. was busy with these many activities, the American automobile market grew brisker than ever, partly as a result of the removal of excise taxes on passenger cars and a reduction in American income taxes. This automobile boom also brought about a gradual recovery in the demand for imported motor vehicles. Imports had regained some of their price competitiveness as a result of price hikes by the American automakers on their vehicles and because consumers were beginning to favor economy and product quality. This trend became much more pronounced in 1973, when, because the series of gasoline price hikes that year created great demand for small cars, Toyota enjoyed brisk sales. Business was so brisk, in fact, that serious supply problems emerged. Sales in 1973 were 322,000 units, which enabled Toyota to consolidate its system for annual sales of 300,000 units.

At that time, Canada had the world's fifth largest number of registered motor vehicles. Toyota had signed a distributorship agreement with Canadian Motor Industries Limited (CMI) in July 1964 and that same October CMI established Canadian Motor Sales Corporation Limited to handle the Toyota line. At first, Toyota shipped the Crown, Publica and Land Cruiser to Canada, but sales of these models did not get off to a smooth start.

The Crown and the Land Cruiser were not selling in large quantities, and the air-cooled Publica was not appropriate for Canadian driving conditions. This was partly because its performance was not adequate for driving in Canada, where there are a great many expressways; but another reason was that the frigid winter temperatures, which often reach --20C even in the large cities, were more severe than anticipated. The result for the Publica was that its ignition did not always turn over the first


time, and its heater was too small to be adequate. It was unfortunate for Toyota that it was unable to introduce its main export model, the New Corona, but CMI was also selling the Isuzu Bellett and wanted to avoid direct competition with that model. This was not, however, the only misfortune for Toyota CMI had only just started in business and had used most of its capital for plant and equipment investments. When its inventories increased, therefore, the company immediately suffered a capital shortage, resulting in a full-blown management crisis. Even though orders came in from dealers, CMI could not deliver the vehicles because it was unable to pay the duties to bring the vehicles out of the customs warehouse. In the end, Mitsui, the company that had introduced CMI to Toyota, came to the rescue. CMI recovered after an influx of capital from Mitsui, other financing and impact loans from the provincial government.

As a link in CMI's recovery, it was decided to introduce the New Corona into Canada. Prior to that, Toyota had sent a team to Canada in early 1967 to carry out winter weather tests on the New Corona and Corolla. As a result of those tests, major improvements were made in the two models, including fitting them with large-capacity batteries and high-performance starters. Exports to Canada of the New Corona began in 1967, and of the Corolla in 1968.

The Corolla with cold-weather specifications sold particularly well, partly owing to the success of an effective television advertising campaign. Although the Corolla competed with the Volkswagen, its design, performance and comfort made it more popular than the Volkswagen, especially among young drivers. As more customers visited dealer showrooms, the New Corona, Crown and Land Cruiser also began selling well. The number of dealers also increased, and in order to avoid the adverse effects of dealers handling other lines as well, it was decided to appoint only dealers who would sell the Toyota line exclusively and to


allow absolutely no consigned sales. This approach later led to increased sales. In 1967, Toyota exported 2,000 vehicles to Canada; in 1968, the figure was 9,500 vehicles; and in 1969 it was 25,000 vehicles, including the Cressida.

CMI also gradually improved its after-sales service system, such as by bolstering its regional parts depots. In 1971, the year the nationwide dealer network was in effect, sales were 50,000 units, making Toyota the number one import brand in Canada. As sales of Toyota vehicles boomed, CMI's dependency on Toyota grew, and Toyota saw Canada become its fourth largest export market. This prompted TMC and TMS in January 1972 to participate with equity to strengthen CMI and further reinforce the cooperative relationship between Toyota and CMI.

Early Exports to Europe

The automobile originated in Europe, and one of the great goals of Toyota had been to have its motor vehicles run on European roads.

Although TMS began early exporting on a small scale to Cyprus and Malta, which it included in its Middle East operations, it was slow in exploring the European market. As the situation developed, exports to Europe came about in many forms, a reflection of the great diversity among the countries of Europe.

The entry of Toyota into Europe was, in fact, prompted by an unexpected visitor to Tokyo in October 1962. A man introducing himself as a Danish handler for the Czechoslovakian-made Skoda visited the Tokyo Office of TMS. He happened to be in Japan on business and, while visiting the Tokyo Motor Show, he had been attracted by the dignified, refined styling of a Toyota car on display. He felt sure that the car would be suitable for northern Europe and said he wanted to be Toyota's distributor for Denmark, Sweden, Norway and Iceland.


At that time, Toyota felt it was not yet ready to begin exporting to Europe, one of the world's most sophisticated markets, partly because of the high freight costs. However, the visitor to Tokyo, Walther Krohn, president of Erla Auto Import A/S, the present Toyota Danmark A/S, was insistent and finally persuaded Toyota to ship a sample right-hand-drive Crown to Denmark in December 1962.

The Crown proved to be quite popular at auto shows held in three major Danish cities, assisted partly by the presence of kimono-clad stewardesses from Japan Air Lines. In 1963, TMS shipped 400 Crowns to Denmark, and in 1964 1,500. Since the price initially agreed upon was comparatively high, each time TMS officials visited Erla Auto Import, President Krohn would ask them, for price reductions. The negotiations usually took place over glasses of wine aboard a yacht in The Sound, the scenic strait near Copenhagen.

With regard to Finland, the first contact was established in April 1962 with Korpivaara Oy, the Finnish distributor for Citroen and other automakers. In June 1962, a number of Tiaras were shipped to Finland as samples. The results of road and other tests were not good, however, and the relationship with Korpivaara Oy was not realized.

Two years later, in September 1964, efforts on the part of the TMS representative in Europe led to the signing of a distributor agreement with Korpivaara Oy.

An interesting episode occurred around this time. The president of Korpivaara Oy, on a visit to the Motomachi Plant, gave the New Corona a personal endurance test by driving it for hours on end around the test course inside the plant. He was so satisfied with the result that he signed an order on the spot for 2,000 cars. And the close relationship built then with Toyota had continued until the present day.


Following entry into the northern European countries, TMS finally undertook exports to the main continent. Toyota's representative had, in fact, been traveling around Europe looking for distributors. Japanese motorcycles, however, were entering Europe at the time, and the general image of Japanese products was that they were "cheap but bad." Partly for that reason, there was a long period before any distributor would sign an agreement with Toyota.

The first agreement was signed with Louwman & Parqui B.V. of the Netherlands in May 1964. Louwman & Parqui was the Dodge distributor for the Chrysler Corporation. Because Louwman was in the automobile business, he had known through Automotive News about Japan's postwar reconstruction, and he was interested in the emerging Japanese automobile industry.

In 1964, price negotiations also took place between TMS and N.V. International Motor Company S.A. of Belgium; in January 1966, the two parties signed a distributor agreement. International Motor, led by President Joska Bourgeois, had been a major distributor of Jaguar and other motor vehicles. The decision to become a Toyota distributor was made after Toyota marketed the New Corona domestically in September 1964 and then prepared it for export. International Motor knew of the New Corona and soon after it was marketed in Japan suggested that Toyota make the back of its front seats thinner so that four adults could fit more comfortably in the car. In early January 1965, New Coronas with modified seats arrived in Belgium. That prompt action impressed President Bourgeois, and the distributor agreement was signed shortly afterward.

In October 1966, TMS began negotiations with Emil Frey Ltd, a company in the auto repair business and the most important


Swiss distributor of Austin vehicles, and soon after Toyota AG was established. Contract renewal talks with British Motor Corporation were also under way at the time, but because President Emil Frey wanted to expand his company, he pushed for the tie with Toyota, and the new company was set up as a subsidiary.

According to Emil Frey, he originally became interested in Japanese motor vehicles during a visit to South Africa in 1965. At that time, he heard from an automobile distributor there about a Japanese motor vehicle that could be driven even in the bush without any problems. He instructed his son, Walter, then studying in England, to send letters of inquiry to Japanese automakers and to go to Japan to visit TMS at its Tokyo Office. Emil Frey subsequently chose Toyota.

The deciding factor in Frey's choice was the quality of the New Corona. When Frey received a sample New Corona in February 1966, he and his son drove the car non-stop from Hamburg to Zurich, an 800-kilometer journey, in seven and a half hours.

In February 1967, under the management of Walter Frey, a small staff of several persons began operations at Toyota AG. Toyota vehicles were unknown in Switzerland at the time, but the combination of good products and strong sales efforts resulted in notable success from the start. Toyota AG also searched for responsible dealers, and from an initial 10 dealers the company came to have 359 dealers in 1973.

In the late 1960s, TMS also appointed distributors in other European countries, including Great Britain, France, Italy, Austria and Greece. Subsequently, TMS began to export to almost all parts of Europe, emphasizing the Crown and the New Corona, but also other models as well.

During this period, however, TMS was shipping over 3,000 units per year to only five European countries: Finland, Belgium, Denmark, Switzerland and the Netherlands, in order of volume.


The main sales points of Toyota motor vehicles in Europe were their novelty and the simplicity of their mechanical structure, which made them relatively trouble-free. However, becoming a Toyota distributor was no automatic guarantee of sales. The only way for the distributors to increase sales was to formulate sales promotion plans of their own tailored to the particular needs of their countries.

In Finland and Denmark, the distributors exhibited Toyota vehicles at local motor shows, and the media extensively featured the story of Japanese mechanics from Toyota making regular service calls on customers, which had a positive impact on Scandinavian consumers.

In Belgium, International Motor organized the "My Toyota is fantastic" sales campaign as well as offering a bold three-year warranty. In Switzerland, President Walter Frey himself drove Toyota vehicles in rallies. In the Netherlands, Louwman & Parqui owned a zoo, which was well known for its collection of birds; parrots at the zoo were trained to repeat "Buy a Toyota."

The distributors who faced the greatest difficulty were those in Great Britain, France and the Federal Republic of Germany, countries which had their own automakers, and this made the competition intense. In Great Britain, for example, Toyota imports remained around 1,000 units per year until 1970. However, Motor Imports Co., the Toyota distributor, spun off its automobile division as Toyota (GB) Ltd. in 1968 and carried out other measures to improve the marketing structure. As a result, sales moved to 6,800 units in 1971, and, after the British economy entered a period of expansion in 1972, Toyota exports grew and reached 19,000 units in 1973.

In France, because exports had remained under 1,000 units for over a period of years, it became necessary to look for a new


distributor. In those days, however, there were no distributors that were wanting to handle the Toyota line. Consequently, TMS had to ask International Motor in Belgium to provide servicing for Toyota customers in France for six months. The situation was normalized in February 1971, when Toyota AG in Switzerland and an Austin distributor in France jointly set up Société d'Importation et de Distribution des Automobiles Toyota S.A. (SIDAT) for marketing the Toyota line in France, with Toyota AG contributing 51% of the initial capital and the French concern 49%.

In the Federal Republic of Germany (FRG), German automakers like Daimler-Benz AG, Bayerische Motoren Werke AG (BMW) and Volkswagenwerk AG, as well as American-affiliated companies such as Adam Opel AG and Ford-Werke AG vied for positions in one of the world's most freely competitive markets. It was also, because of that competition, one of the last countries for Toyota to enter. Further, since most distributors in the FRG were associated directly with automakers, it was impossible to appoint an existing distributor to handle the Toyota line as well. That led in September 1970 to the establishment of a new distributorship, Deutsche Toyota-Vertrieb GmbH & Co. KG, by the British importer of Morris and MG cars and some other entrepreneurs. Since the Toyota name was not known in the FRG, it was also impossible to get existing automobile dealers to handle the Toyota line. Deutsche Toyota-Vertrieb, therefore, advertised for dealers in trade papers and built a sales network comprised mainly of agricultural machinery dealers, gasoline stations and car repairs shops. Although in 1970 only eight Toyotas were sold in the FRG, in 1973 the sales increased to 14,000 units.

In the meantime, TMS had begun exporting knockdown kits. Portugal, which in principle prohibited the import of completely built-up vehicles, allowed only 75 Toyota vehicles to enter


the country per year. Despite those restrictions, TMS looked for a distributor and signed an agreement with Batista Rousso & Irmao S.A., which was a BMW distributor. TMS sent its first shipment of 75 vehicles to Portugal in 1968. Batista Rousso & Irmao, however, canceled the agreement soon afterward, and the exports had to wait until TMS could find a replacement distributor.

Then, Salvador Caetano I.M.V.T., S.A., a fabricator of bus bodies with headquarters in the north of Portugal, agreed to accept the bill of lading for the 75 vehicles. A formal distributor agreement was signed in October 1968. Initially, Caetano consigned the assembly of 150 Corollas a month to Sociedade Comercial Tasso de Sousa, Lda., an affiliate of Chrysler. The Corolla was received very well in the market, and after moving energetically Caetano obtained a government license to assemble the vehicle. Caetano then began construction of an assembly plant of its own with the capacity to produce 1,200 units a month.

The assembly of Corollas began in March 1971 at the new plant, located in a suburb of Oporto, the second largest city in Portugal. Since this was Toyota's first production base in Europe, both TMC and TMS had high hopes for it and agreed, at the request of Salvador Caetano, to participate with 27% equity in the company to strengthen the relationship with the distributor. The investment was made in March 1972, with TMC and TMS each providing 13.5%. The total number of vehicles assembled at the plant in 1972 rose sharply to 10,000 units, including the Corona and Dyna truck in addition to the main product, the Corolla.

In Ireland, the government restricted the import of completely built-up vehicles to a set percentage of the total number of vehicles assembled locally from imported complete knockdown kits. Toyota (Ireland) Ltd. was established in January 1973, and assembly of the Corolla began at a new plant there in February.

In northern European countries, too, where it had early


appointed distributors, TMS made efforts to strengthen its sales networks. In accordance with the policy of one distributor for one country, TMS changed the territory of Erla Auto Import A/S to Denmark alone, and it signed distributor agreements with Salen & Wicander AB of Sweden in March 1969, F.E. Dahl & Co., A/S of Norway in April 1973 and P. Samuelsson & Co. HF. of Iceland in April 1980. Also, in order to bolster its sales capabilities, in November 1973 Salen & Wicander spun off its distributor division into an independent company called Toyota Autoimport A.B.

Exports to Europe totaled only 13 units in 1960 and no more than 5,900 units in 1965. By 1970, though, TMS had appointed distributors in almost all the European countries, and the Corolla had established its reputation in Europe. In that year, exports to Europe amounted to 59,000 units, and in 1973 they increased to 163,000 units.

Together with entry into the sophisticated European market, Toyota's products were improved. Four-speed transmissions were introduced, for example, and separate seats and disc brakes were installed.

In August 1964, TMS set up a representative office in Copenhagen. That office was moved to Brussels in April 1969 and its staff were increased to strengthen its information-gathering capabilities. In 1970, TMC also opened a representative office in Brussels in order to facilitate the application for type approval certification for its vehicles in European countries. Because the European Economic Community (EEC) had still not unified its certification system, the staff at the representative office had great difficulty meeting the different requirements of the various countries. They overcame these difficulties, but only as a result of tremendous efforts. The Brussels Office gradually expanded its function of gathering information on technical trends among European automakers and conducting local tests and evaluations


of Toyota vehicles, thereby facilitating model development.

Boosting Exports to the Middle East, Africa, and Latin America and the Caribbean

Toyota was also expanding its markets gradually in the Middle East, Africa, and Latin America and the Caribbean as a result of years of effort and improvements in its products.

Toyota's sales network in the Middle East came to cover the Gulf States after TMS signed distributor contracts with Abdulla Abdulghani & Bros. of Qatar in 1967 and Ebrahim Khalil Kanoo of Bahrain in 1969.

Today, Kuwait and other countries in the Middle East have grown into modern states, but in the late 1960s they were just beginning to undertake the refining of oil, following the examples of Saudi Arabia, Iran and Iraq. A TMS representative at the time made the comment in a report that there were only two hotels in all of Abu Dhabi, but that the people in the area were very friendly toward Japanese. He said that after business discussions were over, he enjoyed going for a drive into the desert to drink tea with the people he was doing business with.

The Middle East distributors started almost from zero in building up Toyota sales networks. The most active and fruitful efforts were made in Saudi Arabia, and the early success there had a substantial effect on efforts in the region's other countries. Abdul-Latif Jameel Co., Ltd., became the Toyota distributor in Saudi Arabia in 1955. At first, Abdul-Latif Jameel sold only the Land Cruiser, but in 1964, encouraged by the good sales of the Land Cruiser, the company began to market Toyota's entire line of passenger cars and trucks. To strengthen its marketing system, the company employed British nationals with automobile experience to operate the sales and service divisions. This combination


of Arab owner and foreign expert staff worked so well in Saudi Arabia that it was widely adopted afterward by other distributors and dealers in the region. Indeed, it was one of the important factors that contributed to the region's later expansion.

While progress was thus being made in putting the sales network into order, there were also efforts to attend closely to suggestions from dealers and to improve the Toyota products. Special consideration was given to heat-related problems, such as by enlarging the radiator fan to help prevent overheating. Other improvements included preventing sand from entering vehicles by equipping them with an oil bath air filter.

In November 1965, TMS set up a representative office in Beirut, Lebanon, an international commercial center, to strengthen support activities for the distributors in the region. Initially, only two representatives were stationed at the office, and they had to spend 20-25 days a month traveling to surrounding countries. Besides visiting the distributors and dealers, they handled other matters, such as those related to parts supply and service centers.

The first Middle East distributors meeting was held in Beirut in October 1968. The gathering offered the distributors in the region an opportunity to meet one another and exchange information and opinions.

In Pakistan, which was included in the Middle East operations of TMS, National Motors Ltd. began assembling the Land Cruiser in April 1970.

As a result of these various efforts, exports to the Middle East increased 19-fold between 1964 and 1973, from 1,600 to 30,000 units. In particular, with 13,000 units sold a year, Saudi Arabia became the largest market for Toyota in the Middle East. Other major markets were Kuwait with 4,000 units sold, the United Arab Emirates with 3,100 units and Libya with 2,800 units.


In the Republic of South Africa, local production of Toyota passenger cars began in 1964. However, under circumstances such as the Japanese government's prohibiting investment and provision of financing in South Africa to show its opposition to apartheid, Toyopet Commercials Pty. Ltd., Toyota's distributor, had to secure financing on its own as it moved to meet the local content requirement of 55% by weight.

Given that situation, and in order to secure a share of the market, Toyopet Commercials acquired a motor vehicle assembler, Motor Assemblies Ltd. (the present Toyota South Africa Manufacturing Ltd.) and started local production.

Sales of the New Corona, the vehicle that Motor Assemblies began producing locally, increased steadily as it gained a reputation for fuel economy and maintenance-free operation. Toyopet Commercials changed its name to Toyota Sales Co., (Pty) Ltd. [the present Toyota Marketing Co., (Pty) Ltd.] in 1966 and gradually built up its passenger car operations, even as European and American manufacturers, who had a head start on Toyota, competed among themselves for a share of the South African market.

Exports to other African countries also increased gradually. New distributors included Westlands Motors Ltd. (present Motor Mart Group Ltd.) of Kenya in 1963, R.T. Briscoe (Nigeria) Ltd. in 1968 and Agence Africaine de Distribution de Matériel S.Z.R.L. of Zaire. In 1973, total exports to African countries amounted to 54,000 units.

In Ghana, TMS proceeded in line with the Africanization movement toward local assembly. In 1969, it signed a contract with Fattal Vehicle Assembly Ltd. Fattal Vehicle Assembly began assembling the New Corona after obtaining all the necessary equipment from Japan, including paint shop facilities and jigs and tools for assembly.

In Latin America and the Caribbean, meanwhile, sales


stagnated until 1964, partly owing to Toyota pulling out of Mexico in the early 1960s. After 1965, however, exports increased rapidly, from 5,000 units in 1965 to 14,000 units in 1967 and 39,000 units in 1973. One factor accounting for the increase was the expanded line of models being exported to the region: In addition to the existing Land Cruiser and large trucks, Toyota added the Stout and Hiace as well as passenger cars, such as the New Corona and Corolla. Another factor was the expansion of Toyota exports around the world following the improvement in the quality of its entire line of products.

In those days, Toyota's largest market in Latin America and the Caribbean was Puerto Rico. Responsible in large part for the good sales performance in Puerto Rico were the New Corona, with its product attractiveness, and the introduction of the Corolla. The distributor in Puerto Rico, recognizing the high quality of these two cars, also contributed much to sales by increasing the number of dealers on the island.

In Central America, TMS opened a representative office and a parts depot in Curaçao in January 1969 to secure its share of such vital markets as Panama and Costa Rica, as well as to provide support services to distributors in surrounding countries.

In South America, countries such as Brazil, Venezuela and Uruguay were already assembling Toyota motor vehicles locally. In Peru, Toyota del Peru S.A. was founded in January 1965. Toyota participated in the company with 50% equity in August 1966, and assembly of the Corona and the Stout began there in April 1967. Initial local content was 5%, but that figure increased almost yearly. The company faced many difficulties because the government required that the engine and other major components be imported in a disassembled condition. There were originally 15 assemblers in Peru, but the number was gradually reduced until only five remained after international bidding in 1970. Toyota, one of the five, cooperated closely with the local


parts makers to improve their technology and product quality as the local content of its vehicles was raised. In 1971, Amar Auto Supplies, Ltd. of Trinidad and Tobago in the West Indies began local assembly of the Cressida. Many other countries in the region also began assembling Toyota motor vehicles, albeit on a small scale.

Export of Knockdown Kits to Southeast Asia and Oceania

During this period, exports of knockdown kits to countries in Southeast Asia increased greatly. In Thailand, Toyota Motor Thailand Co., Ltd. (TMT) began operations at an assembly plant in 1964. Initially, the plant assembled only 300 units a month, and TMT itself, burdened with substantial uncollectible receivables, was not in good financial condition. At one point, TMS even seriously considered pulling out of Thailand, and it actually looked for a buyer for the Bangkok Branch of TMS. Branch personnel, however, strongly believed that passenger cars would eventually sell well in Thailand. They were convinced that Thailand would be the first country in Southeast Asia to undergo motorization. Rather than leaving Thailand, therefore, the decision was made to move energetically in putting a sales network into order.

As the first step, TMS decided to eliminate the old system of using agents to sell its line; hitherto, family-owned stores, such as rice shops, general merchandise stores and auto parts stores, had been acting as agents. TMS encouraged the agents to establish companies and then provided them with widespread training, including, for example, the use of installment payment plans, to convert them into modern automobile dealers. Although total sales declined to 100 units a month during the interim period until the conversion was complete, they subsequently recovered.

Next, in January 1967, the Bangkok Branch of TMS, which had been responsible for sales, was merged with TMT, thereby


integrating production and sales.

With regard to the product line, meanwhile, the Tiara was replaced by the New Corona, which, with its superior selling power, became the driving force behind increased sales. In 1969, the Corolla, whose local assembly was consigned to Thai Hino Industry Co., Ltd., was also added to the product line. Sales of Toyota passenger cars subsequently showed outstanding growth. The Hilux, too, introduced in 1968, was evaluated highly for its superior performance and product quality, and its sales increased steadily.

TMT's annual sales in 1969 reached 10,000 units, which made it the market leader in terms of share among all automakers in Thailand. At the end of 1969, TMT opened its integrated center on a large plot of land adjacent to its plant. The center was designed to serve as the nucleus for an improved after-sales servicing system and was made up of a motor pool, an inspection line for new vehicles and a parts warehouse. In these ways, then, TMT became the top automaker in Thailand.

In the Philippines, TMS entered into business ties with Delta Motor Corporation in June 1962 and soon after began knockdown assembly operations. In 1967, TMS opened a representative office in Manila to provide more energetic support to Delta Motor. In 1971, 4,600 units were sold in the Philippines, giving Toyota the largest market share.

In the same year, the Philippine government announced a plan to promote the development of the domestic automobile industry and took the first step toward domestic production of passenger cars. Judging from the size of the domestic market and the undeveloped state of supportive industries in the Philippines, it was generally felt that the domestic production of passenger cars, including engines, would meet with much difficulty. But Delta Motor was enthusiastic about the plan and strongly


requested cooperation from Toyota. TMC and TMS conducted a detailed study of what their participation would involve, including matters such as the amount of the risk and the potential profitability; they also investigated the effect not participating would have. Toyota decided that it would participate. Immediately afterward, Toyota began providing financing for constructing an engine plant as well as technical guidance. The plant was completed and began production of engines for the Corona in 1973. Although the limited scale of production meant that the problem of higher cost could not be avoided, the production of automobile engines by Delta Motor had special significance as a symbol of the industrialization of the Philippines.

Toyota's relations with the People's Republic of China (PRC) date from the spring of 1969 when Toyota participated in the Guangzhou Trade Fair. In September 1971, the Toyota Group China Mission, led by TMS Executive Vice President Seisi Kato, visited the PRC. In September 1972, after the resumption of diplomatic relations between Japan and the PRC, Toyota invited a group of leaders in the Chinese automobile industry to Japan to visit plants of the Toyota Group. Afterward, too, Toyota sent several groups of executives and engineers to the PRC, and participated regularly in the annual Guangzhou Trade Fair. Exports began when the first order came from the PRC for 10 Crowns in October 1971. Exports were 1,591 units in 1972 and 1,493 units in 1973.

Meanwhile, the difficulties and risks involved in doing business in other areas were impressed on Toyota in various ways. In Taiwan, the import of small trucks and passenger cars was restricted. In 1967, a company called Lu Ho Automobile Industrial Corporation, which had obtained a license to produce motor vehicles domestically, requested Toyota for technical assistance.


Because of the importance of the Taiwanese market, TMC and TMS agreed to offer assistance, and an agreement for technical cooperation was signed in April 1968. One of the conditions attached to permission to produce motor vehicles domestically, however, was local production of the engines. It was expected that there would be technical and managerial difficulties because of that condition, but TMC did everything it could to support the project, including procuring equipment and training engineers and line employees. After the plant opened, operations progressed more smoothly than expected and business results gradually moved in a favorable direction. At first, to avoid competing directly with other makers, Lu Ho introduced the Miniace, but that vehicle did not suit the market. In November 1971, therefore, upon request from the distributor, Ho Tai Motor Co., Ltd., Lu Ho started producing the Corona.

The Corona proved to be highly popular, and its market share rose rapidly. Gradually, however, the international situation was shifting: In addition to the rapprochement between the United States and the PRC, diplomatic relations between Japan and the PRC were resumed. In 1972, Lu Ho asked Toyota to take over management of the company.

Because of the suddenness of the request, Toyota initially refused. At that time, however, Ford was moving to enter the Taiwanese market and approached Lu Ho with regard to acquiring the company. Toyota then reconsidered its policy and began negotiating with Lu Ho. However, the two parties could not agree on the purchase price for Lu Ho's shares.

Lu Ho subsequently accepted Ford's offer and sold 70% of its equity to Ford. The business ties between Lu Ho and Toyota thus came to an end in January 1973.

Business ties with Shin Jin Motor Co. Ltd. of the Republic of Korea (ROK), which began in January 1966, were also terminated


at about the same time. The ties with Shin Jin began with knockdown assembly of the Corona. Other models were added later for assembly in the ROK, and assembly lines and equipment for machining engines were exported on a deferred payment basis, all as steps to strengthen the business relationship with Shin Jin. In 1969, exports to the ROK reached 18,000 units. Although Shin Jin came to earn steady profits, it suffered constantly from a shortage of funds. As a way of resolving its problems, Shin Jin requested equity participation by Toyota. Talks were conducted, but agreement could not be reached on matters such as how the capital was to be used or how to evaluate Shin Jin's assets. Meanwhile, GM had approached Shin Jin via a separate route with regard to business ties, and Shin Jin and GM negotiated an agreement. Shin Jin and GM established a joint venture, and Shin Jin terminated its business ties with Toyota in October 1972.

There were, of course, many countries during this period where Toyota was able to lay solid foundations, overcoming various difficulties through a cooperative relationship with joint-venture partners or companies with which it had business ties. Two such countries were Indonesia and Australia.

Toyota's all-out entry into Indonesia was achieved after the country's politico-economic situation stabilized with the start of a new government in 1968. The new government eased restrictions on imports and foreign investment, which had blocked the entry of foreign capital into the country, and it liberalized the import of automobiles on the condition that importers appoint general agents and start knockdown assembly operations within five years. In 1969, Toyota applied for permits that would allow it to enter the Indonesian market.

In 1970, Gaya Motor Inc. began assembling the Land Cruiser and large trucks for Toyota and, although it took time to


receive official permission, in April 1971 Toyota set up a joint venture called P.T. Toyota-Astra Motor (TAM) with P.T. Astra International. Close consultations were held with President William Soeryadjaya of P.T. Astra International to establish TAM's general policies. Soeryadjaya's younger brother, Tjia Kian Tie, became the central figure on the Indonesian side of the joint venture, and he led the company through the difficult start-up period. To make the company as much a local operation as possible, a large number of Indonesians were hired, including individuals who would go on to become managers.

Of course, there were misunderstandings in daily operations between the Japanese and Indonesian staff because of different business practices and customs; however, the Indonesian staff supported Toyota's basic personnel policy and a relationship of mutual trust was created between the two groups. Many among the Indonesian staff, incidentally, were highly competent graduates of foreign universities, and they played an important role in maintaining good communications between the Japanese and Indonesian staff.

In the meantime, Gaya Motor had started assembly of the Corona, and TAM moved to its new head office building in May 1973. In 1974, however, a visit to Jakarta by the Japanese prime minister precipitated a series of unfortunate events.

Amidst the turmoil, TAM's head office, located conspicuously on one of Jakarta's main streets, was suddenly targeted by a group of demonstrators and set on fire. Though the building was severely damaged, fortunately none of the employees were injured. Throughout the period of unrest, the Indonesian staff did all they could to protect their Japanese colleagues. Though TAM President Hideo Kamio suffered, both personally -- his wife suffered a fatal shock as a result of a separate incident -- and publicly, as president, he issued a statement in which he referred to the occurrences as "unfortunate." He said neither he


nor Toyota held a grudge against the Indonesian people, and he emphasized that TAM intended to continue its operations as before and would, in fact, make additional efforts in the future to contribute to the further development of Indonesia.

After the fire, TAM conducted its business in a temporary office. It also studied carefully the question of what had to be done to become accepted in Indonesia as a necessary business. One result was the establishment in October 1974 of the Toyota & Astra Foundation.

The foundation expanded the scope of its activities year after year, including awarding scholarships, supporting diverse seminars, donating educational and research materials to schools and research institutions, translating foreign publications into Indonesian, sponsoring traffic safety campaigns and providing technical training to mechanics at small automobile repair shops. Also, trade school students were invited to visit the TAM factory to give them practical training in a modern industrial plant. During its first 10 years, TAM awarded scholarships to 1,200 college students. Half of those students have since received either master's or doctor's degrees. They are now a major force working toward Indonesia's technological independence.

In August 1956, the first Toyota motor vehicle, a Land Cruiser, arrived in Malaysia. Four years later, in September 1960, TMS signed a distributor agreement with Car Motor Bhd. and exported motor vehicles to them until 1967. In preparation for the large-scale export of knockdown kits to Malaysia, however, in September 1967, a new distributor was appointed, Borneo Motors (Malaysia) Sdn. Bhd., an affiliate of Inchcape. Next, in February 1968, assembly of the Corona and Corolla was consigned to Champion Motor Bhd., another affiliate of Inchcape, which had been assembling Volkswagen autos. In April 1975, Champion Motor changed its name to Assembly Services Sdn. Bhd.


Owing largely to local sales efforts, exports to Australia increased annually. Exports were 16,000 units in 1965, and they increased to about 50,000 units in 1973.

Soon after the export of passenger cars to Australia, Australian Motor Industries (AMI) began local assembly operations to attain a local content proportion of 60% in line with government policy. After introducing the New Corona in 1966, AMI increased the number of units it was assembling and selling, and its business situation became favorable. AMI improved the seats of its cars, making them more suitable for driving in Australia, where average trips by automobile are relatively long. In addition, it installed separate front seats in some cars in 1967, even before Ford offered such a feature. Thus, besides making the products more attractive, AMI also gradually increased its procurement of locally made parts. With the introduction of the Crown in 1967 and the Corolla in 1968, AMI's business turned brisk. In 1968, AMI discontinued the assembly and sale of other product lines, which had failed to meet local content requirements, and concentrated on the Toyota line. At that time, TMC and TMS acquired 10% of AMI's common stock. In 1971, TMC and TMS increased their equity to 50%; they then moved to strengthen the company's production and sales systems and bolstered their support system.

In 1971, TMC and TMS also supported the efforts of Thiess Sales to improve its marketing system by participating with 40% equity. In the same year, the company changed its name to Thiess Toyota Pty., Ltd., and in 1972 Robert H. Johnston became managing director. Under the powerful leadership of the new managing director, Thiess set up sales outlets in regions other companies had not yet entered, making advance investments in anticipation of future growth. Moreover, Thiess took advantage of the full product line-up at its disposal and expanded its share of the market for commercial vehicles.


In New Zealand, meanwhile, knockdown assembly began in 1967. Until then, the New Zealand government had in principle prohibited the import of motor vehicles. However, as a result of negotiations with the government, permission was granted to import 300 knockdown kits a year to promote the industrial development of South Island. Previously, in January 1966, Consolidated Motor Industries Ltd. (CMI) had been established; in February 1967, Steels Motor Assemblies Ltd., located in Christchurch on South Island, was consigned assembly of the Corona. Next, in April 1968, Campbell Industries Ltd., located in Thames on North Island, was consigned assembly of the Corolla. Assembling the Corolla entailed that Campbell Industries had to terminate its assembly of a small passenger car for Hino, a company with which Toyota had established business ties in 1966. The plant where the Hino car was being assembled switched to assembling the Corolla.

Improving the Export System

As exports of Toyota vehicles increased, TMS continued to strengthen its transoceanic transportation and after-sales service systems. In particular, TMS completely improved its transportation system. As the number of vehicles exported to the United States rapidly increased, delays in shipments emerged because of scheduling difficulties, damage to vehicles occurred during transport, and ocean freight charges gradually increased.

Previously, TMS used scheduled ships for exporting its motor vehicles. Volkswagen, however, had successfully reduced its ocean freight costs by shipping large numbers of motor vehicles to North America aboard car carriers. Nissan, too, began in 1965 using special ships it had built for transporting motor vehicles and had improved its shipping efficiency dramatically.

Against that backdrop, TMS in 1964 established Toyofuji


Kaiun Kaisha, Ltd., a shipping company, and in 1967 it built its own pier at the port of Nagoya, thus bolstering its export system. It also built a special yard exclusively for exports next to the Nagoya Wharf Center, where it had been loading ships with motor vehicles destined for the domestic market. TMS also held a series of negotiations with shipping companies to reduce ocean freight charges. Those negotiations were successful in bringing about substantially lower shipping rates. Also, on the condition that TMS would provide a freight guarantee, it had special car carriers built, thus greatly reducing shipping costs. In November 1968, the Toyota Maru No. 1 was launched. By 1972, a total of 20 car carriers had been launched.

In 1965, TMS set up the Overseas Parts Department to improve the system of supplying overseas distributors and others with replacement parts. At first, the department emphasized putting the supply system into order by establishing parts depots in Curaçao in the Caribbean and Brussels in Europe. However, after it sent a project team to TMS, U.S.A., it also began offering guidance and support to each of the overseas distributors. In 1972, TMS developed a parts inventory analysis system called the TOPIA System. Subsequently, it introduced the Toyota standards to distributors in all countries and shifted its emphasis to further improvement of the parts supply system.

In 1971, TMC and TMS sent complete knockdown survey missions to the various countries where Toyota motor vehicles were being assembled or produced locally. After studying the findings of the mission, TMC created in August 1973 the Overseas Project Office, to handle overseas investments, and the Overseas Engineering Department, to provide support to overseas plants conducting local production.


Previously, the Overseas Technical Department of TMS had supervised assembly at overseas plants. But, as local production increased, TMS found it increasingly difficult to provide overseas plants with adequate assistance. The Overseas Engineering Department of TMC thus took over to provide engineering support to countries where engines and other major components were being produced.

TMS set up the Overseas Knockdown Department in 1974. This set its Overseas Technical Department free to concentrate more on improving after-sales service in other countries, such as holding regional service conferences, publishing various manuals and organizing technical training courses for mechanics.

Chapter 6: Bolstering the Foundations


First Oil Crisis

After the fourth Arab-Israeli war erupted in October 1973, the oil-producing countries raised their official selling prices for crude oil and cut their production. As a result, the economies of the advanced industrialized countries, which depended for their growth after the Second World War on stable supplies of low-cost oil as their principal source of energy, fell into recession. They subsequently came to face problems of higher commodity prices, trade deficits and increasing unemployment. This, for the non-oil-producing countries, constituted the first oil crisis.

Since Japan imports virtually its entire supply of oil, it was affected more seriously than many other advanced countries by the first oil crisis. Uncertainty about what was going to happen, for example, led to panic buying and to shortages of everything from kerosene to toilet paper. Inflation had already begun to rise the year before, tied to excess liquidity, and commodity shortages quickened the inflationary pace. The result was that commodity prices in Japan went completely out of control: In 1974, wholesale prices were up 31%, and consumer prices 25%, compared with 1973 levels.

The auto industry was also affected by shortages of materials, including vital steel products, plastics, rubber and paint pigments. There were even times when otherwise finished automobiles could not be driven off production lines because they had no tires. LPG gas, an important source of energy in auto plants, was also in short supply. In that chaotic situation, many measures for conserving energy and natural resources were introduced at production plants, such as reducing the use of electricity, various raw materials and machinery oil. Steps were also taken in


the plants to conserve energy in the offices, such as by turning down thermostats and removing unnecessary lights.

The prices of some raw materials used in producing motor vehicles, such as petrochemical products and aluminum, rose by 40%-50%, and automakers were forced to increase their prices substantially. Those increases, plus a 60% increase in the price of gasoline, had a negative effect on the auto market. For example, new vehicle sales in December 1973 were only 75.6% of those in December 1972. In addition to these problems, the Automobile Acquisition Tax was increased in April 1974, and the Motor Vehicle Tonnage Tax was increased in May 1974, depressing sales still further. New vehicle sales from January to May 1974 were 63.5% of those for the same period in 1973.

Although the Japanese economy entered a period of low, stable growth, recovery from the effects of the oil crisis came more quickly than anticipated, mainly because of capital investments by corporations to rationalize their operations and conserve energy. In 1975, Japan's GNP growth was in the 3% range. Also, the nation's reliance on oil as its primary source of energy rapidly declined: In 1973, oil supplied 78% of Japan's total energy needs; in 1978, that figure had dropped to 72%. The effects of the second oil crisis, which started in late 1978, aggravated by the turmoil that culminated in the revolution in Iran, were also serious. However, corporations continued to invest in rationalizing their operations and conserving energy, so total energy consumption fell 10% despite nominal economic growth of 20% over a three-year period. It was during this same period that many companies boosted their productivity further by implementing innovations in production technologies, as exemplified by robots.

Exports from Japan turned sluggish for a while after the first oil crisis, but because Japanese companies had continued to


strengthen their international competitiveness, overall exports rose by about 20% a year from 1976 on. Automobile exports also increased. This was related to the worldwide rise in oil prices and to a renewed interest in Japanese cars and trucks because of their good fuel efficiency and high product quality; it was also connected with previous efforts made to develop markets around the world.

Around this time, the American automobile market underwent major changes. After the first oil crisis, for example, the Environmental Protection Agency (EPA) began announcing fuel efficiency ratings for all vehicle models, starting with the 1975 model year. Among other effects of this, consumers began to show a greater interest in fuel economy. Also, the Energy Policy and Conservation Act, enacted in December 1975, set corporate average fuel economy (CAFE) figures for each automaker for the 1978-1985 period, and it required them to achieve an average fuel economy level for their passenger car model line-ups of 27.5 mpg by 1985. The Energy Tax Act of 1978, enacted in November 1978 and scheduled to go into effect with 1980 models, mandated a penalty of 5 dollars per car to be paid by the automaker for each 0.1 mpg by which a particular model exceeded the mileage standard set for it each year. Drivers put energy conservation stickers on their cars at the urging of the American president, and long lines formed for gasoline at service stations. Under these circumstances, the small-car market grew rapidly, putting the Big Three, whose mainstay products were full-size cars with poor mileage, in very difficult straits.

The total passenger car market in the United States started dropping after reaching a peak of 10.95 million units in 1978, and 1982 marked a low of under 8 million units. As one way of offsetting the market decline, the Big Three began producing more small cars. GM, for example, introduced its X-cars in 1979, and Chrysler its K-cars in 1980. Sales of both series did not meet


expectations, however, and in 1980 the Big Three all reported losses for the year.

Besides their good fuel economy, Japanese automobiles also won plaudits for their high product quality. They eventually became so popular, in fact, that their sales increased even though premiums were added to their prices. The countries of the Middle East turned affluent with the inflow there of oil dollars, and the area became a major export market for Japanese automobiles. In a short period of time, in fact, the Middle East market became second in size only to that of the United States.

The export of Japanese motor vehicles increased steadily, moving from 2 million units in 1973 to over 5 million in 1980. Total annual production by Japan's automakers rose to over 10 million units, surpassing the total annual domestic production in the United States and making Japan the world's number one producer of motor vehicles.

Construction of the Kinuura and Tahara Plants

After the first oil crisis, TMC worked energetically with its suppliers to reduce costs and moved to build an internal structure that would assure profitability even in a situation of reduced operating rates. In February 1974, TMC and the Toyota Motor Workers' Union signed a new labor contract, reaffirming the principle of mutual trust between labor and management. The two sides thus became united in their determination to overcome the effects of the first oil crisis. TMS and TMC held discussions which resulted in TMC's reducing production, and TMS adjusted dealers' inventories and shifted its energies toward increasing sales, also providing strong support to the dealers' activities.

As a result of these efforts, TMC recorded 1,995.7 billion yen in sales and 99.6 billion yen in after-tax profits for the period ending June 30, 1976. During the following period, those two


figures increased by 14.6% and 17.3%, respectively.

The profit increase in 1977 resulted from cost-reduction efforts and increased non-operating income. Financing income accounted for nearly one-third of the total after-tax profits, an amount greater even than that of middle-ranking city banks. TMC had also been gradually repaying its borrowings for some time, and it become possible to utilize reserve funds. In 1978, it redeemed all its outstanding obligations and became totally debt free.

Having broken from the worst of the crisis, TMC began in 1976 to re-evaluate its production system, with the goal of establishing a system to support the annual production of 3 million vehicles. To survive in the global struggle in the small-car market, TMC realized not only that it had to strengthen its corporate foundation, but also that it needed a certain degree of excess production capacity to adjust to a situation where production volumes fluctuated sharply. To meet this exigency, TMC decided to build a new plant at Kinuura and to expand the Shimoyama Plant.

Although TMC had already acquired the site at Kinuura for the new plant in 1973, it decided the time was right to move forward with construction because it anticipated a shortage of machine shop capacity and also because the poor business situation of the time meant that the costs of construction were not so high. The Kinuura Plant was completed in August 1978 and immediately began producing automatic transmissions and FF (front-engine, front-drive) transaxles. It became an important production center in promoting the move within Toyota toward the FF configuration.

The Shimoyama Plant, meanwhile, was expanded and further equipped to make it the main plant for producing newly developed engines.

The completion of the Kinuura and Shimoyama Plants greatly rounded out the TMC production system. Along with the


machine shop at the Tsutsumi Plant, the Kinuura Plant came to specialize in transmissions; and the Shimoyama Plant, along with the Kamigo Plant, came to specialize in engines. Thus, TMC had two plants specializing in each of the two principal auto components -- engines and transmissions. With two plants available, production became more flexible, so that if new equipment was being installed at one plant, the other could increase its output to cover for the slack. This flexibility allowed a smoother conversion to new systems and placed TMC in an advantageous position for product development.

Other Toyota plants also began specializing in certain basic units. The machine shop in the Motomachi Plant, for example, specialized in producing chassis-related parts, and the Miyoshi Plant specialized in producing parts related to steering systems. A production organization thus evolved that allowed TMC to satisfy the increasingly sophisticated market demands for products such as four-wheel independent suspensions and power steering.

TMC next started construction of the Tahara Plant, an important link in the production organization it was preparing for producing 3 million units annually. Taking advantage of the coastal location of the Tahara Plant, TMC decided to make it an integrated plant with emphasis on products destined for export. It built a pier on the 4,000,000-m plant site for the exclusive use of TMS for shipping vehicles overseas.

Besides introducing a high degree of automation in the new plant, which was difficult to implement in plants already in operation, it also tested many new ideas, including, for example, features to improve the working environment, such as better air conditioning and natural lighting.

The first Hilux rolled off the Tahara Plant production line in January 1979. In June, the body and paint shops were completed, and integrated production got under way. Being 60 km from the


Head Office, the Tahara Plant was the most distant of the plants, and TMC came to face a number of new problems in its operation. For overland transport of completed vehicles and parts, for example, trucks made regular runs to the suppliers located in the general vicinity of the Head Office, collected items and delivered them to Tahara. The company provided local housing for the employees, and various efforts were made so that the plant could fit smoothly into the local community.

Once into the 1980s, automakers around the world moved to cope with the heightened international competition in the small-car market, and many began constructing modern plants with the most advanced equipment and facilities. GM, for example, built the Orion and Hamtramack Plants in Michigan and the Wentzville Plant in Missouri, and Nissan moved forward with the construction of a plant in Tennessee to produce small pickup trucks, which was scheduled to begin operations in August 1983. Honda, meanwhile, began producing the Accord passenger car at its plant in Ohio. In these ways, automakers moved energetically to prepare for the future.

In the light of those developments, TMC took steps, first of all, to bolster its domestic production system. One such step was building a second plant at the Tahara Plant site. This new plant was also to be an integrated facility, featuring the most advanced production technology. For example, transfer presses would be used widely in the stamping shop, and three different models would be produced on the same line in the body shop. Also, a total of 87 welding robots were introduced to achieve a high level of automation. In the paint shop, new systems were introduced, such as concentrating the drying ovens. Careful consideration was given in the assembly shop, moreover, to make work operations easier and to eliminate the necessity for employees to work in physically demanding postures by using slat conveyors to


raise and lower the vehicle bodies and tilt hangers to incline the bodies at an angle.

Special efforts went into making the production lines as straight as possible and simplifying the plant layout to improve communication between processes. The computer system for giving instructions concerning production was improved, and codes and numbers on instruction panels were made easier to read. A molding shop was also built to produce large plastic parts.

Right on schedule, the first of the newly developed Soarer models rolled off the new Tahara Plant production line in February 1981. The Tahara Plant also produced the new Celica, beginning in June, and the Supra, beginning in August.

The Toyota Production System, meanwhile, entered a new phase in its development in this period of slow growth. By this time, the Toyota Production System had taken hold and was being fully applied at all TMC plants. The parts suppliers, too, used it effectively to reduce costs and improve product quality. New efforts, however, were made to advance it a step further so as to ensure cost reductions even in times of reduced production. For example, it had long been possible to increase productivity dramatically on automated lines by increasing production, but it was not possible, even when production was decreased, to reduce the number of personnel on automated lines. Given that situation, innovations were made to the machinery layout so that adjustments could be carried out with regard to the number of tasks assigned to each employee, depending on the overall production volume. Work standardization was also promoted so that one employee could handle other processes in addition to his own, and a system of job rotation was promoted to facilitate the cultivation of multifunctional employees. Greater emphasis than before was also placed on the maintenance of machinery and equipment, thus raising the operating rate. And to reduce assembly line halts


of important processes to a minimum, measures were introduced so that line employees and production engineers could cooperate to improve processes and equipment, improve the system of daily inspections and detect malfunctions as quickly as possible.

Production control using on-line computers had been introduced on a large scale in the late 1960s, and TMC gradually perfected its system by combining it with the Kanban System, which fully applied human ingenuity and intelligence to production. Although computer systems demonstrate their maximum potential when the number of models and specifications dramatically increase, and the systems are capable of transmitting information rapidly, they are not sufficiently flexible in handling the information in anomalous situations, which sometimes occur at the worksite. After much trial and error during the 1970s, therefore, TMC introduced many improvements in its system of production control. For example, the minimum number of computer terminals needed was installed next to the assembly lines; instead of overreliance on computer systems, specification sheets for each vehicle were hung on the vehicles themselves. This system was adopted so that, according to circumstances, line employees could change the production sequence.

In such ways, TMC has learned how to establish a system for achieving high productivity by using the ingenuity and innovations of its own people to maximize the potential of advanced machinery and equipment. Over the years since then, the company has vigorously continued to introduce state-of-the-art machinery and equipment, such as robots, thereby keeping pace with the rapidly changing trends in technological innovation.

TMC has used robots extensively after first introducing them for spot welding on the Corolla line of the Takaoka Plant in 1979. In fact, TMC used robots experimentally as early as 1970, in forging and welding processes. But it was only later, as robots themselves became more reliable and able to withstand the speed


requirements in practical work situations, and as TMC gained more experience in their utilization, that the company began using them widely. In addition to spot welding, robots were also used for painting, arc welding and even for attaching nuts. In 1982, TMC installed a completely automated arc-welder line using robots in the front-suspension arm production process in the Takaoka Plant. And in 1983, it installed an automatic welding line for frames in the Motomachi Plant, thus achieving wide labor savings there as well as improving the welding quality.

At TMS, meanwhile, a new era began in December 1975 when Shotaro Kamiya became chairman of the board and Seisi Kato became president. Based on the conviction that, beginning in 1976, the domestic automobile market had started along the road to recovery, the company implemented in June 1976 a two-year plan to strengthen its marketing capabilities. The prices of land and materials were rising rapidly at the time, so large amounts of capital were needed to increase the number of sales outlets. To finance dealers' expansion plans, TMS provided them capital in the form of "strategic facility finance loans," which it had begun providing in 1973. By the end of 1978, dealers had established about 250 new sales outlets for new vehicles, thereby virtually achieving the original goal of 3,000 outlets.

Dealers had also added 3,000 more salespeople to their sales force by June of 1977, thus meeting the goal of 30,000 salespeople on schedule. In addition, the company introduced office computers to increase the administrative efficiency of its dealers, and it also moved to improve used car sales.

Despite all these efforts, however, TMS lost market share for three consecutive years, beginning in 1975. In 1977, its share became 37%. One reason for the decline was that in those days new car models were an important means of stimulating market demand, but TMC was concentrating its efforts on emission


controls; it introduced, therefore, fewer new models than other makers. There were also trade frictions at the time, and the outlook for exports was not particularly bright. Against that backdrop, the sluggishness became an opportunity for the company to strengthen its corporate base in the domestic market.

Creating Attractive Products

Directly after the first oil crisis, TMC moved to develop a car with high fuel economy that would also be a market leader. That marked the start of Toyota's development of small cars with the FF configuration.

The Tercel was Toyota's first FF model. Expecting the new model to be a mainstay product not only in Japan but also in North America and Europe, a close study was made of the external dimensions and weights of all cars that would be likely to compete with it. As a result of that study, the Tercel was positioned in a market segment slightly below the Corolla. Although small, the Tercel would be designed to be spacious.

The chief engineer decided on dimensions for the interior that would provide ample leg room. For the external dimensions, on the other hand, the main consideration was width, which was determined by allowing just sufficient space for three people to sit on the back seat. That reduced the overall cross-sectional surface, a major factor in air resistance. Overall length was also controlled to keep the weight down. For power, the Tercel was mounted with the newly developed 1,452-cc 80-hp Type 1A engine, which was designed to be mounted conventionally so that it could also be used in the FR (front-engine, rear-drive) Corolla.

In addition, many components were redesigned for use with FF vehicles, and various innovations were introduced, such as using lighter-weight parts and reducing air resistance to improve fuel economy.


When the Tercel was launched in August 1978, the market responded with less enthusiasm than expected. The mood to conserve energy that followed the first oil crisis had already weakened, and people had become less responsive to rationalized car styling.

For example, when Toyo Kogyo marketed the FF Mazda Familia in June 1980, the car's fashionable styling was a key element to its success, and it was especially popular among young and female drivers. Tercel sales lagged behind those of the Familia, once again demonstrating the difficulty of developing an attractive product and introducing it at the right time.

Still, the Tercel was acclaimed in the United States for its high mileage and roomy interior, and the styling proved to be popular with American drivers. Improvements had been added to the Tercel right up until it was first exported in August 1979, and the stable product quality worked in its favor. Toyota also took two other effective steps: It named the car the Corolla Tercel, thus associating it with the already well-known Corolla model, and it set a price of 3,698 dollars for the two-door standard model. Exports of the Tercel grew steadily, and in 1982 reached 183,000 units.

Following the Tercel, development of the FF Camry began in August 1977. Although the Camry would be a small car, its development goals were to secure ample interior space and to achieve a high-level balance between performance and fuel economy. As a result, the Camry was given a broad chassis with a wide tread, lending it great stability. The Camry was a true FF car, and all its components were newly developed.

The latest in weight-reducing technology was used in the 1,832-cc 100-hp Type 1S engine mounted on the Camry. The adjusted engine weight was only 132 kg, and its 10-mode fuel


consumption rating was an excellent 14.0 km/l.

The Camry's drive train was based on a new design that was appropriate for Toyota's first FF car with a transverse-mounted engine. For the suspension systems, a Macpherson-strut type with an integrated stabilizer and strut bar was used at the front, and a Macpherson-strut type with parallel lower arms was used at the rear.

When the Camry was marketed in March 1982, auto enthusiasts hailed it as the first of a new generation of FF cars. Some thought, however, that it was lacking in elegance because of the functional styling and plain interior. In addition, the Camry was only available as a five-speed, four-door sedan when it was launched, which worked somewhat to its disadvantage and made it difficult to achieve an impetus for increased sales. Nevertheless, a combination of improvement efforts on the part of the development team and sales efforts by dealers gradually turned the Camry into a mainstay product in the Toyota line.

At about this time, exports to the United States, Europe and Australia were doing quite well. The first Camrys were exported to the United States in January 1983, and in 1985 total Camry exports had reached 128,000 units, making it one of Toyota's main products.

In November 1979, Toyota decided to move strongly toward fitting more of its passenger cars with the FF configuration. American automakers had also moved into the FF market, recognizing the energy-conserving benefits of FF cars. In Europe, the mainstream products in the small-car market were FF models with spacious interiors, ample luggage space and outstanding straight-line stability at high speeds. Although huge manpower investments in research and development and capital investments in equipment were needed to convert most of the models in the


Toyota line smaller than the Camry to the FF configuration, these investments were felt to be unavoidable if Toyota was to respond to the worldwide competition in the FF market. The company decided to move ahead.

Based on that decision, it was expected that TMC's investments in plant and equipment in 1980 would be double those of 1979, which would put a severe strain on profits. With facility and R&D investment reaching high sums while the number of products expanded and their life cycles became shorter, better investment efficiency became even more crucial for securing profits. Masaya Hanai, chairman of the board from September 1978, therefore directed that new procedures be created, and hence TMC enhanced its facility investment planning through such moves as reviewing the specifications for ordered facilities and designing facilities to provide higher productivity. To reduce R&D costs, TMC started with plans to reduce costs in the vehicle development stage: moving a step beyond cost planning by model, cost planning by component was begun, such as for transaxles for FF models; and for major models, more detailed cost targets were set.

Despite all those endeavors, the FF models failed to win as great a share of the domestic market as expected. Also, the auto market itself was suffering from the effects of the second oil crisis. Commodity prices had risen, but wages remained relatively stable, leading to a 0.9% drop in real income. Vehicle sales in 1980 dropped to 93% of 1979 levels.

Because of the market sluggishness, competition became more intense. Toyota had few hit products at the time, and its domestic market share, after reaching 38.2% in 1978, stagnated for two years in succession, falling to 37.3% in 1980. Dealer profits worsened despite efforts to improve efficiency by adopting a defensive operating policy.

Sadazo Yamamoto became president of TMS in June 1979,


and the company subsequently moved forward with a wideranging review of its marketing policies. These policies included an emphasis on orderly marketing by the industry in general, a reduction in the number of indirect personnel in the dealers, and stronger marketing support for the dealers in such forms as incentives and sales contests. As another link in those efforts, TMS also developed the concept for a new sales channel, the Vista Dealers. In developing the Vista concept, TMS invited participants from companies outside the auto industry, such as from The Daiei, Inc., Japan's largest supermarket chain, to add new vitality to the planning. Aiming from the start at highly efficient sales and management, the Vista Dealers used fresh outlet designs and introduced new sales ideas, including Sunday opening. Following the Vista experiment, showroom sales were held more frequently in other Toyota sales channels, so as to supplement door-to-door home visits by salespeople.

In June 1981, Executive Vice President Shoichiro Toyoda of TMC became president of TMS. On assuming office, he outlined three management goals: 1) to identify market needs accurately and have those needs reflected in attractive products; 2) to establish a domestic sales organization capable of selling 2 million units per year; and 3) to pursue an energetic overseas strategy based on a long-term perspective.

The first point in particular, that of developing attractive products, became an important managerial strategy in light of the rapid maturation of the auto market. As a result of their experience in having to develop technology to meet emission control standards, Japanese automakers had quickly increased their technological capabilities and rapidly shortened the lead-time needed to develop new products. The key to competitiveness had now become a question of how accurately a company could discern market trends and how quickly it could feed that


information back into product development.

Organizing the Export System

Exports of Toyota products grew from 720,000 units in 1973 to 1,790,000 in 1980. As exports increased, TMS found it necessary to restructure its export organization.

Because exports had expanded so quickly, the workload had tended to concentrate on receipt of orders and shipment of vehicles. But to support the activities related to exporting large numbers of vehicles, it became important to gather accurate data related to market trends in overseas markets, the actual situation regarding sales and inventories of Toyota products, and even the managerial situation of the distributors. Domestically, TMS had built up a close relationship over many years with its dealers, had organized a multilayer system for providing them with guidance and assistance, and had detailed policies based on accurate sales information collected almost daily; however, it did not have a similar system for exports. Overseas, business practices and the economic situation differ from country to country, and the organization of the distributors and dealers is very different, thus making it difficult to grasp and analyze the actual market situation and convert the results into marketing policies.

The first steps taken by TMS were related to putting into order the overall export organization. In February 1974, it began setting up Operations Support Staff in the respective departments for each export region. The Operations Support Staff were made responsible for orders, sales and inventory control, as well as formulating long-range plans and overseeing the subsidiaries in their assigned regions. They also systematized motor vehicle registration information from the principal overseas markets. The registration information from sources such as the automobile


manufacturers' associations and private organizations in each country was analyzed and used to grasp accurately each market situation. TMS also began making thorough demand forecasts for overseas markets and carried out market surveys.

In March 1976, improvements were introduced into the operation of the export committee, and a clear distinction was made between problems related to Export Headquarters in general and problems related to the individual departments responsible for each region, thus clarifying their roles and duties.

TMS also reorganized its transportation system. The number of vehicles exported had increased so rapidly that a serious shortage in storage capacity developed at export facilities, such as the Nagoya Wharf Center, and TMS came to lease about 1,000,000 m2 of public yard space at 64 locations around the port of Nagoya. To alleviate the situation, the Tahara Center was built and began operations in August 1981. The Tahara Plant was under construction at the time, and an area of about 500,000 m2 on the north side of the plant's main buildings was set aside to build a pier, 750 m long, and a storage area. Ships were loaded there with vehicles destined for domestic as well as overseas markets. Between 1977 and 1980, moreover, TMS turned 10 of the 20 ships it was using into large-size car carriers.

In 1978, TMS made a contract with the Great American Lines Inc. shipping company and added the Sunbelt Dixie to its fleet of car carriers. The ship carried grapefruit and other fruit from the United States to Japan and cars and trucks in the reverse direction. This was also an attempt to help alleviate the trade imbalance between the United States and Japan.

During this period, TMC was moving beyond establishing product quality in terms of its functions and was tackling the problem of improving and assuring the quality of the final


product in its entirety. To do so meant paying close attention to details that affected the degree of customer satisfaction, such as ensuring that there was no excess adhesive anywhere on a vehicle and that all the trim was correctly in place. Such checks covered all operations in the plants. TMS also made special efforts to prevent damage during shipment. In 1978, for example, it examined the causes of such damage and then discussed with the shipping companies ways in which to effect new methods for loading and unloading vehicles. To reduce damage related to unloading, which accounted for a higher percentage than that caused by loading, the emphasis was shifted from making loading easier to facilitating smoother, safer unloading; here, a number of innovations were introduced. One result of those efforts was a decrease in the percentage of damaged vehicles unloaded in the United States: The figure was reduced from 5.7% in 1977 to 0.8% in 1982.

In parallel with the increase in the number of vehicles exported, there was also a noteworthy increase in exports of replacement parts. To handle this, TMS moved forward with enhancing the facilities of its domestic shipping points, especially improving the methods of receiving orders and shipping products. To reduce the total number of days from receipt of an order to shipment, it established a special delivery system for handling items that were of the highest priority. Next, to reduce wasted time and effort, it changed the former system whereby items from each parts center were sent to one location for packaging and shipping; in the new system, each center packaged and directly shipped its own parts. In 1979, TMS introduced the TOPAS system to its overseas distributors for handling the administrative work related to ordering, receiving and shipping parts, and in 1980 it began a new parts ordering system that utilized a communications satellite.


Strengthening the System in North America

The first oil crisis caused great confusion in the American auto market. Although the United States was less dependent than Japan on imported energy resources, long lines formed at gasoline stations all across the United States from early 1974, and the number of visitors to the showrooms of automobile dealers rapidly decreased.

From about mid-1974, the Big Three sought to break from the prevailing sluggish auto sales situation by introducing large price discounts. Foreign automakers followed suit.

Toyota raised the prices of its 1974 models several times and made extensive efforts in other ways to maintain a situation of orderly marketing. Gradually, its sales position worsened: Sales of Toyota vehicles in December 1974 were 13,000 units, 57.7% of sales in December 1973; sales for all of 1974 were 266,000 units, the first time in four years that total annual sales had dropped below 300,000 units.

Once into 1975, a major shift began to occur in the American auto market: Sales of small cars expanded rapidly.

The EPA began publicizing fuel economy ratings for all model passenger cars, starting with the 1975 model year. As a consequence, not only manufacturers of imported small cars but also American automakers initiated sales campaigns for their small cars. The combined effect of those efforts was a sharp expansion of the demand for small cars with high fuel economy. As a result, sales of small cars, which had accounted for 43% of the total American auto market in 1973, came to account for 54% of the total market in 1975.

In February 1975, TMS Director Isao Makino became president of Toyota Motor Sales, U.S.A. In March, he announced a series of measures to give powerful support to the Toyota


dealers. For example, in order to provide relief for dealers with excess inventories, TMS, U.S.A. assumed the interest burden on those inventories, and -- along with other measures -- as a long-term policy TMS, U.S.A. bolstered its system of strategic incentives.

Makino also visited Toyota dealers throughout the United States, emphasizing to them the outstanding qualities of Toyota products. As evidenced in articles in Consumer Reports and other publications, Toyota products were highly evaluated for their fuel economy, their good construction and their durability. Makino listened closely to the dealers and emphasized at every opportunity the importance of viewing matters from the perspective of the dealers. Under Makino's direction, TMS, U.S.A. made efforts to grasp rapidly trends in the market and to promote early and powerful countermeasures.

The measures Makino introduced soon began to produce results. Sales of Toyota products recovered from mid- to late 1975, moving above the 300,000-unit mark again to record annual sales of 328,000 units. The news that Toyota had replaced Volkswagen during the year and assumed the number one import car position greatly encouraged everyone connected with Toyota.

TMS, U.S.A. moved next to reinforce its base for establishing a system of mass-volume sales. First, to consolidate its internal organization, it moved vigorously to hire outstanding Americans for its staff. Then, following the principle of "selling the vehicles in demand, to those demanding them, when they are demanded," TMS, U.S.A. adopted a system of promoting close discussions between its Japanese coordinators and its American staff members; the subsequent decisions made by top management were based on the results of those discussions. The system did not proceed smoothly at first, but once goals were established and a consensus was reached, everyone involved saw that tremendous energy was released at the implementation stage, and this system


eventually contributed greatly toward increasing sales.

The next task for TMS, U.S.A. was to set a product policy strategy, the key to mass-volume sales. It decided to emphasize three models: the Corolla, the Celica and the pickup truck. That decision was based on the fact that the three models already had unique product characteristics not previously seen in the American auto market. Additional efforts were made afterward to make those products still more attractive. Five-speed transmissions were introduced, liftback versions of the Celica and Corolla were brought out, and an enlarged-cab version of the pickup truck was also introduced. The decision to emphasize those three models, therefore, tied in directly with the development of products at Toyota tailored to the American market. In the sense that the introduction of those products contributed gradually to establishing a solid reputation for Toyota in the American market, the decision to emphasize sales of the three products was a crucial one.

In a related development, a new American advertising agency was appointed in December 1975, and the new agency soon introduced a number of powerful advertising campaigns. When the Celica Liftback was launched in December 1975, for example, the phrase that appeared in advertisements -- "You asked for it. You got it." -- became very popular among the general public. The Celica Liftback went on to win Motor Trend magazine's 1976 Import Car of the Year award, and the sales were so good that they were reminiscent of the Ford Mustang's debut.

As one more step to establish a system of mass-volume sales, TMS, U.S.A. moved all-out to provide guidance and support to its distributors and dealers. Through nationwide sales contests and incentive plans, for instance, it encouraged dealers with outstanding sales records to give themselves the challenge of even higher sales goals. Among the distributors, efforts by Southeast Toyota Distributors, Inc., which joined the Toyota


organization in January 1969, enabled Toyota to replace Volkswagen in 1973 as the best-selling import in its territory. Southeast Toyota introduced many innovative sales policies and became a dominant force in setting volume-sales records.

Dealers, meanwhile, also competed with each other to set new sales records. In 1976, for example, Rice's Toyota World, Inc. in North Carolina set a monthly sales record of 401 vehicles, only to be beaten by Longo Toyota in Los Angeles, which sold 430 vehicles in a month. Longo Toyota was in turn beaten by Wayne Stephen's Toyota of Dallas, Inc., which sold 516 vehicles, and then Toyota World won back the record with a monthly tally of 904 vehicles.

In April 1976, one of the American staff members of TMS, U.S.A. suggested establishing a "President's 1,000 Club" for the dealers. Only the dealer principals themselves would be eligible for membership, and to qualify a dealer had to sell 1,000 or more Toyota motor vehicles in one year. The President's 1,000 Club had two main goals: First, to express Toyota's gratitude to the dealers for their ongoing sales efforts; and second, to deepen further the friendly relations between the dealers and top management at TMS, U.S.A.

Strong moves were also made to strengthen the Toyota organization in regions that were relatively weak. For example, TMS, U.S.A. made plans to consolidate three distributors that were causing some concern. Together, the distributors covered 14 Midwestern states, and they were to be absorbed by Toyota Motor Distributors, Inc., directly managed by TMS, U.S.A. The plans were realized in February 1976 when TMS, U.S.A. acquired AMCO Industries, the parent company of the three distributors. The three were then transformed into sales regions based in Chicago, Cincinnati and Kansas City.

Following practices of the Big Three, Toyota Motor Sales, U.S.A. also established departments to monitor closely regional


indices and other information in order to determine such matters as dealer locations. The company then moved boldly to make whatever changes seemed necessary when a dealer's performance was lagging, including termination of contract, acquisition, liquidation, relocating or the reshuffling of management.

One result was that at the end of 1976, the total number of Toyota dealers in the United States passed the 1,000 mark for the first time, reaching 1,014. Also, the average annual sales volume per dealer rose to 391 units, showing that the dealer organization had improved both qualitatively and quantitatively.

The transportation system was also enhanced. In January 1977, an inland port center for vehicle distribution was established in Chicago, with a direct link to Portland on the west coast. This move enabled much faster delivery of vehicles to the north-central states. Previously, this region had been served from the south with car carriers bringing the vehicles through the Panama Canal. From Portland to Chicago, and to Kansas City and Cincinnati, where smaller distribution centers were set up, a rail service was started using specially designed full-shield carrier cars. Also, Toyota's facilities at nine ports in the United States were boosted. In parallel, similar bolstering efforts were made at 11 parts depots around the country; in terms of the parts fill ratio, Toyota became the top automaker in the United States. These various efforts bore fruit, and the total number of vehicles sold in 1976 was 389,000 units. Then, in 1977, aided by the surge in sales of small cars, energetic sales campaigns and new policies to promote the sales of trucks, total sales of Toyota cars and trucks rose to 568,000 units, an increase of 45% from 1976.

Meanwhile, TMC began to strengthen its technical organization in the United States. In 1975, for example, it established the Los Angeles Technical Center as a branch facility under the Factory Representative Office in the U.S.A. It renamed this center


the Toyota Technical Center, U.S.A., Inc. in 1977, separating it from the Factory Representative Office. The center was made independent, and its functions were strengthened, both in terms of quality and quantity, in collecting and analyzing various kinds of technical information.

Calty Design Research, Inc., meanwhile, established in 1973, was successful in designing vehicles such as the Celica and the pickup truck. To enable the organization to create additional designs appropriate for the American auto market, a new headquarters was built for it in Newport Beach, California in 1978.

Sales continued to increase at a remarkable pace in the United States until October 1977, when the situation changed with the appreciation of the yen. The yen rate moved from 263 yen to the dollar in October 1977 to less than 200 yen to the dollar in August 1978; in November 1978, it surged to 176 yen to the dollar.

Although Japanese cars had steadily built up a good reputation for high product quality, good fuel economy and excellent after-sales service, a series of price increases caused by the yen's appreciation resulted in a considerable drop in their price competitiveness. For the Toyota Corolla, for example, the price in 1978 for the 1,600-cc two-door deluxe sedan was 3,588 dollars, which was on a par with the 3,354 dollars for GM's subcompact Chevette Hatchback Coupe. The 1979 model of the same Corolla, however, sold for 4,338 dollars, competing with the 1979 Chevette at 3,794 dollars.

In place of the Corolla, which was already at the end of its model life, TMS, U.S.A. shifted its all-out sales emphasis to the Celica, which had been selected by Motor Trend magazine as Import Car of the Year for 1978, and to the pickup truck. Efforts began in 1976 to increase sales of the pickup truck in the form of the "Kato Challenge," in which President Seisi Kato of TMS urged the dealers to sell at least one pickup truck a month. These


efforts started to show results, and the pickup truck became the best-selling import truck in 1978. Consequently, TMS, U.S.A. became the top importer in the United States, not only in sales of passenger cars and trucks but also in overall number of units sold. Still, total sales for 1978 were 530,000 units, a figure lower than the previous year, and the situation did not bode well for the future.

The 1979 revolution in Iran intensified the second oil crisis. The United States responded to the new crisis by making nationwide efforts toward energy conservation. Gasoline prices soared, however, and an unexpected boom in small-car sales arose. Although the impact of the second oil crisis was less severe overall than the first in terms of oil supplies and prices, the demand for small cars accounted for 60% of total passenger car sales during the year.

This was the backdrop for the October 1979 debut of the small FF Tercel, whose development had been a priority for TMC ever since the first oil crisis. The introduction of the Tercel proved to be a major boost to Toyota's model line, and circumstances developed advantageously for Toyota.

In line with this, TMS, U.S.A. launched a sales incentive program in March 1979, offering trips to Japan as prizes for winning dealers. New monthly sales records were set almost every month during the course of this program. In September 1979, Toyota brought a nationwide group of top executives and their spouses of dealers from all over America -- 2,400 people in all -- to Japan for the first dealers' convention to be held in Tokyo. While in Tokyo, the dealers agreed to move ahead toward building a system for achieving annual sales of 800,000 vehicles in 1985. At the same time, the new advertising campaign in the United States, which was marked by the theme, "Oh, what a feeling!" moved forward successfully. Total sales for 1979 were 630,000


units; the favorable sales also continued into 1980, with sales figures totaling 705,000 units, up 11% from 1979.

The rapidly increasing sales of motor vehicle imports in the United States, especially of Japanese cars, from the second half of the 1970s, caused various repercussions in many areas. Out of that situation, four particularly important developments emerged.

One development was the dumping problem, which surfaced in 1975. The direct cause of the problem was the statement made by a Volkswagen executive that Volkswagen was selling all of its models in the United States at losses of between 250 and 650 dollars each. The Department of the Treasury subsequently decided to conduct a dumping investigation. As the result of the investigation, which was directed at automakers in eight countries and took over two years, all dumping charges were dropped in May 1976, even though some doubt remained with regard to certain automakers. Toyota was included in the investigation, but it was cleared of all charges.

A second development was a problem that emerged regarding pickup truck chassis with cabs that were being imported into the United States. In May 1980, the United States government revised the customs duty classification concerning small trucks. Previously, chassis imported with cabs attached were classified as "chassis," and the customs duty on them was 4%. Under the new classification, however, as of August 1980, the same chassis would come under the category of "trucks," and a revised duty of 25% would be levied against them.

In response, TMC, TMS and TMS, U.S.A. filed a claim against the Department of the Treasury, and filed a lawsuit at the U.S. Customs Court. Both the primary and appellate courts ruled against Toyota, however, and circumstances forced it to forgo an appeal to the Supreme Court of the United States.

A third development was a controversy concerning the International Trade Commission (ITC). In June 1980, the United


Auto Workers (UAW), arguing that Japanese motor vehicle imports were the cause of rapidly increasing unemployment among auto workers in the United States, petitioned the ITC to apply Section 201 of the Trade Act of 1974 to have Japanese automakers build plants in the United States and apply volume restrictions on their exports to the United States. Ford filed for similar action in August 1980. This was an appeal to apply the so-called escape clause, by claiming that a rapid increase in Japanese motor vehicle exports to the United States was causing significant damage to domestic industry and that, therefore, the imports should be restricted.

TMC, TMS and TMS, U.S.A. formed a committee to study ways of responding to the ITC matter. At the same time, with TMS, U.S.A. playing a central role in maintaining close contact with Toyota dealers in the United States and with the American International Automobile Dealers Association, Toyota exerted all its efforts in an energetic appeal to clarify its viewpoint. A senior vice president of TMS, U.S.A. testified at a public hearing of the ITC held in October, citing specific facts and figures and emphasizing that the difficulties the American auto industry was facing were caused by economic conditions and that the principal cause was not imports.

In November 1980, the ITC ruled by a close three-to-two vote that there was no direct causal relation between the increase in automobile imports and the difficulties of the American auto industry.

A fourth development was voluntary restraints on exports of Japanese passenger cars. In 1980, the impact of poor business conditions and interest rates as high as 20% caused the demand for automobiles in the United States to turn sluggish. Owing to the difficult situation, Chrysler Corporation applied for and received 1.5 billion dollars in loan guarantees from the federal government, and American Motors Corp., Ford and GM all fell


into deficit. Under these circumstances, moves toward placing restrictions on imports of Japanese motor vehicles became more urgent.

There were various opinions being voiced in the United States at the time concerning import restrictions, but on May 1, 1981, the Japanese government, concerned about protectionist moves in the American Congress, set an overall limit of 1.68 million passenger cars to be exported to the United States during fiscal 1981. This move ushered in the period of voluntary restraints on automobile exports to the United States.

As sluggishness spread through the American auto industry, the Canadian auto industry also came to face hardships. The unemployment situation worsened, and auto-related trade problems developed between Japan and Canada. However, because Japan had an overall trade deficit with Canada, the Japanese government hesitated in responding to Canadian calls for voluntary restraints on exports of passenger cars from Japan to Canada. Still, the Canadian government was concerned that the voluntary restraints on exports to the United States would lead to a large influx of Japanese cars to Canada, and thus it strongly requested voluntary restraints on exports to Canada as well.

In that context, Japan's Ministry of International Trade and Industry (MITI) announced in June 1981 that the Japanese government's outlook for exports of Japanese passenger cars to Canada in fiscal 1981 was for a total not to exceed a 10% increase over the previous year, which meant somewhat over 174,000 units. That was recognized as a de facto agreement between the two governments that voluntary restraints were in effect.

Amidst the inflation that had followed the first oil crisis in 1973, the Canadian dollar had weakened in value against the yen, and Japanese motor vehicles lost their price competitiveness. Toyota had to raise its prices several times, and sales that had


exceeded 52,000 units in 1971 dropped to just over 35,000 units in 1975. Canadian Motor Industries Ltd. (CMI), struggled to maintain a steady sales volume but suffered by not having the right products to respond to the shift in demand toward small cars. In 1979, with the mainstay Corolla reaching the end of its model life, the sales of Toyota vehicles in Canada turned extremely sluggish, dropping to 20,000 units. The downward turn forced CMI to reduce its labor force, sell a parcel of the land around its head office and take other measures to rationalize its operations.

In this bleak situation, CMI's Executive Vice President Yukiyasu Togo and Senior Vice President Hector P. Dupuis went as far as singing and dancing on the stage at dealer conventions and other gatherings to raise the morale of the dispirited dealers. Also, arrangements were made to have the scheduled launch of the long-awaited FF Tercel for the Canadian market to take place at a dealers' meeting in Tokyo in October 1979. In conjunction with that launch, CMI planned a sales contest based on a day-by-day countdown to the Tercel debut date, with trips to Japan as prizes for the contest winners. At the meeting in Tokyo, in addition to the FF Tercel the new Corolla was also announced, and, standing on the stage before the dealers, Togo and Dupuis began singing an impromptu song, "Sell, sell, sell! Sell like hell!" It was almost a chant, and it quickly became a sales-boosting battle call. In 1980, the following year, CMI's sales had made an amazing recovery to the 50,000-unit mark in a single leap.

In February 1980, as a link in the efforts to bolster CMI's managerial structure, Toyota increased its equity in CMI to 50%, and in April the company's name was changed to Toyota Canada Inc. That same September, the "Toyota...We care" program was initiated to raise the level of dealer responsiveness to customers. It was at this point, just as Toyota Canada was poised to increase its sales further, that voluntary restraints on exports of Japanese passenger cars to Canada went into effect.


Reinforcing the Sales Network in Europe

The first oil crisis had a severe negative effect on the European automobile market, leading, for example, to the nationalization of British Leyland Motor Corp. Ltd. and to huge losses for Volkswagen. Sales of Toyota products, too, which had been increasing smoothly, were also affected. Total sales of Toyota motor vehicles in 1973 in Europe were 163,000 units; that figure dropped rapidly in 1974 to 138,000 units. The effects of the oil crisis differed widely, of course, from country to country, partly because of different national circumstances and partly because the automobile sales networks were better organized in some countries than in others.

Sales increased in Norway and Sweden, for example, where the distributors were independent and thus more enthusiastic, and in Portugal, where a local assembly operation was well under way. In Belgium and the Netherlands, the mainstay products were small cars and the declines in sales there were thus comparatively minor. But in Switzerland, Austria, Finland, Denmark and some other countries, sales in 1974 dropped 35%-40% against 1973 sales.

Toyota AG in Switzerland, meanwhile, in the context of its rapid growth, completed a new headquarters complex in July 1972 in Safenwil, a small village located between Zurich and Bern. Around this same time, it bolstered its managerial structure by bringing in Leonhard Müller, currently president of Toyota AG. Following these efforts, total sales in 1972, including the mainstay Corolla and the newly added Carina and Celica, were 22,000 units.

In 1973, however, sales in Switzerland dropped rapidly to 14,000 units and in 1974 dropped further to 9,200 units. Although the oil crisis was partly to blame, the market decline in


Switzerland was also related to factors such as higher domestic interest rates. Also, because of the rapid earlier sales, Toyota vehicles on Swiss roads were still only two to three years old, and thus there was little demand for replacement parts, which affected business performance.

During this period of sluggish sales, relatively newly appointed dealers began losing their confidence, and it became obvious that decisive measures had to be taken to correct the situation. As one step, top executives from Toyota AG visited dealers and re-emphasized to them the reliability of the Toyota brand. Also, the Emil Frey Group provided substantial financial support by reducing dealer inventories, setting competitive prices and favorable dealer margins, and extending vehicle payment terms from the previous 15 days to 60 days.

Toyota AG introduced a number of other measures as well to appeal directly to customers about Toyota AG and the quality of Toyota's vehicles. For example, it invited leading journalists from the Swiss daily and trade press to tour the Toyota plants in Japan. The journalists were impressed with the plants and after returning home wrote extensively about them.

Tied in with the journalist tour, Toyota took out five-minute promotion spots on Swiss television, a highly innovative move, outlining Toyota's management philosophy and introducing the current situation at Toyota.

Another step Toyota AG took was expansion of the readership of Toyota AG's in-house publication Toyota Information to include vehicle owners in general. Toyota Information thus came to serve as a public relations tool, providing information about the outstanding qualities of Toyota motor vehicles. This publication is printed in German, French and Italian.

Finally, when sales began moving upward in 1976, Toyota AG changed its previous six-month warranty into a multi-warranty, which was a highly effective public relations move as well.


Besides extending the warranty period from six months to three years, distance restrictions were removed. Thus, if a driver experienced a breakdown during, say, a vacation in another country, the warranty covered lodging for all passengers in the car and air fare or other transportation costs to return home.

Increased sales of the Hiace introduced in 1973 and other light utility vehicles, and of Toyota forklifts, helped Toyota AG to assume the leading position from 1980 in those areas as well.

The negative effects of the oil crisis were felt most strongly in the Federal Republic of Germany (FRG). Until then, sales of Toyota products had been increased by offering reasonably priced vehicles equipped with a full line of accessories. However, the design of Toyota products was considered outmoded compared with other makes, and inventories began to increase steadily. Coupled with those difficulties, the financial failure at that time of the Bankhaus I.D. Herstatt, the main bank of Deutsche Toyota-Vertrieb GmbH & Co. KG, plunged the company into a managerial crisis.

A team was sent from Japan to study Toyota's various options in the situation, such as whether to bankrupt the company or set up a new company. The decision was finally made to have TMS acquire the company in November 1974 and operate it directly as a wholly owned subsidiary.

One of the first steps taken afterward was to reduce exports to the FRG. Exports had reached 14,000 units in 1973, but they were reduced to 3,600 units in 1974, and inventories subsequently declined.

A Japanese president was appointed around this time, and under his leadership concrete steps were taken to rebuild the company: A clear managerial policy was set, close dialogue continued with union leaders and everything possible was done to assuage the uneasiness of German employees. Next, highly


capable German managers were hired, and unsparing efforts were made to bolster the dealer network. A search for reputable dealers was initiated, assistance was provided to dealers so they could improve their facilities, and the holding of regular dealers' meetings began. Local tests were also started to facilitate the development of vehicles that would meet the specific needs of the market in the Federal Republic, and active participation began in motor sport activities, such as rallies and circuit races. These activities resulted in sales increasing rapidly from a low of 7,000 units in 1974 to 17,000 units in 1976. Toyota became the top Japanese brand in the FRG, and sales remained brisk throughout 1977 and 1978.

Deutsche Toyota-Vertrieb was recapitalized, with TMC also participating with equity, and in August 1976 its name was changed to Toyota Deutschland GmbH.

From 1975 onward, the markets in Europe moved steadily toward recovery. Utilizing that recovery, Toyota took steps to put its product line and sales organization into order. In March 1976, the first European product introduction conference was held in Brussels. The conference was especially beneficial because TMC engineers were provided with the chance to listen directly to the product-related requests of the Toyota distributors. The experience the engineers had of driving on the cobbled roads of Belgium, the winding mountain roads of Switzerland and the autobahn of the FRG, where there are no speed limits, served to confirm the information in reports they had been receiving from local Toyota representative offices. The engineers also saw and felt for themselves how important it was for a car to handle precisely when passing cars in the opposite lane at high speeds, on curves, or along narrow country roads. It was after this that concerted efforts began at TMC to develop products more appropriate for the markets in Europe.


In September 1976, to commemorate the cumulative total of 1 million exports of Toyota vehicles to Europe, the first European distributors' meeting was held in Copenhagen. One of the key items on the agenda was the approval of long-term policies. A budget system, placing emphasis on the principal markets, was also established, and bold steps were taken to reorganize the sales organization.

In March 1978, Inchcape PLC, a company which had achieved fine results in Malaysia and Ethiopia, was approached for assistance, and it agreed to take Toyota (GB) Ltd. under its wing. In July 1979, after the president of N.V. International Motor Company S.A. in Belgium retired, that company was also placed under the auspices of Inchcape. Inchcape is an international trading company with its headquarters in England. It has an automotive division with its own automotive specialists. Placing the companies in England and Belgium under Inchcape solidified the foundation for future growth.

During this period, one after another, the distributors expanded the size of their facilities. In May 1979, for example, Toyota's Finnish distributor, Korpivaara Oy, completed the building for its new headquarters. In the same month, Toyota Deutschland GmbH also completed a new headquarters facility alongside a highway in the suburbs of Cologne near the River Rhine. The new headquarters brought the parts warehouse and service center, formerly separate, together in one location. The unique exterior design of the building resembles an eight-cylinder engine, and it became popular not only among the Toyota employees but also the people in the local community. Toyota (GB) also moved to a new headquarters building in December 1980. In January 1981, Toyota's distributor in the Netherlands, Louwman & Parqui B.V., completed a new building for its headquarters along a highway not far from the port of Rotterdam. A huge


domed enclosure built inside the spacious site for the new Louwman & Parqui headquarters was designed by the famous architect R. Buckminster Fuller, and the company opened a showroom inside the dome. A separate building on the same site housed an automotive museum with a diverse collection of hundreds of classic cars, as well as horse carriages, bicycles and motorbikes.

TMS also introduced vigorous measures during this period to strengthen its parts supply and after-sales service systems. For example, it held a conference for those heading the parts-related departments of the distributors in 1973, participated in the computerization of the parts operations of the distributors in 1975, initiated a parts division awards system in 1977 and held the First World Parts Conference in Nagoya in 1980. Partly as a result of that series of spirited activities, sales of Toyota vehicles in 1976 broke the 200,000-unit mark for the first time, totaling 207,000 units. The introduction of new models of the Starlet in February 1978, the Tercel in February 1979 and the Corolla in September 1979 contributed to another record in 1980, when sales of 324,000 units broke the 300,000-unit mark for the first time.

Increased sales, however, led to trade imbalances and heightened moves to suppress Japanese exports. In December 1975, in a related development, the first talks were held between leaders of the Japanese and the English motor industries to discuss the market outlook and the situation regarding exports. As a result, export levels for each automaker were set on the basis of past registration figures. Because Toyota had entered it somewhat later than other automakers, its maximum share of the British market was set at 2% of the total market.

The French government, meanwhile, decided in 1977 to set the maximum market share for all Japanese vehicles at 3% of the total market. Italy also introduced measures to limit total Japanese


vehicle imports to 2,000-3,000 units per year.

Then, in March 1981, the EEC placed passenger cars on the list of import items from Japan to be monitored, and close watch was kept on trends in the number of units being imported from Japan into the EEC countries. As a result of a careful analysis of the situation, Toyota decided to follow its policy of prudent exporting with even greater resolution.

An area that was also tackled ambitiously was the procurement of overseas parts and materials. Those procurements began with tires: Semperit tires were purchased from Austria, Pirelli tires from the Federal Republic of Germany and Italy, and Michelin tires from France, the Federal Republic of Germany, Italy and Spain.

Once into the second half of 1980, the yen started appreciating rapidly, and it became obvious that the price competitiveness of Japanese vehicles would eventually be affected. TMS discussed the developing situation in great detail with its European distributors and became the first Japanese automaker to begin settling accounts in local currencies. Toyota bore the short-term foreign exchange risk, aiming to stabilize retail prices as much as possible and ease the foreign exchange losses for the local distributors. This measure was well accepted by the distributors.

Nonetheless, the rapid yen appreciation began to be reflected in retail price increases, and the sales situation turned severe throughout Europe. Added to that, European automakers discounted their prices in bold competitive moves, and they also introduced sales incentives. Subsequently, sales of Toyota vehicles in 1981 fell below the 300,000-unit mark to 269,000 units.

Several other background factors were also involved. For example, virtually all new European cars announced after the 1979 Frankfurt Motor Show were FF models; they not only had


excellent driving performance but also had become more refined products, offering color-coordinated interiors, deep seats exactly fitting the contours of the body and other features; like Japanese cars, they had luxury-class specifications and were filled with options.

These developments demonstrated to Toyota once again that to survive in the European market, where there was a wide array of competitive products, it was essential to develop attractive products that exactly fit local market tastes.

Enhancement of Activities in the Middle East, Africa, and Latin America and the Caribbean

The oil price hikes that began in October 1973 brought huge amounts of dollars to the oil-producing countries of the Middle East, and economic activities there suddenly turned brisk. Amidst energetic economic development programs and extraordinary consumer spending tied to rapidly rising incomes, the automobile markets in all the Middle East countries expanded dramatically.

Sales of Japanese automobiles, in particular, grew noticeably. Toyota exported 30,000 vehicles to the Middle East in 1973, a figure accounting for only 4% of its total exports. In 1975, however, exports destined for the Middle East were over 100,000 units, jumping to 12% of total Toyota exports. The Hilux and the Land Cruiser already held dominant positions in the Middle East, and in 1978 the Corona and Cressida were added to the Toyota line. Toyota sales in Middle East countries that year were 222,000 units, which accounted for 16% of total Toyota exports. Thus, the combined Middle East countries quickly grew into Toyota's second largest overseas market after North America. In 1976, Toyota became the top seller in Saudi Arabia, the country with the largest automobile market in the region.


Demand in the Middle East expanded so rapidly during this time that the supply of products sometimes could not keep pace. Although ships could easily be loaded with motor vehicles in Japan, the ports in the Middle East were so crowded that ships sometimes had to wait at anchor for 50 or even 100 days before they could be unloaded. It was during this period that TMS was forced to adopt the inconvenient method of shipping via large car carrier to Djibouti on the African coast and then reloading the vehicles there onto smaller ships for transport to Saudi Arabia and the other Gulf states. There were also problems in maintaining a flow of replacement parts appropriate to the volume of sales, because the parts could not be sufficiently supplied by ship; thus, around 40 cargo planes were chartered to ensure that after-sales service could be carried out properly and without delays.

Although the market in the Middle East grew rapidly, it was quite difficult to obtain market and other information in order to understand the situation fully. Some of the countries in the Middle East did not even have clear information on their total land area and population, and they were a long way behind in terms of keeping statistics regarding motor vehicles. Assessments of market size depended on actual shipping figures mutually exchanged among the automotive industry associations of each country, and sales data were determined according to reports from dealers and customers. In particular, information as to who was buying vehicles and how they were using them was unclear. Also, there were some foreign workers from nearby countries employed in the oil-producing countries who would buy a vehicle and take it home. The result was that many Toyota vehicles were seen running on the roads of countries where Toyota had not appointed a distributor. Sometimes, ships would no sooner dock than customers would rush to buy the automobiles immediately for cash, without going through the local distributor. The local


Toyota people humorously said that these vehicles just "disappeared into the desert."

To obtain market information more systematically, a project team was dispatched to Saudi Arabia in July 1975. The team consisted of staff from TMC and TMS as well as from other related companies, such as Hino Motors and Nippondenso.

According to the final report by the team, oil dollars were flowing directly and indirectly into Saudi Arabia; vehicles such as the Hilux pickup truck and Land Cruiser were being used instead of camels for moving about the desert; and the Hilux, the Coaster light bus and the Cressida sedan were being used as taxis. The target markets were divided quite clearly. Among general Arab customers and Western technicians, the two groups comprising the largest demand, the Cressida was most popular; foreign laborers liked the Corona and Corolla; the Hilux was popular as a multipurpose vehicle for moving about rural areas; and the Land Cruiser was popular in places where there were no paved roads. Energetic marketing efforts were made after the market survey. In 1978, for example, the first ever Toyota sales campaign in the Middle East was held, and in 1980 a special sales promotion campaign was made that featured world heavyweight boxing champion Muhammad Ali.

Meanwhile, Toyota continued its research into improving its products so that they could fully meet the unique requirements of the Middle East market. In August 1974, for example, a joint TMC-TMS team conducted heat tests by driving across the Arabian peninsula. These tests proved that Toyota vehicles did not overheat even at temperatures as high as 60C; they also demonstrated that the air conditioners and anti-dust devices on Toyota vehicles were highly reliable and performed outstandingly. The results of the tests were emphasized at the Middle East distributors' meeting held in May 1976 and at the first Middle East


product introduction conference held in December 1977. At the latter gathering, a number of other improvements on vehicles destined for the Middle East were introduced, including steering wheels and dashboards that withstood high temperatures, temperature indicators improved to avoid the false impression of overheating owing to high ambient temperature, and the use of side stripes and rear step bumpers on the Hilux. In those ways, Toyota gradually developed models with Middle East specifications.

The sales network in the Middle East was also strengthened during this period. In January 1973, a distributor agreement was signed with Irtoya Co., Ltd. of Iran. Next, in April 1975, an agreement was signed with Suhail & Saud Bahwan for the latter to handle distribution in Oman. Suhail & Saud Bahwan took over the Oman territory from Al-Futtaim Motors, which had supplied Oman ever since the United Arab Emirates (UAE) gained independence in 1971. Then, in September 1979, a distributor agreement was signed with Toyota Egypt S.A.E. Finally, in the early 1980s, the territory of Al-Futtaim Motors was expanded to include a total of seven of the UAE sheikdoms, including Dubai and Abu Dhabi.

Other developments occurred against the backdrop of the increasing economic nationalism in developing countries during this period. There were stronger calls for moving away from imports and toward local assembly, for example, which represented the first steps toward domestic production policies. In line with such calls, in South Asia, local assembly of the Hiace began at Awami Autos Ltd. in Pakistan in December 1973.

In parallel with the efforts to boost the sales network, strong efforts were also made to bolster the after-sales service organization. In those days, the usual way to sell imported automobiles in the Middle East was for a broker to line up his vehicles on a lot and wait for customers. There was very little


appreciation of the importance of after-sales service.

When sales are expanding rapidly in a market, after-sales service always tends to lag. But a good service system is essential for success in the competition for market share after a booming market cools down. Efforts were made to convince the distributors of that fact and to strengthen the service organization. An example of the kind of effort made was the dispatch of technical personnel to Saudi Arabia in August 1976 and again in March 1977 to train local mechanics. In all, almost two years of service training was provided.

Service facilities in the region were also steadily put into order. In 1977, for example, the UAE distributor opened a new vehicle service shop, and the Omani distributor opened an integrated automotive center, including a warehouse for storing new vehicles and a service shop. In 1978, the distributor in Saudi Arabia built an integrated service center.

Just as the situation was progressing smoothly, however, a serious problem arose. Somehow, Japanese motor vehicles acquired a reputation for being less durable than their American and European counterparts. To handle this issue, the Japan Automobile Manufacturers Association (JAMA) set up a committee and dispatched a fact-finding team to the Middle East. JAMA also cooperated closely with the Saudi Arabian government's efforts to prepare motor vehicle standards. In May 1984, Saudi Arabia established a motor vehicle certification system, and motor vehicles subsequently appeared with specifications for Saudi drivers.

New opportunities also presented themselves in Africa. In Kenya, Associated Vehicle Assemblers Ltd. began commissioned assembly of the Land Cruiser and the Stout in August 1977. Nigeria, meanwhile, traditionally an agricultural nation, rose to prominence as an oil producer, and from the mid-1970s on its


automobile market expanded rapidly. In response to requests from the Nigerian government for TMS to localize its operations, distributor agreements were signed with four Nigerian-operated companies, besides its existing distributor, R.T. Briscoe (Nigeria) Ltd., thereby preparing for the expansion stage of the Nigerian market. The Nigerian government also tightened import restrictions on each model to protect those automakers who had already built local plants. For its part, Toyota continued making efforts to expand the market in such ways as using the Hiace and Liteace to develop a market for small buses that carried baggage and passengers.

TMC and TMS responded to an invitation from the Nigerian government to participate in a project to build a plant for small trucks by submitting a proposal in January 1981. Nigeria's policy called for dispersing auto plants throughout the country, and siting was expected to pose a problem. Toyota was a late market entrant, but in order to stay in that market it decided to participate. In September 1981, the Nigerian government gave permission to five companies to build plants. Toyota was not included. Immediately afterward, however, there was a worldwide decrease in the demand for crude oil and the Nigerian government introduced severe restrictions on imports. In effect, the import of completely built-up vehicles was prohibited, and Toyota had no choice but to watch how the situation developed and continue discussions with its distributors.

Other auto markets in Africa were also depressed from the negative effects of the world economic situation. But TMS continued its steady efforts to support the distributors, despite their weak managerial foundations and the small number of units they were selling. In 1979, for example, a pan-Africa campaign was started. Also, beginning in 1980, representative conferences were divided into those for French- and those for English-speaking regions, thus helping to promote better understanding of management


policy and marketing methods. Beginning in 1979, moreover, the first annual Toyota Marketing Seminar was held. A number of manager-level personnel were invited from the distributors each year in this long-range effort to develop human resources in their organizations.

Latin American and Caribbean countries were also jolted by the developments in the world economy. Motor vehicle exports to these countries had stagnated somewhat, beginning in 1972, but they had generally recovered by the mid-1970s. Total exports grew from 39,000 units in 1973 to 106,000 units in 1980. In the 1980s, however, the cumulative debt problem came to the forefront, and further market expansion became difficult. The situation differed greatly from country to country, with demand expanding rapidly in some countries because of the shift in demand toward small cars. In other countries, there were sharp rises and falls as their governments shifted policies, for example, toward liberalization, tighter import restrictions or legal requirements for local production.

In Puerto Rico, the shift in demand toward small cars since the first oil crisis was even more pronounced than in the United States, and sales of Japanese cars increased greatly. In response to the changing market structure, Toyota strengthened its line-up of small cars, expanded its dealer network and promoted a policy of dealers exclusively handling Toyota products. These steps enabled Toyota in 1977 to take firm hold of first place in the Puerto Rican market and maintained Puerto Rico's position as Toyota's largest export market in Latin America.

In 1979, the revolution in Nicaragua ushered in an era of turmoil in Central America. Motor vehicle exports to Guatemala and El Salvador had been growing steadily, but they declined in the 1980s. Since the government in Costa Rica removed the preferential tariff treatment on complete knockdown vehicles,


Toyota's local assembly operations there were halted in October 1982. On the other hand, motor vehicle exports to Panama expanded, partly because corporations and investment capital shifted there in consequence of the unstable political and economic situation elsewhere in Central America, strengthening Panama's role as an offshore financial center. Another reason for the growth of exports to Panama was that Toyota had two distributors in the country.

In South America, there were increasing moves to invigorate domestic auto industries by removing the ban on imports of completely built-up vehicles. Chile was the first country to do so, in 1976. Argentina, the largest producer of automobiles in South America after Brazil, liberalized its imports in 1979. TMS immediately appointed a distributor and moved quickly in other ways, such as holding launches for new vehicles and participating in car rallies. As a result, exports to Argentina in 1980 reached 14,000 units. From 1982, however, imports were in principle prohibited again, and, although small in number, limited sales of certain models have been allowed to continue to Argentina to this day.

In Brazil, where Toyota had continued local production since 1958, it was difficult to secure a profit because of chronic inflation and government price controls. Despite this, however, support was provided from 1974 on for bold measures by Toyota do Brasil to strengthen its corporate structure. One of the first steps taken was capital investment to put the production facilities into order, thereby increasing the in-house production rate and improving profitability. A casting shop was built in 1974, a forge shop in 1975, and gear-processing machinery was introduced to raise the in-house production rate. In 1980, widespread improvements were introduced to chassis-related products made in Brazil, such as transmissions and axles. During this period, Executive Vice President Taiichi Ohno visited Brazil many times


to provide guidance concerning the Toyota Production System.

The economy in Brazil later fell into recession, but Toyota do Brasil was able to improve its performance through continued efforts to overcome difficulties, such as by expanding the variety of its products and improving the quality of the bodies it produced.

In Venezuela, assembly operations had been transferred in 1971 from Ensamblaje Superior to Industria Venezolana de Maquinarias C.A., and the number of units assembled was subsequently increased drastically. Since the Land Cruiser was so well suited to the mountainous regions of Venezuela, where many roads were not paved, complete knockdown production expanded from 3,800 units in 1973 to 14,000 units in 1982.

Promoting Domestic Production in Southeast Asia and Oceania

The move toward local production of motor vehicles began earlier in Southeast Asia and Oceania than elsewhere, and once into the 1970s the region entered a new phase in that direction. There had been an increase in the models introduced, the capacity of the local assemblers had expanded and the number of knockdown kits exported had increased steadily. There were major developments in various countries in the region in terms of government policies related to the automobile industry. In particular, rapid developments took place in tightening local content regulations toward nurturing the local automobile industry.

After Thailand announced a 25% local content policy in 1971, local content problems came under close scrutiny. When Toyota Motor Thailand Co., Ltd. (TMT) completed its second plant in 1975, it began actively using locally made stamped and other parts. Then, in 1978, the Thai government raised the


percentage of local content by banning the import of all completely built-up passenger cars and enacted a law requiring that all new passenger cars be assembled in Thailand. The following year, it enacted further legislation to raise the local content of commercial vehicles as well. Because of those developments, Toyota established Toyota Auto Body Thailand in February 1978, thereby promoting greater local content.

During the foregoing process, Toyota Auto Body and Hino Motors supplied technical guidance to assist Toyota as it promoted the transfer of technology to Thailand. Those efforts helped lay the foundation for local production of stamping dies. Beginning in 1980, regular conferences were held in Thailand to discuss local production, including selection of the most appropriate parts to be produced locally, deciding on a line-up of models that reflected considerations concerning local content and setting the timing for the switchover. Also, in order to strengthen TMT as a manufacturing company, moves were made to increase the inhouse production rate, and assembly of engines and transmissions was initiated.

During this period, TMT embarked on a dealer expansion and improvement program in order to establish a volume sales system able to meet the increased sales that would be needed to support local production. It started by building a nationwide sales network, providing low-interest loans to build and improve showrooms, parts warehouses and service shops. Dealers who had started as private concerns gradually came to realize how their operations had expanded and their business performance improved through their association with Toyota. The relationship of mutual trust between the dealers and Toyota thus became much firmer. TMT also promoted a series of finely meshed dealer programs similar to those used in Japan, such as education and training programs and agreements setting annual sales targets. Particular emphasis was placed on service training in order to


strengthen service operations as a constant source of profit for the dealers. To that end, TMT acquired a large tract of land and built a center there in 1975 for training mechanics. The work at the center also included the development of trainers and the preparation of textbooks and other teaching materials in the local language. Besides the education and training of service personnel from the Thai dealers, it also became possible for the first time to dispatch instructors from Thailand to train such personnel in other countries.

Even while strengthening its service-related education and training system, TMT expanded its production activities so as to reinforce its internal organization, such as by establishing technical and purchasing departments, thereby improving its structure in terms of management control. From its inception, therefore, TMT moved energetically to secure outstanding human resources and then to train and develop them. Besides developing the technical personnel needed during this period to promote local content, great efforts were also made to train managers and supervisors who could take care of the daily operation of business. In 1982, TMT also established an association comprised of local suppliers and tackled the question of transferring managerial experience to related companies.

TMT was also active in the area of corporate social responsibility. Besides providing motor vehicles for the use of the royal family and organizations such as the Thai Red Cross, it also began dispatching lecturers to hold regular classes at universities and sponsored technical seminars at its training center aimed at high school teachers and university students. In these ways, TMT rounded out its activities in responding to the need to transfer technology to Thailand. Moreover, in answer to requests for greater local equity participation, Toyota in 1974 transferred 22% of its stockholdings in TMT to banks and domestic dealers. These and other measures steadily helped to consolidate TMT firmly as


an influential corporation in Thailand.

In Indonesia and the Philippines, meanwhile, Toyota developed and introduced so-called Asian cars, vehicles that closely fitted local needs and whose technology was easy to transfer, and the company moved forward with having all development and other processes, including design, done locally. In the development of these low-price, multipurpose vehicles -- called basic utility vehicles (BUV) -- staff from Delta Motor Corporation in the Philippines and P.T. Toyota-Astra Motor (TAM) in Indonesia participated right from the needs assessment and design stages. That participation later proved important for promoting the all-out transfer of technology in the two countries.

Production of the Tamaraw, which was the BUV in the Philippines, began in November 1976. TMC prepared the basic design and prototypes for the vehicle, while the technical staff at Delta also built prototypes and made design changes based on driving tests they carried out.

In Indonesia, meanwhile, Toyota decided to set up a new company in order to supply vehicles to the local market at the lowest possible prices; it also decided to move forward with transferring the Toyota Production System to the local operation. P.T. Toyota-Mobilindo was established in Indonesia in November 1976, and preparations began immediately for producing bodies for a local BUV. Called the Kijang, production of the BUV began in May 1977. Low price was the primary consideration in designing the Kijang, and structurally the vehicle required a minimum of investment in stamping and other new equipment and facilities. The size of the overall investment in the company's plant was also small, and to raise productivity the company introduced unique production processes and the Toyota Production System from the start. TMC gave total support to the P.T. Toyota


Mobilindo plant and specifically designated the Motomachi Plant as its supporting plant in Japan.

The Indonesian managers in charge of production at Mobilindo, some of whom had studied at Japanese universities, underwent training at the Motomachi Plant. That experience, plus their understanding of the current situation in Indonesia, made them especially determined to succeed in adapting the Toyota Production System to the Mobilindo plant. One of the first requirements impressed on them was the importance of observing time schedules, such as punctuality in reporting for work. Standardized work is the basis of the Toyota Production System, with the time required for work operations -- such as picking up parts, installing them and confirming the quality of the work done -- calculated right down to the minute and second. At the start of operations at 7:15 each morning, therefore, the switches are turned on for all machines and the standardized work processes move forward precisely in tact-time. Just as Kiichiro Toyoda said in the earliest years of Toyota concerning just-in-time production, "People talk about having missed a train just by a minute, but of course it's possible to miss a train just by a second." Although the principle of observing time schedules was understood, great efforts were needed to apply this notion thoroughly in Indonesia, where many new employees were joining the company and work habits differed greatly from Japan.

Managers also emphasized the Four S's: seiri (tidiness), seiton (order), seiketsu (neatness) and seiso (cleanliness). Floor employees at the plant were not sure what was expected from them at first, but when they saw managers putting items away after use, they realized that at the plant, like at home, it is important to keep the environment clean and tidy. A positive mood emerged as employees saw that putting things away ensured less damage to parts and fewer work-related injuries.


Thus, many difficulties were encountered during the process of introducing the Toyota Production System, but once major improvements were introduced that made a visible difference, such as changing the floor layout, the employees themselves began to participate on their own initiative. Regarding the important concept of employees helping one another when necessary, the Indonesian word gotongroyong, which means "mutual assistance," came to be used on the shop floor as a kind of slogan, and it contributed toward the concept being accepted smoothly.

The Kijang, meanwhile, sold better than expected. "Kijang" means "deer" in Indonesian and was originally proposed by Astra International. The name proved to be popular and the vehicle, mounted with an engine that had already won a good reputation in the Corolla, came to represent Toyota in Indonesia. When a new TAM president was appointed in 1977, one of the first steps taken was to focus sales promotion efforts on the Kijang and the Dyna truck. In addition, the dealer network was boosted, especially in urban areas, and new efforts were placed on improving sales training. With the notion of transferring technology to Indonesia, moreover, new efforts were made to help the development of domestic parts makers. P.T. Multi-Astra, established in 1975 as an exclusive assembler of Toyota vehicles, steadily increased the number of units it was assembling, especially in the context of brisk sales of the Kijang.

An unexpected development occurred in November 1978, however, when the Indonesian government announced a 50% devaluation of the rupiah. For TAM, this was its first experience of this kind; it knew sales would drop sharply if large-scale price increases were introduced. The company was thus confronted with an unprecedented managerial crisis. The saving factor in this bleak situation was an offer of total cooperation from its dealers. The dealers offered to overcome the crisis by accepting


higher prices and making additional efforts to increase sales. Eventually, an oil boom helped the Indonesian economy to recover, and automobile sales also improved. More importantly, the sense of trust created during that crisis served later as the foundation for TAM's strengthened sales capabilities. In the spring of 1981, production of the Kijang reached 2,000 units per month, a figure 10 times the original production goal, and sales the same year were 19,000 units.

In December 1981, however, P.T. Toyota-Mobilindo was hit by a strike. The direct cause was a dispute with some union leaders, but inadequate day-to-day communication with the ordinary employees was also to blame. Efforts were subsequently made that included holding monthly meetings between labor and management, where ample time would be given to discussions, and working through worksite managers and supervisors to achieve better understanding. As one result, quality control circles became more active and progress was made in building product quality into the work processes and in reducing costs. Operations manuals were prepared in Indonesian, moreover, and work operations became more widely standardized as the employees understood their jobs not only by performing them but also by reading about them.

In Australia, meanwhile, the government changed hands, and from 1971 onward the country's local content policies vis-a-vis the auto industry were revised several times. The New Motor Plan of March 1976, which stipulated a high local content goal of 85%, led to the establishment of a system for supporting all-out local production activities. To meet a level of 85% local content, it was necessary to approach a situation close to integrated production, including major components such as engines and transmissions. From the dual standpoints of profitability and the level of technology required, it was expected that meeting that local


content percentage would mean facing great difficulties. However, based on ongoing discussions held with the Australian government, TMC and TMS officially decided in June 1976 to participate in the local content program.

In February 1977, TMC and TMS jointly established Toyota Manufacturing Australia Ltd. (TMA), capitalized at 20 million Australian dollars. The new company began assembling engines for the Corolla in 1978 and finished constructing an integrated plant for producing engines and transmissions in 1979, after completing the aluminum casting and machining facilities.

Toyota also commissioned GM-Holden Ltd. to produce stamped parts for its locally manufactured vehicles, thereby raising its percentage of local content. Engines made by GM-Holden were also purchased for mounting aboard the Corona. In 1980, the 85% local content percentage for the Corolla and Corona was achieved.

By August 1981, TMA had completed a stamping shop and thus made intensive efforts to raise the in-house production rate of stamped parts. On the occasion of changing the Corona over to a new type of engine in 1983, the procurement of engines from GM-Holden was halted and the Type 2S engine was supplied from Japan.

During this period, GM, Ford, Toyota, Nissan and Mitsubishi competed fiercely in the Australian market. In 1982, for example, Ford replaced GM as the market leader, and competition grew more intense. In that situation, in 1981, TMS supplied financing to AMI, its distributor for passenger cars in Australia, thereby strengthening the company's financial structure, and moved in other ways to bolster the sales system.

At around this time, the parent company which owned 60% of Thiess Toyota Pty., Ltd., Toyota's distributor of commercial vehicles in Australia, was acquired by another company. Under these circumstances, TMC and TMS decided to purchase Thiess


and in March 1980 Thiess Toyota became a wholly owned subsidiary. Afterward, Thiess Toyota continued its vigorous investments in sales outlets and, based on a close relationship with its dealers, implemented new programs adopted from TMS, U.S.A., programs which were enthusiastically received. As a result of these marketing efforts, Thiess Toyota became the leader in the commercial vehicle market in 1979.

Chapter 7: New Directions


Structural Changes in the Japanese Economy

After the second oil crisis in 1979, almost all Western economies fell into a period of negative growth, while the Japanese economy began a phase of low, steady growth. Production in Japan's mining and manufacturing industries remained approximately level, and the growth rate of the economy, which had stood at 5% in 1978, dropped to 3% in 1982. It was against this backdrop that Japan's efforts to restructure its industry moved rapidly forward. The steel and shipbuilding industries, which had been the mainstay behind Japan's postwar economic growth, were losing their competitive edge to the newly industrializing economies (NIEs) of Asia and were being increasingly regarded as structurally depressed. In contrast, Japan's machine, business machine, consumer electronics and semiconductor industries grew quickly.

With the beginning of 1983, the Japanese economy commenced its recovery. Supported by the revival of business in the United States, a strong American dollar and an official policy of promoting high interest rates, exports from Japan grew quickly. The rapid rise in exports destined for the United States came principally from the processing, assembly and high-technology industries, and it resulted in sharper trade frictions between that country and Japan. In 1985, exports to the United States accounted for over 40% of total Japanese exports.

Although the business recovery in the United States was achieved mainly because of an expansion in domestic American demand, the United States continued to have a huge fiscal deficit. During this period, Japan implemented fiscal reforms aimed at achieving a balanced budget, and at the same time its exports


were increasing. Since a large percentage of those exports were destined for the United States and Europe, international economic frictions entered a new phase. Japan's Western and other trading partners demanded that it open its markets, and Japan came to face problems related to its distribution system, the high propensity of its population to save and the length of Japanese working hours.

As mentioned earlier, a rekindling of automobile trade frictions between the United States and Japan began almost at the start of 1981. After the introduction by the Japanese government of voluntary restrictions on passenger car exports to the United States in April of that year, similar actions were taken with respect to some other countries as well.

To remedy the situation in the United States, the world's largest automobile market, where their exports had declined, Japan's automakers, including Toyota, were forced to consider seriously the need for local production. A need also emerged to formulate more precise product and marketing plans in order to respond more quickly to global competition in the small-car market.

Launch of the New Toyota Motor Corporation

In January 1982, TMC and TMS decided to merge and signed a memorandum of agreement to that effect. President Eiji Toyoda of TMC and President Shoichiro Toyoda of TMS issued a joint statement on the aims of the merger as follows: "To cope with the turbulent 1980s and to progress further along the path we have taken thus far, a need has emerged to integrate our production and sales functions, which are in fact two sides of the same coin, so that they can augment each other more comprehensively and organically."


The two companies merged in July 1982, thus launching the new Toyota Motor Corporation. A total of 53 directors headed the company, including Chairman Eiji Toyoda, Vice Chairman Shigenobu Yamamoto and President Shoichiro Toyoda. All employees of the two previous companies continued with the new company.

Chairman Toyoda issued a message to all employees entitled, "On the start of the new Toyota Motor Corporation." In it, the Chairman recalled how the original Toyota Motor Company, at the brink of bankruptcy in 1950, was forced to split its production and sales departments into separate companies, Toyota Motor Company and Toyota Motor Sales Company, as a condition for obtaining financial assistance. "Today," he said, "we must win the struggle to survive in a changing world. The time has come to rid ourselves of the vestiges of the early postwar years and to make a new start. Let us return to our original organization, let us grasp our capabilities to their fullest, and let us make the effort needed to carve ourselves a new future."

For 32 years, TMC and TMS had concentrated their managerial resources in their respective areas of responsibility, and they had become leaders in the Japanese automobile industry. To develop their international operations and to make decisions more quickly, however, a need had emerged to integrate the functions of both companies and restructure the new organization.

With the integration of TMC and TMS, the new company was reorganized into the eight functional groups of Head Office, Purchasing, Domestic Sales, Overseas Affairs, Engineering and Production Engineering, Logistics Control, Production, and Offices.

The Head Office remained in Toyota City, Aichi Prefecture, at the Head Office of TMC, while the former Head Office of TMS in Nagoya became the Nagoya Office. The Tokyo Office was


moved to a new building in the city.

President Toyoda, addressing the employees at the start of Toyota's new organization, said, "I want to ask each of you to look beyond past events and organizational frameworks, to do your best to understand your own duties and position in the company, as well as those of others, so that we can continue to foster harmony among ourselves." Harmony among employees is indeed a matter of great importance at the new Toyota, and the president added that, in addition to such harmony, Toyota employees must "use innovative concepts and flexible thinking in creating a new history for our new company."

The specific results of the merger included a faster decision-making process and more energetic development of plans and measures in all areas of operations. In particular, the rationalization of material-handling operations was expected to lead quickly to greater efficiency. Before the merger, for example, spot inspections of new vehicles were performed three times -- by TMC, TMS and the dealer -- and TMS inserted tool kits and fitted spare tires to vehicles in its yard. Some of the improvements included spot inspections and tool kits and owner's manuals being placed in the vehicles during assembly line operations. In addition, a new on-line computer system was developed that enabled Toyota to shorten the lead-time between receiving orders from the dealers and delivering the vehicles.

Toyota also made various improvements in its replacement parts supply system, and it became possible to use the Kanban System to cover the receipt of parts from the parts makers.

Besides setting improvement targets for major indexes in areas such as inventory, product quality and lead-time, Toyota introduced a budget control system to put its control organization into order. Once its in-house improvements were consolidated, Toyota broadened the scope of its activities to support improvements


in the logistics systems for domestic dealers, parts distributors and body makers.

Toyota also reviewed its entire export distribution system in order to shorten the number of days that vehicles remained in Japan after production, covering everything from ex-plant shipment to loading aboard ship. In 1985, it completed the new Tobishima Wharf Center for storing vehicles destined for export and made improvements to its system of storage yards, eliminating wasteful procedures such as transportation to the yards and sorting vehicles by destination. Toyota also gradually replaced its aging Toyota Maru car carrier fleet with larger ships. Beginning in 1984 with the Century Leader 1 and Century Highway 1, a number of advanced specialized ships were put into operation.

Toyota also moved to bolster the management base of its domestic dealers in such ways as revising their margins, extending the due date of on-sight drafts and providing low-interest loans, all of which contributed to a rapid improvement in dealer profits. This stabilization of the dealers' management position greatly strengthened their sales capabilities. In 1983, the year after the merger, Toyota's share of the domestic market reached 40.2%, surpassing the 40% mark for the first time in nine years, and Toyota's share of the domestic market continued rising afterward.

Toyota also began moving more vigorously in its overseas activities. Toward this end, the various overseas-related departments were reorganized. The functions of the old TMC Overseas Engineering Department and the TMS Overseas Knockdown Department were taken over by the Overseas Production and Engineering Department and the Overseas Engineering Cooperation Department. In addition, the Overseas Operations Department of TMC and the Overseas Planning and Administration Department of TMS were integrated to form the new Overseas Planning Department. The two new overseas engineering


departments work directly with the main production engineering departments to provide support for overseas plants. The Overseas Planning Department focuses on product planning, price studies and planning and administration of export volumes. Besides reinforcing its Overseas Projects Office, Toyota also established a Fremont Project Office and a Taiwan Project Office in order to move vigorously in promoting important overseas projects.

Against this backdrop, Toyota announced new policies in 1984 that stressed "integrating the operation of our overseas organizations to facilitate the consolidation and timely implementing of measures by region to expand the sales of passenger cars and trucks, and to promote overseas projects."

The first-ever Toyota World Convention for overseas distributors was held in Tokyo in November 1984. On the opening day of the convention, about 400 representatives from distributors in 120 countries gathered in the main conference room of the Imperial Hotel. When Chairman Eiji Toyoda addressed the gathering, he began by reflecting on Toyota's history and expressing his gratitude on behalf of the company for the untiring efforts of the distributors in promoting the sale of the company's products. He then went on to say, "The world is rapidly changing and the road ahead is filled with many challenges. For your part, I would ask you to strengthen further the ties binding the members of the Toyota family, to continue encouraging and supporting us in our work and to help us make the next great leap forward into a new era."

President Shoichiro Toyoda also spoke at the meeting. "One of the dreams I have," he said, "is to see our automobiles being driven in every corner of the world, allowing people to lead fuller lives. I intend to undertake every effort so that Toyota will be able to meet whatever challenges may emerge and continue to build attractive products."


The highlight of the conference was an ocean voyage aboard the Royal Viking Star, a luxury cruise ship flying the Norwegian flag. The ship was popularly known as the "Swan of Northern Europe." The Royal Viking Star sailed from Yokohama on the evening of November 13 and entered the port of Nagoya the following morning. The passengers were then conveyed by a fleet of buses to Toyota City, where they toured the Toyota plants. After the tour, they reboarded the Royal Viking Star in Nagoya and sailed the same night for Nagasaki and then on to Hong Kong, with arrival in Hong Kong set for November 19. A full schedule of activities kept the distributors and other passengers busy throughout the voyage. Included were seminars by Toyota executives and discussions among the distributors, divided according to region, for frank exchanges of opinion.

On the evening of November 18, the night before docking in Hong Kong, a gala "sayonara party" was held aboard ship. Upon disembarking in Hong Kong, there was a firm shaking of hands as representatives promised to maintain their close ties in the future.

Putting Advanced Technology to Work

Once into the 1980s, the domestic market entered a mature phase, and disparities in technological capability between companies became directly reflected in their ability to compete. Toyota had made continuous and all-out efforts during the 1970s to meet the social demands for cleaner engine emissions and for conserving energy and natural resources. In September 1980, the Toyota Central Research & Development Laboratories, established in 1960, moved into a new facility in Nagoya, which was twice the size of the old one. Its "matrix organization" bolstered the research and development organization in all areas and divided research into basic groups, with specialization in such


areas as combustion, heat, materials and electronics. With such an organization, it became possible for the entire laboratory staff to work together on special projects in developing new technology. Toyota also expanded and enhanced the organization and facilities at its Higashifuji Technical Center, originally set up in 1971, and activities at the center progressed smoothly.

Toyota's engineering departments, meanwhile, established programs and accumulated experience for promoting concentrated research and development activities. In early 1980, the programs were reviewed and it was decided to expand the scope of the laboratory's research and development activities to cover the entire spectrum of automobile technology, including engine combustion research, electronic fuel injection and other electronic technologies, various control technologies, the study of new materials such as catalysts, ceramics, and metal materials, and other technical fields. In the area of ferrous metals, Toyota and Nippon Steel Corporation jointly developed a type of plate steel for use in automobiles that was rustproof and could be painted easily. This reorganization enabled Toyota to develop products one after the other that responded to the market's increasingly sophisticated demands for improved engine performance, running performance, maneuverability, riding comfort and overall comfort.

Emission control devices adversely affected engine response when first introduced, and Toyota engineers subsequently set about developing a new engine that would be compact and lightweight, high in performance but low on fuel consumption, require minimal maintenance and have good response. They critically reviewed each engine component and tried to make every moving part lighter. They used new technology, such as laser holography, to devise ways of minimizing vibration and sought to streamline the engine block and other components. Their new engine used many newly developed


components, such as a sintered hollow camshaft and a sinterforged connecting rod. Taking advantage of their cumulative store of basic research on combustion and analysis technology, the engineers redesigned and greatly improved the shape of the engine's combustion chamber, the intake and exhaust systems, and the fuel system. They also perfected the Toyota Computer Controlled System (TCCS), which comprehensively controls the entire engine, including its ignition timing and idling speed.

A number of new double overhead cam (DOHC) engines were developed, which have two intake and two exhaust valves per cylinder and allow a sharp engine response over a low to high range of rotations per minute. They also made progress in research into supercharged engines, developing marketable high-performance engines installed with Toyota's own turbo-chargers or mechanical-type superchargers.

In addition to sporty and luxury-class models, the multivalve engines came to be used as the base engines for all Toyota cars. The new engines were outstanding in performance and in fuel economy, which improved the basic performance of the mass-produced cars. The first such engine was the 2000-cc Type 3S-FE, mounted on the new Camry, introduced in August 1986. To meet the conditions required of a base engine, including low cost, downsized cylinder heads and combustion chambers to achieve high fuel economy, the Type 3S-FE features four valves per cylinder and one camshaft that drives another camshaft via a gear. As a noise-reduction feature, the engine uses a scissors gear. Subsequently, newly developed multivalve engines were mounted whenever new models or model changes were introduced.

Toyota also took positive steps to enlarge and enhance its research and testing facilities in order to improve the transmission and other parts of the drive system, especially in terms of transfer efficiency, quietness during operation and durability.


Advances have been particularly conspicuous in automatic transmission engineering. In 1977, Toyota developed an automatic four-speed transmission with overdrive in response to demands for greater fuel economy, more dynamic performance and quieter operation. Then, in 1980, Toyota brought out a four-speed automatic transmission with two-way overdrive that featured a built-in direct-link clutch for greater torque-converter efficiency. Next, in August 1981, Toyota equipped the Crown with a four-speed automatic electronically controlled transmission that was the first in the world to include a microprocessor to control both the converter and direct-link clutch.

With regard to the suspension system and other chassis-related components, Toyota used the introduction of the FF configuration as an opportunity for radically reducing vehicle weight, selecting new materials and redesigning structural features; in the process, experience was gained in new areas of technology. To improve handling and straight driving at high speeds, Toyota studied the rigidity and arrangement of suspension arms and made a number of fine improvements in the bushings and in the shape and materials used for cushions in order to increase the comfort of the ride. Among the devices and systems developed were the Electronic Height Control device in 1982 to keep a car at a set height regardless of the load, followed in 1983 by the Toyota Electronic Modulated Suspension (TEMS) system, the first in the world to be electronically controlled. TEMS includes mechanisms that automatically adjust the shock absorbers to provide a comfortable ride and suppress excess movement during acceleration or braking. Also in 1983, Toyota developed the Electronic Skid Control mechanism, which automatically adjusts the braking force balance between the front and rear wheels. Thus, there was a series of developments in suspension systems in the early 1980s that related directly to the rapid progress made in electronics technology.


Once the trend toward FF cars had begun, it became necessary to develop new bodies to provide the roomier passenger cabins allowed by the FF configuration. For improved fuel economy as well, the body had to be made lighter and the coefficient of air resistance had to be reduced. At the same time, the body had to be sufficiently rigid to provide better operating stability and quietness. In response to these various demands, efforts were made to improve the technology related to developing bodies. In 1983, Toyota developed a three-dimensional traverse device employing a computer to measure and process automatically the data acquired in laboratory tests concerning wind velocity, wind direction and pressure against car bodies, as well as a system that evaluated the aerodynamic performance of car designs still on the drawing board. Advances were also made in designs for increasing body rigidity and in the use of sandwich-type vibration-reducing panels for minimizing vibration and noise.

Toyota's body design efforts were bolstered by a computer-aided design (CAD) system for styling put into operation in late 1981. This system enabled designers to speed up considerably the steps between the drafting stages and molding processes. The conformation data created on the CAD system's screen were supplied to a numerically controlled machine that quickly fabricated a clay model. The personnel and time saved by this CAD system enabled Toyota's designers to attend more to raising design quality. As a result, Toyota's design capabilities improved rapidly and were put to good use in the development of new models and full model changes.

Toyota also began using advanced technology to develop new types of passenger cars. In February 1981, for example, Toyota marketed the Soarer, a passenger car developed by drawing together the company's most advanced technology. With a


2759-cc 170-hp high-performance engine, an electric display meter, a microprocessor-controlled automatic air conditioner and other new mechanisms, the Soarer gained wide acceptance among drivers as the consummate high-class specially car, and it also received the Car of the Year Award for 1981 from Japan's Car Graphic magazine. It proved popular not only among young people but over a wide range of other drivers, and its broad appeal contributed toward improving Toyota's high-technology image.

Concurrent with these developments, Toyota also began benefiting from an engineering campaign related to a new generation of engines it was developing called the Lightweight Advanced Super Response Engine (LASRE).

In June 1984, Toyota launched the MR2, a mid-ship, two-seater with the driving performance of a sports car. The MR2 achieved early success and received the Car Graphic Car of the Year Award for 1984.

Next, in January 1986, the Soarer underwent a model change, bringing it to a higher level of perfection. It was mounted with the most powerful engine of all Japanese passenger cars, a 2954-cc 230-hp engine, and incorporated a total of 101 technological and mechanical improvements.

In February of the same year, Toyota marketed the Supra, developed as a high-performance specialty car. The Supra's four-wheel, double-wishbone suspension system, in particular, had a high degree of flexibility in design and setting, thus providing an improved handling performance. Development of the Supra owed a great deal to the CAD system Toyota had created especially for chassis design in 1979. That system was a powerful tool for studying all aspects from the Supra's basic layout to a simulation of the action of the suspension system. Toyota ran the Supra through numerous road tests not only on its test course at the Higashifuji Technical Center but also at overseas locations.


In those ways, the results of efforts in research and development were directly tied to new product development. During the same period, cooperation between the research and development and production departments was also bolstered. About 18 months before marketing the new Soarer and Supra, for instance, a project team was formed, including team leaders and group leaders in the plants, to prepare for the production changeover. In addition, the engineering departments asked team members from the plants to participate from the prototype stage in developing the new models. Issues they studied together included the use of robots, how to raise the efficiency of work operations and other production-related matters. Such interdepartmental cooperation helped make it possible to build high product quality into the Supra and new Soarer.

Besides its passenger cars, Toyota also moved to strengthen its product line of trucks. Based on the feedback from its dealers and customers, special emphasis was placed in four areas: improving basic performance, filling out the model line, introducing innovative and functional styling, and moving energetically to utilize new technology. Among the results of those efforts were full model changes introduced in the Dyna, Toyoace and Hiace trucks.

In the truck market, meanwhile, consumers had shown a strong tendency toward choosing a model whose specifications precisely matched their needs; the key to increased sales gradually came to be the development and production of trucks on a custom-order basis. In response to that trend, Toyota strengthened its production system by integrating it in its entirely from chassis production to custom finishing; this integration covered the original orders, production instructions and production control. It permitted the design of processes and a system of parts procurement best suited to producing single trucks on order.


With the new system, it was possible to reduce the delivery time for trucks from 18 to 12 days. This contributed to the boosting of truck sales, which in turn brought about improved dealer profitability.

Because of the good sales of new passenger car and truck models, Toyota's market share increased gradually until its share of the domestic passenger car market (excluding minicars) for the month of October 1986 amounted to 53.2%. Although the market share for the year ended at 46%, the increase in the sales of Toyota vehicles led to an improvement in dealer profits and definitely strengthened Toyota's domestic sales position.

New Level of Production Technology

The appropriate use of new technology became increasingly important throughout the automobile industry. Responding to the need to supply products that satisfy customer preferences and meet driving conditions in many countries around the world, Toyota's production departments continued to build better products at more reasonable prices at the right time. It had become vital for TMC to increase the variety of models and their specifications, resulting in small-lot production of a large number of models in many variations. Today, dramatic changes can suddenly occur in all markets and in customer preferences, and the key to succeeding against the competition depends on how quickly a company can respond to changes in demand by switching over smoothly to new products.

Thus far, Toyota has built a production organization dependent on establishing and operating the Toyota Production System, with the idea of producing only the products required in the volumes required. Also, in order to avoid any drastic fluctuations in the overall operation of its plants related to shifts in demand, Toyota's policy has been to produce the same car model


simultaneously at two or three plants and to produce a number of different models on the same line. Since 1982, Toyota has moved anew to emphasize the fundamentals of the Toyota Production System and to tackle the problem of building a system that responds flexibly to increased diversification in car models and to changes in demand.

For processes like stamping and molding, where the parts are produced in lots, steps were taken to reduce production lead-time by tackling problems related to shortening the setup time and promoting small-lot production further. In the case of processes such as painting that use large facilities, innovations were introduced, including the development of simple paint booths, which made per-unit processing possible. A computer information network was also developed that allowed on-line processing of information, all the way from the receipt of orders from dealers to production and delivery.

Toyota's production engineering departments, meanwhile, tackled problems related to factory automation. In machining processes, Toyota began in 1981 to increase flexibility on its production lines in such ways as introducing numerically controlled machine tools, developing jigs and conveyors to make mixed production possible and devising technology for the automatic exchange of axle heads. In the engine machining and assembly processes, Toyota developed lines capable of freely assembling several types of engine simultaneously and converting smoothly to assembling wholly new engines.

Toyota also developed new body production lines. Beginning in 1985 at its Tsutsumi Plant, Toyota has gradually introduced "flexible body lines" at its plants, including the TMM plant in Kentucky. The principal feature of these lines is that the jigs conventionally used to hold the body units in a fixed position are replaced by pallets, which signal instructions to robots on the line


with regard to where to weld or make the other connections for each model. This feature has made the operations more versatile.

Since each line can handle mixed production, the time needed for switching to new models was shortened considerably. Toyota has taken its production engineering technology beyond the stage of working with specialist manufacturers for jointly developing production equipment that operates efficiently within the Toyota Production System; it has entered the stage where it is capable of efficiently producing equipment on its own that includes up-to-date mass production technology to respond to the age of factory automation.

In February 1986, Toyota completed construction of its Teiho Plant, which specializes in machine tool production. This new plant reflects Toyota's efforts to bring together the activities of its tool and die manufacturing departments, which were formerly distributed among the Honsha Plant and four others; the new plant also increased the capability to respond to new products and preparations for overseas production and emphasized in-house production of equipment using the latest in mechatronic technology. In the diecasting departments, Toyota introduced state-of-the-art equipment such as CAD/computer-aided manufacturing (CAM) systems and high-precision numerically controlled lathes to raise the efficiency of producing dies. It has thereby put into order a system for producing high-quality products at lower cost and in a time-efficient manner.

Joint-Venture Production with GM

Various political and economic developments on the world scene forced Toyota to give high priority to the creation of overseas production capabilities. It was becoming apparent that without such regional operations, it would be impossible to carry out the basic company policy of supplying vehicles of high quality at


reasonable prices and in a timely fashion.

In 1981, the voluntary restrictions on Japanese automobile exports to the United States were initiated. In response to those supply limitations, Japan's automakers began moves toward establishing plants in the United States.

For Toyota, setting up production facilities in the United States became a matter of the utmost urgency, since it was realized within the company that if it failed to maintain a punctual and stable supply of products to the American market, its dealers would suffer and many customers would be lost. However, from the results of feasibility studies carried out on its behalf by one Japanese and two American research organizations regarding such overseas expansion, Toyota had already learned in April 1980 that the outlook was not wholly favorable. Specifically, the studies indicated that Toyota would have to make considerable efforts to establish a system for achieving high quality, high productivity and favorable labor relations.

In June 1980, Toyota proposed a joint-production venture with Ford as a way to implement local production in the United States. Negotiations between the two companies continued for a year, but because Ford was moving forward with a plan of its own to develop small cars, the two companies could not agree on a model to produce jointly. The talks ended without agreement.

Meanwhile, a visit by Chairman Seisi Kato of TMS to GM set the stage for a meeting in March 1982 between President Eiji Toyoda of TMC and Chairman Roger B. Smith of GM. At that meeting, Chairman Smith presented a joint-production proposal. Although GM was already vigorously promoting its own small-car strategy, it knew that success would require not only capital investment but also an overhauling of its parts procurement and production systems, and this stimulated GM to re-evaluate the production systems of Japan's automakers. Although Isuzu


Motors Ltd. and Suzuki Motor Co., Ltd. were already supplying GM with small cars, GM's proposal aimed at absorbing additional knowledge and experience through joint production with Toyota, while at the same time responding to the demand for small cars.

From Toyota's perspective, joint production with GM would reduce the risk related to local production and would let Toyota accumulate experience in local production in the United States. Once back in Japan, President Toyoda immediately organized an in-house project team, and in April this team met representatives from GM at Toyota's Head Office and began working-level negotiations.

At a relatively early stage in the negotiations, the two sides reached basic agreement on an annual production volume of 200,000 units of a passenger car based on the FF Sprinter. Also, from a list GM prepared of possible production sites, the recently closed GM plant in Fremont, California was chosen.

During this stage of the negotiations, there was still some concern in Toyota about matters related to labor relations and the venture's profitability. Against this backdrop, Vice Chairman Shigenobu Yamamoto and Senior Managing Director Masami Iwasaki visited GM in December 1982 to confirm the enthusiasm within GM toward Chairman Smith's proposal. That visit led to a final consensus in Toyota in favor of the project. Not long afterward, former United States Secretary of Labor William Usery was appointed as a special adviser on labor problems for the joint venture, and discussions then began with the United Auto Workers (UAW). Meanwhile, as a result of great efforts by everyone involved, it became possible to resolve problems related to making the joint venture profitable.

On February 15, 1983, GM and Toyota announced they had reached a basic agreement on establishing a joint venture for producing small cars in the United States. The main points of the


agreement between the two companies were as follows:

  1. The objective is to establish a joint-venture company to produce a small passenger car, and it is not intended to establish any other form of cooperative relationship.
  2. The equity ratio for ownership of the new company will be 50% Toyota and 50% GM.
  3. The board of directors of the new company will be made up of equal numbers of representatives from each of the partners, and the company's president, who will be the chief executive officer, will be selected by Toyota.
  4. Production will be carried out at the Fremont Plant, previously operated by GM, and the small passenger car produced will be a new front-wheel-drive model.
  5. Production will begin as early as possible in the 1985 model year, and annual production will be approximately 200,000 cars.
  6. The joint venture will terminate not later than 12 years after the start of production.

In the context of the voluntary restrictions in effect on exports of Japanese passenger cars to the United States, there was some concern in Toyota that its American dealers might be demoralized by the idea of cars jointly produced by Toyota and GM being supplied to the latter. After signing the Memorandum of Understanding on the basic agreement on February 17, 1983 in San Francisco, however, Chairman Eiji Toyoda visited the head office of TMS, U.S.A. and spoke there to a group of dealer representatives. He won their understanding by explaining Toyota's position vis-à-vis the joint venture and emphasizing Toyota's relationship with the dealers. "The purpose of the joint venture with GM," he said, "is to protect free trade, and our agreement is not intended as a slight to any of our Toyota dealers here in the United States. Also, there is the possibility that Toyota-brand cars


will be produced at the Fremont Plant."

Immediately after the signing of the Memorandum of Understanding, Toyota established a Fremont Project Committee. The committee included several subcommittees, covering areas such as engineering, procurement, production and logistics. They exhaustively studied all aspects of the venture and pulled together Toyota's total capabilities to complete preparations for the project in a short period of time.

Toyota knew that in order to introduce the Toyota Production System and thereby realize a high level of productivity, it was important to establish stable labor relations. Talks with the UAW proceeded, and basic agreement was reached in September 1983 on several important points, including the establishment of mutual trust between labor and management, the resolving of problems through discussion, simplification of job classifications to promote the versatility of workers and ease of job rotation, and a degree of labor-management cooperation that would make it possible to bring about efficient production.

In February 1984, GM and Toyota signed a contract concerning the operation of the joint venture. That occasion marked the official start of New United Motor Manufacturing, Inc. (NUMMI), capitalized at 200 million dollars. The United States Federal Trade Commission (FTC), as a reflection of the great impact the joint venture between these two corporations would have on competition in the market, completed an intensive study of the venture it had begun in April 1983 in relation to American antitrust laws; in April 1984, the FTC granted NUMMI its official approval. In April 1985, a settlement was reached with Chrysler concerning its antitrust suit opposing the joint venture, and NUMMI was finally able to get off to a smooth start.

NUMMI began building its shops and preparing for


production. The former GM plant in Fremont did not include a stamping shop, and NUMMI followed the Toyota approach by constructing a stamping shop next to the assembly shop. Although existing structures were used for the body, paint and assembly shops, a great deal of old equipment was replaced. For the body line, NUMMI used Toyota's standard line, where two lines carry the body components up to assembly of the main body, thus providing leeway in production capacity. Also, in order to avoid an entire line halting when a problem occurred in a particular process, the painting and assembly lines, which had been single long lines, were broken into shorter segments.

In setting up the lines, there was some concern at first that the use of Toyota's system of line-stop switches might lower the operating rate, but it was finally decided that the switches were necessary to ensure quality and job control. Like Toyota, NUMMI allowed its line personnel to decide when to stop the line, and it used the same system of andon boards to indicate at a glance when and where problems were occurring.

Innovations were also introduced into the parts supply and logistics systems. A container vanning center was set up near the Kamigo Plant so that large quantities of parts could be transported in containers, and the wooden crates that had previously been used were replaced by modularized steel pallets. Because the steel pallets could be transported directly to the assembly lines, both the logistic flow inside NUMMI and the line operations became more efficient. In December 1984, moreover, a dedicated computer system was developed so as to increase the efficiency of all operations from the receipt of orders to loading aboard ship.

For the logistics concerning procurements in the United States, arrangements were made to have parts collected regularly in Detroit. The parts were then transported long-distance in


mixed shipments from Chicago.

As soon as NUMMI started its all-out production activities, however, it found itself having to resolve a wide spectrum of problems. They ranged from local parts procurement to quality assurance and after-sales servicing. There was also the question of how to handle technical information, such as handing over blueprints. To achieve the same or a higher level of product quality, Toyota felt it was essential to use its own blueprints, parts numbering system and general standards. After much discussion with GM, it was agreed that this would be done. In addition to problems involving the immense volume of technical information that had to be translated into English, it was also necessary to hold explanatory meetings with parts makers and publish various types of operation manuals, all as part of the untiring effort to facilitate a proper understanding of the Toyota approach.

NUMMI received GM's help in evaluating how well the local parts suppliers could meet NUMMI's requirements in terms of technical capabilities, product quality, cost and delivery time. In response to these moves, the American glass manufacturer Libbey-Owens Ford Co. reopened its automobile glass division plant near Fremont, and Hoover Universal, Inc., which is now a subsidiary of Johnson Controls Inc., built a plant near Fremont to produce parts such as seats that were inefficient to transport. Toyota's Kanban System was used by some parts suppliers, and a daily delivery system suited to NUMMI's production was adopted. In addition, Maruyasu Industries Co., Ltd., a Toyota supplier in Japan, established a joint venture with Curtis Products Corp., an American company, to supply brake pipes to NUMMI, and Japan's Hayashi Telemp Co. Ltd. formed a joint venture with C.H. Masland & Sons to produce and supply carpeting.

In these ways, the local receiving system was put into


order, the cost and quality of parts procured locally improved rapidly and a relationship of mutual trust with the suppliers was established.

Concurrent with NUMMI's plant construction and production setup efforts, the new company's internal organization was strengthened and hiring began. After hiring its staff, NUMMI began in April 1984 to select the group leaders and team leaders, destined to be the "core" staff supporting its production activities. These personnel went to the Takaoka Plant for on-the-job training to learn how Toyota carried out its production activities and worksite management.

The first group of 25 trainees arrived in Toyota City in June 1984. At first, they were given general background courses on such aspects as Toyota's history, corporate policies, production philosophy, quality control circle activities and teamwork concept. Next, they spent about two weeks at the Takaoka Plant, receiving on-the-job training in various processes. Managing Director Tatsuro Toyoda, the man who became NUMMI's president, visited the Takaoka Plant to meet each of the trainees personally and encourage them to keep up their good work.

Toyota continued to receive groups of NUMMI trainees until February 1985. NUMMI sent a total of nine groups of group leaders and team leaders, comprising 257 trainees in all.

From about September 1984, NUMMI began intensive efforts to hire employees, and the number of support personnel sent from TMC to help prepare for the production start-up increased quickly. All production preparations were completed in November, and the first Chevrolet Nova to be supplied to GM rolled off the line on December 10.

In April 1985, NUMMI held its official opening ceremony, attended by GM Chairman Roger Smith, Toyota Chairman Eiji Toyoda, a number of federal government and California state


officials, UAW representatives and many other guests. At the ceremony, NUMMI President Tatsuro Toyoda spoke as follows:

Principally as a result of the efforts of the team members of NUMMI and the people in so many related companies who have cooperated in this project, we have built here in Fremont a first-class assembly plant. Thanks to our cooperative parts suppliers and our 1,200 employees, we are now producing cars of world-class quality. Our slogan at NUMMI this year is "Quality assurance through teamwork." People working together means teamwork, and I believe it is teamwork that will be the key to our success.

In starting up the company, the emphasis on teamwork and on mutual trust between labor and management was put into practice at every opportunity, from an "open office" floor plan to the use of a single cafeteria for all employees, including the president, and common parking facilities for everyone. The labor union was informed beforehand of managerial decisions such as organizational reforms or personnel shifts, and the president personally announced company policy to an assembly of all employees at the start of the year. Efforts were made to promote mutual understanding through frequent labor-management discussions. Mutual trust between labor and management was also promoted by having President Tatsuro Toyoda and other members of the top management attend the presentations made by trainees returning from Japan and participate in discussions. A team system, comprising teams of about six members, was introduced and took root, and the team leaders provided personal advice and assistance to team members. During the first year of operations, employee attendance reached 97%. With teams as the basic unit, employees have also been enthusiastic about introducing work improvements through a suggestion system.


NUMMI received an award at the International Labor Organization conference held in Turin, Italy in October 1986 for being a model of mutual trust in labor-management relations.

The Nova was initially marketed in June 1985 through GM's Chevrolet channel in 25 of the central states in the United States. By the end of 1985, NUMMI had 2,500 employees, as originally planned. In September 1986, production began of the Corolla FX, a model which was destined for sale through the Toyota dealer network in the United States. In September 1988, Corolla FX production was switched to production of the Corolla sedan.

Independent Production in North America

In February 1985, Toyota organized a team in its Overseas Project Office for studying the possibilities of independently starting production in North America. The study group's aim was to make an in-depth review of the feasibility and long-term potential of conducting operations in North America, covering everything from production to sales. Toyota executives subsequently took every opportunity to study questions such as the positioning of the operations within the company's overall strategy, timing, methodology and scale of operations. On July 23, 1985, Toyota held a special board meeting and afterward formally announced the company's decision to build plants in the United States and Canada.

The announcement described Toyota's plan to build a plant in the United States to produce about 200,000 passenger cars per year with 2000-cc engines, starting in mid-1988, and to build a plant in Canada to produce about 50,000 passenger cars per year with 1600-cc engines. In August 1985, Toyota prepared to implement this plan by establishing a North America Project Committee, headed by Executive Vice President Gentaro Tsuji and made up of directors in charge of related operations. In October, Toyota


also set up a North America Projects Office to make the necessary arrangements.

Soon after announcing its intention to build plants in the United States and Canada, Toyota received site proposals from many regions. After considering all the factors, including the procurement of parts, the convenience of transportation, land prices, electricity supplies, labor resources, and tax and other preferential treatment from the various states and provinces, Toyota announced in December 1985 that it would build its American plant in Georgetown, Kentucky and its Canadian plant in Cambridge, Ontario.

Chairman Eiji Toyoda and President Shoichiro Toyoda held a press conference in Kentucky, where President Toyoda spoke as follows to over 200 reporters about the decision to locate its American plant in that state:

We view today's official announcement of our plant site selection as one of the highlights in our company's history, which began in 1935 with the production of the first trial Toyota passenger car. In fact, choosing the site for our American plant was one of the most difficult decisions we've ever had to make at Toyota. After considering all of the factors involved, however, we decided that Kentucky is the best location for our American plant. At the same time, we wish to thank all the other states that presented site proposals. More than 25 years have passed since we started our exports to the United States, and since then we have moved steadily forward toward realizing our dream of building a perfect partnership with our American friends. As we continue to move into the future, we intend not only to contribute toward creating more job opportunities and promoting economic growth, but also to try and build a new relationship that will serve everyone's needs.


The Governor of Kentucky and other state officials also spoke at the press conference and gave Toyota an enthusiastic welcome.

The North America Project Committee turned immediately to finalizing plant construction plans, production setup schedules and other preliminary measures.

In January 1986, Toyota established Toyota Motor Manufacturing U.S.A., Inc. (TMM) and Toyota Motor Manufacturing Canada Inc. (TMMC). Executive Vice President Kaneyoshi Kusunoki, who had overseen production departments and the North America Projects Office, was appointed president of both TMM and TMMC. After studying local tax systems and future operating methods, Toyota decided to establish TMM as 80% owned by TMS, U.S.A. and 20% owned by Toyota; TMS, U.S.A.'s share constituted a reinvestment in the United States of profits it had earned there. Toyota decided to make TMMC a wholly owned subsidiary.

In March 1986, Toyota set up branch offices in Lexington and Toronto, the largest cities near the plant sites, so that representatives posted there could negotiate with state or provincial and municipal authorities, employ local workers and arrange for housing for expatriate Japanese employees and their families. These offices also worked in conjunction with Toyota's North America Projects Office and other related departments in Japan on specifications, the system for evaluating cars produced locally, the procurement system for parts and materials, and the training program for employees. Toyota's experience at NUMMI proved especially helpful. In developing an information system for the new plants, for example, Toyota modified the daily order system formulated for NUMMI so that it could include information support for TMS, U.S.A. and Toyota Canada and thus take further advantage of producing cars locally.

Groundbreaking ceremonies for the two plants were held


in the United States and Canada in May 1986. Chairman Eiji Toyoda and President Shoichiro Toyoda attended both ceremonies; they were joined in Georgetown by Kentucky Governor Martha L. Collins and in Cambridge by Ontario Premier David Peterson.

The construction plan for the TMM plant in Kentucky called for total investments of 800 million dollars, employment of about 3,000 people and a 1,300-acre (approximately 5,200,000 m2) land parcel on which would be built a passenger car assembly plant large enough to produce 200,000 units a year, plus various related facilities. The TMMC plant in Ontario required total investments of 400 million Canadian dollars, employment of about 1,000 people and a 380-acre (approximately 1,500,000 m) piece of land for a passenger car assembly plant able to produce 50,000 units a year. Before TMM could start any construction work in Kentucky, it needed an environmental impact authorization from the state's environment agency, and this was granted in July.

In this way, after many years of study and planning, Toyota's long-standing ambition to produce passenger cars on its own in North America was finally achieved. Work on erecting the steel frames for the Kentucky plant began immediately, and by early 1987 the general outline of the buildings had taken shape. The procurement and testing of the equipment needed for processes related to stamping, body fitting, molding, painting and assembly also began. Back in Toyota City, particularly at the Tsutsumi Plant, which was designated the support plant in Japan for the TMM Plant, employees were making the most of the NUMMI experience in carefully preparing the equipment and parts supply system and the information system that would be used to support the new overseas plant. With cooperation from the Kentucky state government, the hiring of management personnel and regular employees progressed smoothly. Vice President


Alex M. Warren Jr. was among the first to be hired. Training in the Tsutsumi Plant and the preparing of training courses and reference materials for the TMM trainees also progressed smoothly.

Although various unexpected problems occurred during construction of the TMM Plant, each was tackled with enthusiasm and eventually resolved. One such matter concerned a construction union affiliated with the American Federation of Labor and Congress of Industrial Organization (AFL-CIO). The union had initially requested preferential hiring of its members in building the TMM Plant. However, in December 1986 the union and Ohbayashi Corp., the construction contractor, reached an agreement whereby Ohbayashi declared it would be impartial in its hiring by giving equal opportunity to local union members.

Another problem concerned the constitutionality of incentives, such as subsidizing education and training, constructing access highways and providing land, which the Kentucky state government had promised Toyota. It was resolved in June 1987 when Kentucky's supreme court ruled the incentives to be constitutional according to state law. A third problem concerned the legitimacy of Kentucky's granting of favorable taxation zone (FTZ) status to the TMM plant. After holding a special public hearing on the matter, the matter was resolved when the FTZ Council issued an authorization order in December 1987.

Even as it moved to resolve those problems, TMM also moved energetically to participate in various local activities. For example, it contributed 1 million dollars to renovate a historic monastery into a local community center, and it also offered to establish a 20-year program in which TMM would contribute 400,000 dollars each year to schools in Scott County, where the plant is located. Such efforts are a reflection of TMM's intention to become a "good corporate citizen" in the local community.

In planning for the procurement of parts and materials for TMM, Toyota's policy emphasized long-term supplier


relationships. It began in the spring of 1986 to distribute design drawings and samples to some 200 local suppliers and asked for estimates. In selecting suppliers, Toyota gave preference to local manufacturers, based primarily on their ability to provide technical adaptability, product quality, low cost and prompt delivery according to Toyota's specifications. At the same time, Toyota built a purchasing system that suited local business practices. In November 1987, TMM held a meeting with the suppliers it had selected. At this meeting, top management from Toyota and the suppliers agreed to aim for long-term, stable business relationships based on mutual trust.

In November 1987, Toyota announced its plan to build a powertrain plant at the TMM site, which meant a further investment of some 300 million dollars and the creation of 500 additional jobs. By then, TMM had almost completed its preparations for producing the Camry, including construction of the stamping, body and molding assembly shops and employee training. As part of the second stage of preparations, the percentage of local procurement was to be raised further.

During this period, Toyota worked jointly with the local parts suppliers to resolve problem areas and improve product quality. To raise the local content percentage, moreover, Toyota decided to purchase locally not only ordinary steel but also rustproof and high-tensile plate steel sheet.

Production preparations continued smoothly at TMM, and in May 1988 the company celebrated the occasion of the first quality-approved car to roll off its line. At a meeting held with all the employees on this occasion, a pledge was made for closer unity under the slogan "Quality today, success tomorrow," which was chosen from many sent in by TMM employees. For TMM, this occasion was a solid step toward setting the goal of achieving the world's foremost quality assurance and productivity.


At TMMC, meanwhile, steel girder frames were erected as soon as the snow began to thaw in the spring of 1987, and the site quickly took shape as an automobile plant. One of the principal reasons for deciding to build the Canadian plant in Cambridge, Ontario was the particularly enthusiastic invitation Toyota had received there. The invitation had been tied in with efforts made by the local authorities to promote industry in the area as a measure toward overcoming the stagnant local economy and inflation. As it turned out, there were no problems whatsoever related to the plant's construction, and the local authorities even exceeded Toyota's expectations by actively cooperating in building access roads to the plant. A notable feature of the plant is that the road along the front is lined with cherry trees, and it is thus named "Cherry Blossom Road." For its part, Toyota responded to the warm reception of the local people by announcing a plan to donate 600,000 Canadian dollars to the city of Cambridge. TMMC, in turn, pledged 200,000 Canadian dollars to expand facilities at the Cambridge Memorial Hospital.

Plant construction at TMMC moved forward according to schedule. All the buildings were completed by the end of 1987, and then the installation of machinery and equipment began. Local procurement related to the buildings, machinery and equipment amounted to 80% of total purchases. Because of the severe winter weather in Cambridge, all machinery and equipment was kept indoors. Also, because TMMC's annual production capacity was a moderate 50,000 units, special consideration was made in a number of areas, such as providing the most appropriate level of automation and introducing a flexible body line for body-related processes in order to achieve greater production flexibility. TMMC, however, spared no expense for equipment related to processes that influenced product quality. For example, the world's top-level facilities were used for paint


processes to assure outstanding product quality.

In October 1986, TMMC hired its first Canadian, Vice President William J. Easdale. The hiring of staff then began in earnest, with people being brought in to head manufacturing, quality control and other departments. When TMMC began hiring general employees, there were 15 times as many applicants as there were jobs, despite the tight employment situation. TMMC was thus able to hire particularly highly qualified people. Training of TMMC personnel at the Takaoka Plant progressed well. At the same time, TMMC moved ahead to be ready for starting production by tackling vigorously many tasks in areas such as parts and materials procurement, production control and logistics.

During this period, TMS, U.S.A. faced difficulties because of the third major upward thrust since the autumn of 1980 in the yen's value against the dollar and also because of the start in April 1981 of Japan's voluntary restrictions on passenger car exports.

Although a drop in demand because of price increases related to the yen's appreciation seemed to alleviate temporarily the shortage of Toyota vehicles in the United States, a rapid rise in gasoline prices from early 1981 led to another sales boom for small cars. The voluntary restrictions, however, prevented an increase in export shipments, and a chronic shortage of vehicles resulted.

TMS, U.S.A. responded to the situation with a policy of rapid inventory turnover to promote sales in the context of a shortage of products. Using the opportunity of Motor Trend magazine's presentation of its 1982 Import Car of the Year award to the new Celica Supra, the marketing staff began to stress further the quality appeal of Toyota products and emphasized selling points centered on their high performance and high product quality.


Besides its ongoing moves to establish a network of regional offices, TMS, U.S.A. worked to provide broad support for its operations by establishing Vehicles Processors, Inc., a distribution company, in July 1981 and Toyota Motor Credit Corporation, a finance subsidiary, in October. As a final step in expanding various facilities, TMS, U.S.A. completed a new head office complex in Torrance, California on November 23, 1982. A gala opening ceremony was held to commemorate the event and was attended by Chairman Eiji Toyoda, President Shoichiro Toyoda and Senior Adviser Seisi Kato.

Honda, meanwhile, had begun producing passenger cars in Ohio in 1982. It operated its plant there at full capacity, thereby adding the production volume from that plant to the cars it was exporting to the United States from Japan and increasing the overall number of its vehicles being sold in the American market. The Big Three began earning good profits again as business conditions improved, and they quickly started developing new models as they made efforts to improve their product quality and productivity. The competitive situation became extremely severe for Toyota.

Toyota sales for 1982 in the United States were 667,000 units, only 94% of 1981 sales. In light of this situation, Toyota appointed Managing Director Yukiyasu Togo as the new president of TMS, U.S.A. as of October 1983. Robert B. McCurry, who had a noteworthy record of achievement in the Los Angeles region, was brought in as senior vice president to assist the new president in overcoming the company's difficult situation.

In 1984, Japan's voluntary restrictions on car exports, meanwhile, were entering their fourth year, and although the overall export ceiling had been raised to 1.85 million cars, it was still a seller's market in the United States. Toyota was concerned that problems might emerge about how its customers were being


treated and felt that a negative trend would damage its long-term competitiveness. It was under these circumstances that Toyota introduced the Toyota Touch Program to promote a customer-first policy in order to achieve even higher levels of customer satisfaction. TMS, U.S.A. established a Customer Relations Department and introduced specific measures based on an evaluation of the results of questionnaires returned by customers and the results of a dealer performance survey, which had been conducted by a specialist research organization on behalf of the company. It also provided dealers with videotapes and other tools for training their salespeople and carried out a campaign for raising the overall level of customer services.

In the passenger car market, all-out efforts to promote the FF Camry in the United States after it was introduced in March 1983 succeeded in raising it to the status of a core vehicle alongside the Corolla. The MR2, meanwhile, launched in November 1984, got off to an excellent start and it received Motor Trend magazine's Import Car of the Year award for 1985. Other models introduced around this time to respond to diversified customer demands included a Supra with a detachable roof, a Camry station wagon sold only overseas, a two-door Tercel Coupe built exclusively for export and a specially priced Tercel.

TMS, U.S.A. moved more actively than before to expand sales by adding more dealers to its dealer network and increasing the number of dealers exclusively selling Toyota products. TMS, U.S.A. had bought out the private distributor New England Toyota Distributors, Inc. in March 1978 and opened the Boston Region Office to handle business in the area. That office was successful in bringing business back in line and sales on the east coast expanded greatly.

In October 1985, as local production by Japanese automakers in the United States took firm hold, Toyota recognized the new type of competitive situation that was developing and


invited its American dealers and their spouses (over 3,000 people in all) to a National Dealer Meeting in Tokyo. There, Toyota told the dealers again about its plans for building plants in North America. The theme of the meeting was "Team Toyota," and all the participants pledged to work jointly with Toyota to make even stronger efforts to expand sales.

In 1986, efforts by those dealers resulted in sales of over 380,000 commercial vehicles, mainly pickup trucks, thereby achieving the number one import position in commercial vehicle sales for three consecutive years. The total number of Toyota cars and trucks sold annually in the United States, excluding Hawaii, rose from 718,000 units in 1983 to 811,000 units in 1984. Because the ceiling on Japan's voluntary export restrictions was raised to 2.3 million cars in 1985, total sales were 937,000 units in 1985. Then, in 1986, total sales topped 1 million units, making Toyota the first importer to break that mark.

Once into 1986, however, the elation at having sold 1 million units was brief. The yen, which had begun moving upward in 1985, began appreciating rapidly. By April, the dollar, which had stood at 245 yen six months earlier, had dropped to 166 yen; even after this, the yen continued to accelerate upward. As a result, Toyota was forced to make four large price increases in its products during 1986. The negative influence of the yen's appreciation was especially serious on pickup trucks, which were at the top of their market segment. Overall sales of Toyota vehicles in the United States dropped to about 922,000 units in 1987, 90% of the previous year's sales.

In addition to the influence of the appreciated yen, competition intensified in the low-priced car market, especially after Korean automakers began entering the American market. American automakers, meanwhile, ran campaigns offering low interest rates on car financing and large cash incentives. Major changes thus began to occur in the overall market.


In this rapidly changing sales environment, TMS, U.S.A. launched all-out efforts to expand its sales, with special emphasis on the Camry and Corolla, the two models that Toyota would be producing in North America. At the same time, it proceeded to bolster its personnel and organization. In June 1988, McCurry was promoted to executive vice president, thus becoming the first American member of the TMS, U.S.A. board of directors. Because close ties with Toyota had become more important than ever, TMS, U.S.A. took every opportunity to have Toyota's top executives meet with representatives of the most influential American distributors and dealers to discuss the situation in the United States and exchange opinions on future policies.

In these various ways, TMS, U.S.A. achieved a closer understanding between itself, the distributors and dealers. The company was able to explain the future outlook as it related to increased supplies after domestic car production began, and it asked the distributors and dealers to make the investments needed to prepare for this increased supply. All across the country, Toyota dealers replied by investing 400 million dollars between 1985 and 1988 in new or renovated facilities and moving energetically to introduce measures for heightening customer satisfaction.

The Longo Toyota dealership in Los Angeles, for example, was sold to Roger Penske in November 1985. Until then, the dealership had been owned by Dominic Longo, who had won the confidence of his customers over a period of many years. Penske, an entrepreneur who had been involved in a wide range of activities, including car sales, transport and motor sports, orchestrated further customer-oriented efforts. As a result, Longo Toyota in 1987 had total sales of 19,000 units, making it the largest singlepoint dealer in the United States. A little over two years later, in January 1988, Penske redeveloped an old shopping area and built a huge 21-acre (85,000 m2) sales outlet that allowed the display of


2,300 vehicles.

In August 1987, Toyota decided to establish a second sales channel in the United States. To be called Lexus, the new channel would sell luxury cars developed using all the technical capabilities accumulated by Toyota in its 50 years of experience. With a V-8, 4,000-cc engine, the new upper-end model would be aimed at boosting Toyota's image and responding to the market trend toward luxury cars. TMS, U.S.A. set up a new division to handle the Lexus channel and began preparations to market its new models with a first-phase goal of establishing 100 dealers by mid-1989.

Honda and Nissan also established second sales channels, Honda its Acura channel and Nissan its Infiniti channel, and the competition to be the top importer thus intensified.

Toyota Canada, meanwhile, in the context of Toyota's decision to build a plant in Canada, and in order to respond to a future increased supply of vehicles in North America, altered its sales policy from the passive stance it had adopted since 1981. This stand had been necessary because of import restrictions; it was changed to an active policy that included improving and expanding the ability to handle volume sales. In 1985, for example, Toyota Canada formulated a five-year plan and made moves to establish new dealers and help existing ones strengthen themselves further. As a result, membership in Canada's President's Club of dealers, those selling at least 1,000 Toyota vehicles a year, grew to 20 dealerships.

Toyota Canada also strengthened its advisory role by creating a model plan for improving dealer management and boosting dealer profits, and it urged dealers to reinvest their profits into bettering their facilities in order to prepare themselves to handle volume sales. As a result, Toyota Canada set new sales records in 1985 and has continued to do so every year since; its cumulative sales surpassed the 1-million mark in April 1988. Its sales network


was thus gradually bolstered as it prepared for production to begin at the TMMC Plant in Cambridge, Ontario.

Toyota was the first Japanese automaker to build a manufacturing plant in Canada, where it began producing high-quality, low-priced aluminum wheels. In March 1983, Toyota established Canadian Auto Parts Toyota Inc. (CAPTIN) in British Columbia. CAPTIN's plant, which began aluminum wheel production in February 1985, uses highly automated equipment and also benefits from Canada's abundant natural resources and electrical power. Although CAPTIN was troubled at first by uneven product quality because of a lack of skill in low-pressure casting methods and incomplete equipment maintenance, the company carried out a thorough analysis of the causes of the problems and introduced countermeasures to get production gradually on track. CAPTIN also devised procedures to establish a multi-process work system, introduced quality control circle activities and a suggestion system, and moved in other ways to raise productivity and ensure product quality. In April 1987, CAPTIN began construction of the facilities needed to double its production capacity in preparation for supplying Toyota's North American plants. In this way, CAPTIN was able to cover fully its cumulative deficit in 1988, demonstrating that in British Columbia, a province aiming toward industrialization, it was possible to manufacture successfully industrial products that boasted world-class quality and price competitiveness.

Strengthening European Operations

The year 1982 in Europe was a difficult one for the sales of Japanese cars. Their price competitiveness dropped as retail prices continued to rise with the yen's appreciation, and the market itself became more competitive as European automakers improved their products.


In November 1982, Toyota sponsored the first pan-European dealers meeting. The meeting was held in Monte Carlo on the occasion of the European debut of the new Camry and a 4WD Tercel. The three-day meeting, held under the slogan "Force for the future," was attended by some 1,100 representatives of distributors and dealers from 19 countries, all of whom had qualified as winners in a pan-European sales contest held under tough sales conditions.

At the meeting, President Shoichiro Toyoda made the following remarks concerning Toyota's European market strategy:

The European market holds much potential for Toyota, and it demands only the finest products. The main point in our European strategy is to bolster the attractiveness of our products, and in order to do so we have directed our utmost efforts into developing small cars that are wholly competitive.

We feel strongly that Toyota must be a leader with vision in Europe and elsewhere, and the first step in becoming a leader is to regain the number one position among Japanese automakers as early as possible, and after that to widen the gap between ourselves and others.

There is another quite important factor that should be mentioned concerning our goal and that is you, the distributors and dealers. Toyota can produce attractive, competitive products, but it is up to you to carry us into the position of undisputed leader. In short, Toyota's success in Europe becomes possible only when your thinking and our thinking are the same, when we share the same goal.

In the years after the pan-European meeting, specific measures were introduced to follow the policy outlined by President Toyoda. In line with product planning formulated from


a long-range perspective, new products incorporating new technology were later successively introduced.

In April 1983, for example, an FF Corolla was introduced in response to long-standing requests from the distributors. Next, in January 1985, an FF Starlet and a two-box Corolla were introduced. Prior to shipping the Corolla, Toyota invited representatives from its distributors to Japan for a marketing conference. Because it would be difficult for the Corolla to compete as in the past just on the basis of being more economical than other small cars, the theme at the conference was how to build an image of reliability in the small-car market for the new Corolla, based on new technology. It did in fact turn out to be difficult to carry through this policy all the way to the salespeople in contact with the customers. Even though the new product won the support of customers, it still took time for that support to become characteristic of the entire market.

In northern Europe, meanwhile, attention had been drawn to problems such as collision safety and rust perforation of auto bodies, which hampered sales.

Toyota sales in Europe remained flat in the period of 1982 to 1984, moving from 276,000 units in 1982 to 298,000 units in 1983 and 297,000 units in 1984.

In November 1984, representatives of the Toyota distributors around the world were invited to attend the Toyota World Convention held in Tokyo, described earlier in this chapter. During the regional meetings held while sailing from Yokohama to Hong Kong, the European representatives discussed the concept of a basic five-year sales plan to put an end to the stagnant sales situation of the previous few years. The discussions focused on an overall annual sales goal of 400,000 units. After the general discussion, each of the distributors then drafted five-year plans of their own and agreed among themselves to follow up on the progress


of their plans by holding two annual marketing conferences.

To support the distributors in executing their plans, comprehensive concrete steps were taken on the product side to heighten the image of Toyota products. In subsequent years, several new products were introduced in Europe: the MR2 marketed in March 1985, the Supra marketed in July 1986 and the FF Celica marketed in January 1987. All of these passenger cars were equipped with multivalve engines, had the latest aerodynamic styling, and featured dramatically upgraded interiors.

During this period, Toyota also energetically undertook a series of activities to provide motor journalists and the general public with more information on its products. For example, Executive Vice President Kiyoshi Matsumoto began holding annual technical seminars for journalists in the motor press. At the first seminar, held in July 1985 in Düsseldorf, Executive Vice President Matsumoto, whose primary responsibility for many years at Toyota was the development of engines, provided a detailed description of Toyota's high-performance engine development efforts, emission control technology, research and development organization and future trends in engine technology. His talk left a deep impression on the participants at the seminar.

In the area of promotional activities, Toyota energetically participated in motor shows, displaying its products in Paris, Geneva, Frankfurt and other European cities. It made all-out presentations there, emphasizing the high-technology appeal of its products. In addition, based on the recognition that it was important, first of all, to gain the acceptance of motor journalists, Toyota increased the number of test-drive meetings. Journalists highly rated the Supra, especially for its handling stability, after test-driving the model at its top speed of 245 kph, and it was referred to as the "Porsche Eater" and "Traveler's Car."

Although Toyota had previously focused its technological thrust on developing emission control technology and thus had


been forced for a period to curb its participation in motor sports, it began once more to participate actively in these events. For example, Ove Andersson, a professional driver who drove exclusively for Toyota, gained the backing of Toyota's European distributors and moved the head office of his Toyota Team Europe (TTE) from Brussels to Cologne in 1979. TTE had been established in 1975. After the move, his team began participating much more actively in events.

From 1983 to 1986, TTE and their Twin Cam Turbo Celicas became famous over the whole of Europe as they won all six Africa Rallies they entered as part of the World Rally Championship. This included the Safari Rally, the most grueling of all the Africa Rallies.

Concurrent with efforts to strengthen its product line, Toyota also made moves on the marketing side. After Toyota Deutschland GmbH moved to its new head office building in May 1979, for example, it experienced two years of sluggish sales in 1981 and 1982 because of the yen's rapid appreciation. Subsequently, the company recovered steadily by working closely to a fixed budget and made efforts to bolster its retained earnings and shareholders' equity. Then, in 1984, after the managerial staff was strengthened and a new president assumed office, the marketing and regional divisions were separated and reinforced with new personnel.

The Federal Republic of Germany was broken into three sales regions, and regional offices were opened in Hamburg, Cologne and Munich. Also, based on a new five-year plan, vigorous efforts were made to expand the size of the average dealership and to increase the number of dealers handling exclusively Toyota products. Moreover, in response to a shift toward high-class models, advertising campaigns were launched that emphasized the high-technology appeal of Toyota products.


Efforts were also made to strengthen the overall sales foundation of Toyota Deutschland by putting in order its distribution system and building more parts storage warehouses. These efforts proved successful, and in 1986 Toyota Deutschland was able to return Toyota for the first time in five years to the position of top Japanese automobile importer in the Federal Republic of Germany.

Thereafter, Toyota gradually became not only the leading Japanese importer, but the overall top-selling maker in some European countries: Finland was first, in 1983, followed by Denmark and Ireland in 1985, and Norway in 1987. In each of these countries, success was due primarily to the outstanding long-term leadership of the distributors as well as the steady measures taken to support the dealer network. In Norway, for example, after the distributor moved to new offices in 1982 and a new president took office, overall customer-first orientation was strengthened, and the dealers united their efforts in closer solidarity. This combination of events and activities led to the surge in sales there.

Steps also progressed to build up regions where Toyota sales were weak. These moves included the appointment of distributors in Gibraltar in February 1979 and Iceland in April 1980, and the decision was also finally made to enter the market in Spain. A distributor agreement was signed with Nipauto S.A. in August 1983. Nipauto, originally established as a subsidiary of Spain's largest port and harbor company, Berge y Cia, S.A., had previously hired industrial vehicle specialists and dramatically expanded its sales of these vehicles. After moving into automobile sales, it continued that strong impetus and within a few years was already selling 2,000 units annually.

In August 1986, Toyota ended its distributorship agreement with the Greek company Kassidopoulos S.A. and in February 1987 appointed Toyota Hellas A.E. as its distributor, a company


established under the organizational umbrella of the British Inchcape Group. Jacques Mounier, who had proved his abilities as the head of sales at N.V. International Motor Company S.A. in Belgium, was chosen as chief executive of Toyota Hellas. He made intensive efforts to improve the dealer network in Greece and thereby laid the basis for Toyota's recovery there.

Thanks to these aggressive efforts to enhance both its products and their marketing in Europe, Toyota was able to achieve gradual growth in European sales, increasing from 345,000 units in 1985 to 422,000 units in 1986 and over 440,000 units in 1987. Although this success was partly due to several favorable factors, such as a market that was brisker than ever and delays by European and American automakers in the incorporation of new emission control systems, Toyota and its European distributors were nonetheless delighted that the five-year sales target of 400,000 vehicles had been attained in just two years.

Since becoming the top Japanese auto exporter to Europe, Toyota has sought to develop its European marketing activities in a more orderly fashion and has recognized the need to make further endeavors to manufacture cars and trucks and build dealerships that are particularly suited to the tastes of European consumers.

In strengthening its overseas operations, Toyota has also taken care to proceed in a manner that is appropriate to the conditions in the host country. In Europe, for instance, Toyota has always striven toward peaceful and profitable coexistence with local automobile manufacturers.

As early as April 1980, Toyota responded to a request from the Spanish automaker SEAT for equity participation by sending a study group to explore the feasibility of knockdown passenger car production in Spain. As matters evolved, the idea did not


materialize; but, during the same month, Toyota was also approached by Lotus, the British sports car manufacturer, about the purchase of parts from Toyota. In June 1982, Toyota began supplying parts to Lotus, and in August 1983 Toyota responded to Lotus's request for Toyota to have equity participation by buying a 16.5% share in the company. When GM began buying Lotus shares in April 1986, Toyota sold its equity to GM.

In Ireland, Toyota, relieved of its obligations to conduct complete knockdown production, switched entirely from December 1983 to importing completely built-up automobiles. As a result, Salvador Caetano I.M.V.T., S.A.R.L., of Portugal became Toyota's only affiliate in Europe operating production and assembly facilities. Salvador Caetano's annual sales peaked in 1974 at 12,000 vehicles, and a sluggish market pulled annual sales down to the range of 5,000-9,000 units. Adapting to a new law concerning motor vehicle assembly in 1979, the company switched its complete knockdown production from passenger cars to commercial vehicles, successively introducing the Dyna truck, Land Cruiser, Hiace and Hilux models. As a result, Salvador Caetano sold 15,000 units in 1981 and became the top seller in the commercial vehicle market. Unfortunately, the market took another downswing in 1984 and 1985; in February 1986, therefore, Toyota sent in one of its own staff to join the Salvador Caetano management and the company adopted more aggressive policies.

In 1985, Salvador Caetano geared up for Portugal's planned entry into the EEC the following year by seeking to boost its export strength. A full-scale export project got under way with the start in January of spare muffler exports to five European countries; it continued in April with shipments of the Coaster light bus to the United Kingdom and exports to Italy and Spain of Land Cruisers equipped with engines built by Stabilimenti Meccanici VM S.p.A. of Italy.


During a visit to the Federal Republic of Germany in January 1986, Chairman Eiji Toyoda met with Volkswagen's Chairman Carl H. Hahn. Their meeting led to the birth of a cooperative production project, and in June 1987 the two companies signed a memorandum outlining an agreement for jointly producing small trucks in the Federal Republic of Germany. The agreement called for production of Hilux trucks at Volkswagen's Hanover Plant, with the trucks to be marketed through the sales networks of both companies. Toyota would contribute the required production technology and also supply parts. Plans included a target to raise the local content percentage to over 60% in 1990 and annual production volumes to 7,000-8,000 trucks in 1989 and 15,000 in 1990 and subsequent years.

Once this cooperative production project is operational, Toyota will be able to contribute to the creation of local job opportunities and supply European markets with small trucks, while Volkswagen will be able to make use of its excess production capacity and expand its product line. Both companies began preparing for the start up of production, scheduled for early 1989.

Thus, after a long and sometimes arduous journey, Toyota was again able to embark on a new local production project in Europe.

As the leading Japanese automaker in Europe, Toyota needs more than ever to organize thoroughly its marketing and strive to build vehicles more suited to European tastes, while contributing to the local community. In line with these efforts, in September 1987, Toyota established the Toyota Technical Center of Europe outside Brussels to handle type approval certification applications and other matters and to conduct such work as vehicle evaluations. In April 1988, Toyota decided to establish the long-awaited Toyota Design Center of Europe at the same location, and in June a groundbreaking ceremony was held for the new center.


Enhancing Overseas Support Activities

During the 1980s, the birth of NUMMI in a joint venture with GM, the building of Toyota manufacturing plants in the United States and Canada, and new joint production in Europe have brought Toyota's overseas activities to a new stage. Toyota has begun building new production facilities or expanding existing ones in Southeast Asia and Oceania, Latin America and the Caribbean, and Africa.

As Toyota began to establish local production facilities in various countries around the world, it came to recognize the need to operate plants that fit most closely the particular situation in each country, including the scale of production, level of industrialization and even labor practices. Internationalization opened new vistas not only for overseas operations but also for management of production technology and production. In short, for Toyota to survive, it has become essential for it to build facilities that will be able to achieve a high level of productivity in any production environment, to select appropriate equipment based on a particular understanding of each target country and its plant conditions, and to develop human resources, the people who will be capable of lending appropriate support to the operation of overseas plants.

Since 1984, Toyota has sent "improvement teams" to its various overseas plants to help raise quality and productivity. However, at plants where the production volume is low, practical restrictions on equipment investment have made it difficult to introduce a full line of equipment; this has led to gaps in quality between locally produced vehicles and completely built-up vehicles imported from Japan, particularly in welding and painting. Toyota has responded to such problems by studying the related processes firsthand, instructing local employees in improvement methods, standardizing welding procedures, changing the order


of processes (such as by painting places that are difficult to reach prior to welding), devising simple new quality inspection methods and otherwise developing expertise.

From time to time, Toyota's top executives conduct detailed policy audits with respect to overseas activities. Where they discover a problem, they move quickly to find and implement a solution. They have helped to solve such problems as how to carry out quality assurance for vehicles manufactured overseas, how to provide technical guidance with such vehicles at every stage from development to production, and how to support overseas plants in introducing new models or adopting model changes. Toyota has also established ad hoc committees to address specific problems, ranging from the elimination of incorrect or missing parts among consignments shipped from Japan to the reduction of packaging and distribution expenses.

As the scope of Toyota's overseas production continues to expand, the company's support activities have spread throughout Toyota. In the Personnel and Labor Relations Department, the existing personnel system was expanded in 1982 to include a system for registering personnel with international experience. In 1983, a training program began that included the promoting of job rotation, overseas studies and language studies as part of a new framework for developing internationally minded employees.

In the Finance Department, the search began for more advantageous and international means of raising funds. In this connection, Toyota issued convertible bonds worth 200 billion yen, carrying 1.7% annual interest as a form of low-interest fund procurement. To gain greater recognition among overseas institutional investors, Toyota has also held various information meetings in Europe and North America, and in July 1987 the company issued 800 million Eurodollar-denominated warrants as part of its efforts to procure funds internationally.

It has recently become vitally important that Toyota obtain


reliable information on the political and economic conditions around the world. In October 1983, Toyota responded to this need by establishing in Japan the Institute for International Economic Studies to make long-term surveys and analyses of international conditions centered on economic relationships. Amidst today's increasingly complex web of international developments, the company's various departments are no longer able to keep abreast of all the issues that concern them in order to respond appropriately. Therefore, the in-house system has been bolstered so that Head Office staff will be able to analyze accurately and comprehensively short- to mid-range political and economic conditions worldwide so the company can incorporate these findings into its management policies. As part of this new orientation, in January 1985, Toyota moved its office in the United States from New Jersey to larger facilities in New York. In September 1985, it opened its London Office, thereby further strengthening its information-gathering activities.

New Developments in the Middle East, Africa, and Latin America and the Caribbean

In the Middle East, diminishing global demand for oil led to worsening economic conditions, while the yen's sharp appreciation led to higher prices for Japanese motor vehicles. Amidst this situation, Toyota's annual sales to the Middle East region dropped from their peak of 324,000 units in 1982 to less than 100,000 units in both 1986 and 1987. Having built up such regional assets as sales and service organizations and the trust of its customers, Toyota began to undertake new challenges as the Middle East market shifted from a seller's to a buyer's market.

Toyota's distributors also became active in successively bolstering their networks of sales, parts and service facilities. These efforts were made by reinvesting profits earned during the


high-growth period prior to 1982 in order to build up the sales networks and service organizations vital for achieving long-term success in these markets. In April 1984, Mohamed Naser Al-Sayer & Sons Est., Toyota's Kuwaiti distributor, completed a new company building housing the world's largest showroom. In this showroom, 150 vehicles can be displayed under one roof, thus accommodating the preference of Middle Eastern consumers for actually seeing and touching the vehicle they plan to buy, rather than being satisfied with simply looking at photographs in a catalogue and viewing the limited selection of models displayed in most showrooms. Following this, Al-Futtaim Motors of the United Arab Emirates expanded and strengthened its facilities; and in Saudi Arabia, Abdul-Latif Jameel Co., Ltd. completed a new company headquarters building in November 1986. In Oman, Suhail & Saud Bahwan not only expanded its parts and service facilities but also invested aggressively in staff training, all of which has helped the company maintain a large share of the Omani market. This managerial stance reflects the fact that over 30 years have passed since Toyota entered the Middle East and that the second generation of top executives directly managing the operations in these countries has matured.

By maintaining close ties with distributors in countries of the Middle East, Toyota has devised measures to respond to qualitative changes in local markets. These include special advertising campaigns stressing value for money, installment sales and the organization of means for the orderly sale and service of used vehicles. Based on the recognition that ensuring customer satisfaction with regard to quality and service is vital to success in a stable market, Toyota has promoted customer retention campaigns to give the company a leading position in terms of after-sales service quality.

In June 1987, a Saudi Arabia-Gulf countries distributors' meeting was held in Tokyo, where Toyota and participating


distributors pledged to work together to promote further their marketing activities in that area.

Toyota signed contracts with new distributors in India in 1983 and in Bhutan and Turkey in 1984, thereby expanding its sales network into West and South Asia.

In India, Toyota was able to establish local production facilities. Although India has always in effect prohibited the importation of completely built-up vehicles, the need to correct the country's chronic shortage of foreign currency and stimulate its depressed economy eventually led the Indian government to relax some of these restrictions and open the door to new market participants. When Delhi Cloth & General Mills Co., Ltd. (DCM), a major Indian company, received the government's provisional approval to produce small trucks, it asked Toyota to participate in the project.

In 1982, Toyota, deciding that expansion into India was sound from the perspective of the long-term potential of the market, signed a joint-venture agreement with DCM. The two companies established DCM Toyota Ltd. in 1983, with an initial capital of 150 million rupees. Construction of DCM Toyota's body, painting and assembly plants was completed in June 1985, and production of Dyna trucks commenced.

In Bangladesh, as well, production activities were started. Assembly of the Land Cruiser and Dyna began in July 1982 at Aftab Automobiles Ltd., a company that was under the umbrella of Navana Ltd., Toyota's distributor.

Most African nations have continued to suffer depressed economies owing to the sagging global demand for primary products. African automobile markets were affected by this negative trend, and Toyota's annual exports to Africa dwindled from 130,000 vehicles in 1982 to 113,000 in 1987.


In this situation, Toyota has held a series of African distributors' meetings, beginning in Cameroon in June 1986, then in Kenya in 1987 and the Canary Islands in 1988. At these meetings, Toyota presented marketing plans and exchanged information with its African distributors to encourage them and kindle their enthusiasm.

In the Republic of South Africa, in 1978, the local content of passenger cars reached the high level of 66% by weight. Besides installing engines, which it had been doing up to then, Toyota South Africa Ltd. (TSA), the locally owned operator, began manufacturing stamped parts and casting engine blocks.

But TSA found itself in a difficult position because it was forced to procure funds on its own for investment in plant and equipment. Beginning in 1982, moreover, the South African automobile market began stagnating and competition became severe. But TSA overcame these difficulties, and it bolstered its customer services and worked to contribute more to the local community by further enhancing in-house training for its 6,000 employees, the majority of whom were black.

From 1985, economic sanctions against South Africa developed increasingly into a major issue. Although European automakers continued making direct investments in South Africa, American automakers withdrew their capital but continued to supply the South African market with vehicles made by European subsidiaries.

Given these circumstances, Toyota adopted a more prudent policy in 1988 concerning its exports to South Africa.

In 1980, Rhodesia became Africa's newest independent nation, Zimbabwe, and changes began to take place. Toyota imports to Rhodesia had been restricted because of economic sanctions, but in 1986 Zimbabwe announced a new motor vehicle policy. Toyota reacted to this by presenting a proposal to the government, and it was approved. Consequently, Cressida


assembly began in June 1986, and Dyna truck assembly in May 1988, at Willowvale Motor Industries (Pvt.) Ltd., which had begun assembling the Land Cruiser for Toyota on consignment in 1981.

In Zambia, Toyota in March 1983 commissioned Rover (Zambia) Ltd. to assemble the Hilux.

Even in Mozambique, where the economy had remained stagnant since independence in 1975, the government reviewed its automobile industry policy and, in July 1987, joined with domestic companies, contributing capital to establish Toyota de Moçambique, Ltd. as a new Toyota distributor. During 1987, Toyota was able to export some 300 vehicles to this new distributor, and previously interrupted after-sales service activities were resumed.

In Latin America and the Caribbean, the business environment became extremely harsh as, in addition to the political instability in some countries, cumulative foreign debt had become so serious in the 1980s that in 1983, 21 of the 43 countries had imposed some sort of import restrictions. Under these circumstances, Toyota's annual exports to the region fell from 106,000 units in 1980 to 70,000 units in 1983.

During this period, in 1983, Toyota held its first product introduction meeting in Panama. The occasion provided an opportunity to discuss the conditions under which motor vehicles were used in each Latin American country and to consider in great detail which models were best to introduce to the area.

Toyota also began setting up local assembly facilities in accordance with local political and logistic conditions. In Venezuela, the Toyota distributor Compania Anonema Tocars built its own assembly plant and began assembling the Corolla in April 1986. Because the Venezuelan capital of Caracas is some 1,000 m above sea level and has many hilly streets, Tocars equipped


its Corollas with 1600-cc engines and changed the differential gear ratio to obtain more power for the local terrain. In 1986, it succeeded in selling over 10,000 of these vehicles.

In Peru, a country whose market environment has undergone drastic changes owing to economic conditions, Toyota del Peru S.A. in December 1985 added the Hilux to its line of locally assembled vehicles as a business-boosting measure.

In Uruguay, local vehicle assembly operations, which had been shut down as part of the import restrictions imposed in response to a foreign currency shortage, were allowed to restart in January 1985. This government policy reversal came as a result of the lobbying efforts of Toyota distributor Ayax S.A. to keep its sales organization intact. At first, Ayax had consigned the assembly of Hilux trucks to Ambrois Y Cia. S.A. But, in March 1987, Ayax built its own plant; by purchasing used painting equipment from Chile, making its own jigs and undertaking various improvisatory measures to assure the profitability of its small-scale production, it began assembling the Hilux and Corolla.

Toyota's distributor in Ecuador succeeded in gaining the right to assemble motor vehicles and, in October 1986, began assembling the Stout.

However, in addition to the influx of low-priced vehicles from other Asian countries, the yen's appreciation from the autumn of 1985 placed exports from Japan in an increasingly disadvantageous position. In 1987, Toyota's exports to Latin America and the Caribbean dropped to 68,000 units. In that situation, the distributors throughout the region continued all-out marketing efforts to stem the drop in sales as much as possible. A particularly intense competitive situation developed in the free markets of South America, such as Chile and Paraguay. Toyota's sales in Chile increased remarkably in an expanded automobile market accompanying the country's economic prosperity. In Paraguay, through customer retention activities and a bolstering of the


service network, Toyota distributor Toyotoshi S.A. firmly maintained its top market position.

Local Production Efforts in Southeast Asia and Oceania

Toyota has striven to conform to local conditions throughout Southeast Asia and Oceania.

In Taiwan, after dissolving its business ties with Lu Ho Automobile Industrial Corporation in 1973, Toyota continued to seek opportunities to begin production anew there while still serving the market with exports of a very limited number of completely built-up trucks. In the meantime, Ho Tai Motor Co., Ltd., the Toyota distributor, petitioned the local authorities repeatedly for permission to manufacture automobiles; in 1978, Toyota, Ho Tai and a Taiwanese motorcycle manufacturer presented a joint-venture proposal to the authorities. The authorities refused this petition, however, because they were studying a large-scale project for manufacturing 200,000 passenger cars a year.

In August 1979, the Taiwanese authorities announced an automobile industry promotion bill to establish an official policy to promote the development of the automotive industry. As part of this initiative, the authorities invited foreign automakers to participate as partners with Taiwanese firms. Toyota responded by joining with three other companies -- Ho Tai, Koyo Kogyo Co., Ltd., and Tatung Co., Ltd. -- to present a joint-venture enterprise plan to the Taiwanese authorities in May 1980.

In October 1980, the list of foreign candidates was reduced to just Toyota and Nissan. At the same time, Taiwan's China Steel Corporation joined the project as the major Taiwanese shareholder, thus giving it more and more the character of a public sector project, and China Steel was entrusted to select between the two partner candidates. After more than two years of negotiations, China Steel finally decided to select Toyota as the project's


foreign partner in December 1982.

Toyota moved immediately to prepare for the project by establishing a Taiwan Project Office and by setting up a representative office in Taipei. However, when the project first began to take concrete form, disagreements arose with regard to the transfer of technology and the ratio of Taiwanese production to be exported. Discussions to resolve these issues went on for a full year until finally, in September 1984, the negotiation period expired and the agreement was nullified.

Although Toyota failed in this effort to regain a production base in Taiwan, Executive Vice President Gentaro Tsuji, who had negotiated the matter right until the last minute, promised to fulfill the requests of the Taiwanese authorities for continued cooperation in the development of Taiwan's auto parts industry. A number of Toyota's major Japanese parts suppliers have since begun production in Taiwan by forming joint ventures or through technology tie-up agreements.

The situation in Taiwan later changed when a trade surplus prompted the Taiwanese authorities to revise their policies and, in February 1985, announce a new automobile industry development policy that provided for less stringent export obligations. In response, Toyota began working on another investment plan and, in February 1986, became a 22% partner in Kuozui Motors, Ltd., a joint venture previously formed by Taiwan's Ho Tai Group and Japan's Hino Motors. Approval was obtained for a plan to produce 40,000 passenger and commercial vehicles annually.

Taiwan was in the process of motorization, and its market was opened to motor vehicle imports from Europe and the United States.

To promote the healthy development of an internationally competitive domestic automobile industry that will support motorization, it is necessary to begin by improving the technological level of the automobile parts industry. For Toyota, as a


late participant in the Taiwanese market, it was necessary to achieve high levels of productivity and quality assurance, both of which depend on the local availability of reliable parts and components. Consequently, Toyota moved to establish a new parts manufacturing company and introduce its manufacturing technology and production management system in Taiwan. The Fung Yong Co., Ltd. was founded in June 1986 as an 80% Toyota-owned stamping and body manufacturing company, and construction of its plant facilities started in August on a site adjacent to the assembly plant of Kuozui Motors. Meanwhile, Kuozui began introducing the Toyota Production System prior to the commencement of joint-venture production by starting consignment production of Dyna trucks. Kuozui was also selecting parts suppliers, dividing them into categories based on their level of technology, and making plans to help each raise its technological level.

Taiwan has a solidly established base for industrial and economic development and is expected to strengthen its international competitiveness in terms of quality and production costs by further acquiring advanced manufacturing and management techniques. As better international distribution of production is studied, Toyota has come to consider its undertakings in Taiwan to be as important as those in North America, and it is working hard to set up production there. Expansion work on Kuozui's facilities and the new construction of the Fung Yong plant are proceeding as planned; production of new commercial vehicles began in June 1988, followed by the commencement of trial passenger car production.

In addition to gearing up for production, Ho Tai is also building up its sales network. The new dealer network consists of eight territories covering the whole of Taiwan, of which one territory -- Taipei, the largest market -- is under the direct control of Ho Tai. For the other seven territories, Toyota sought out local entrepreneurs to set up dealerships, and provisional


agreements were signed in August 1987.

In Indonesia, Toyota established P.T. Toyota Engine Indonesia in December 1982. Although local content had reached a high percentage throughout the industry in Indonesia, including even the production of engines, the market was suffering under depressed conditions owing to the ongoing global recession and the downtrend in oil prices. Market demand hit a peak in 1981 and has since declined steadily: Sales at P.T. Toyota-Astra Motor (TAM) dropped from the 1981 high of 57,000 to less than 30,000 units in 1984, having been dealt a further blow by the second devaluation of the rupiah in 1983 and a demand shift toward lightweight trucks.

These worsening sales figures led to overstaffing, overinvestment and rapidly dwindling profitability at TAM and P.T. Toyota-Mobilindo, which had completed its second plant, a full-fledged stamping plant, in January 1979. The two companies enacted radical rationalization measures to survive this crisis.

At TAM, a newly appointed president immediately took the lead in efforts to overcome the difficult situation. He began to put into effect a series of rationalization measures that had already been considered. First, he moved to reduce expenses more thoroughly and to make reductions in vehicle inventories. He also transferred some personnel to the suburbs and invested the savings in bolstering sales-related areas at the head office. Parallel to these efforts, aggressive sales promotional activities were also carried out. In 1985, however, the situation demanded drastic personnel reductions. First, a program was introduced that guaranteed employees their former income, and then an early retirement program was started with incentives such as increased severance pay and a full year's medical coverage paid by the company. Naturally, TAM's management discussed these


matters several times with labor union representatives, and it obtained approval from Indonesia's Department of Manpower, the country's labor ministry, before implementing the measures. The planned number of voluntary retirees was obtained, and TAM was able to survive the crisis.

Although the rupiah was devalued a third time in September 1986, because TAM had applied the lessons of the first two devaluations by implementing effective countermeasures in cooperation with its dealers, the company was able to keep sales reductions to a minimum and, at the same time, build customer confidence.

In November 1986, TAM carried out its long-awaited full model change for the Kijang model. In developing this new model, TAM's staff searched for a test-course site that contained all of the various types of road conditions existing in Indonesia, and a series of road tests were carried out. These tests helped TAM greatly improve the new model's functional and durability features. The new design included many more curves in the vehicle's exterior, lending it a sleek passenger car-like appearance. In addition, Toyota-Mobilindo began supplying stamped parts it manufactured to P.T. Superior Coach, P.T. Nusa Cendana Harum and P.T. Nasmoco Autobody. Previously, these companies had manually mounted hand-wrought bodies onto minibus, van and similar vehicle frames. By helping these companies modernize their factories so as to incorporate production lines, Toyota-Mobilindo enabled them to build vehicles with better-finished, full-pressed bodies of greater durability.

When implementing the Kijang model change, Toyota-Mobilindo also introduced in-house manufacturing of welding jigs and press dies, eventually exporting such jigs and dies to Taiwan, Venezuela and elsewhere.

The development and production of the new Kijang also


had other ramifications that were of benefit in promoting the transfer of technology and the international distribution of Toyota's manufacturing capability.

The new Kijang sold well, and its popularity, coupled with the effects of TAM's rationalization efforts, contributed to the recovery of TAM's profitability and that of its affiliated companies. The Kijang also became the major force that lifted Toyota, in 1987, into the top position in the Indonesian market for the first time since the company had begun operations there.

TAM then began exporting the Kijang to other Southeast Asian nations, including Brunei, from November 1987, and Papua New Guinea, from September 1988. TAM's new Kijang has thus become a typical locally developed and manufactured Toyota model.

In Thailand, in the wake of devaluations of the baht that had occurred since 1984, the market cooled off and competition intensified. Toyota's exports to Thailand fell from 34,000 units in 1983 to 24,000 units in 1985. In response to this worsening situation, Toyota Motor Thailand Co., Ltd. (TMT) adopted a total quality control (TQC) program to strengthen its organization. This introduction began with efforts to impress on people at the management level the philosophy of TQC, in addition to the methodology, and regular meetings for officers were held to keep department heads informed of current trends in management and operating policy. In November 1987, TMT began marketing Toyota's new Corolla, which was equipped with a twin-cam engine. TMT's advertising and promotional campaigns were successful, and the new Corolla won spectacular popularity despite a substantial price increase precipitated by the coincident rapid appreciation of the yen. The market situation in Thailand became favorable in 1987, and Toyota's exports recovered to exceed 30,000 units.


Over recent years, Thailand has received greater international attention as, supported by the government's industrial policies and an abundant supply of labor, the country's technological level has risen. Toyota, too, has taken note of this development: In June 1987, a joint-venture contract was signed with The Siam Cement Co., Ltd. to establish Siam Toyota Manufacturing Co., Ltd. Preparations are now moving forward at Siam Toyota for the production of engines for TMT's main product, small trucks. Meanwhile, TMT is conducting its operations so as to help Thailand develop to the full the particular areas of strength of the country, such as exporting stamping dies to other countries. In 1988, TMT began preparations to move from its down-town Bangkok location, which Toyota had occupied since beginning operations in Thailand some 30 years before, by building a modern office within its plant site on the outskirts of the city. Major renovation of its plant facilities was also initiated.

TMT continues making efforts to be a good member of the community by undertaking a wide spectrum of corporate projects in line with its social responsibility. For example, it conducts joint traffic safety campaigns with government organizations, provides scholarships to universities and research organizations, sponsors seminars on subjects such as technology and marketing, cooperates in national development projects promoted by the government and the King of Thailand, and backs regular visits to orphanages by the wives of Japanese employees stationed at TMT.

In Malaysia, in 1979, Toyota established two locally owned Malaysian affiliates, Sarin Motors Sdn. Bhd. in Sarawak and Emasturin Automobile Sdn. Bhd. in West Malaysia, which began introducing more models and moving to boost sales. However, because this meant that there were now three Toyota distributors in the country -- these two plus the previous Borneo Motors


(Malaysia) -- marketing coordination remained a problem. Therefore, in March 1980, Toyota set up a representative office in Kuala Lumpur to coordinate marketing activities.

In September 1982, Toyota signed a joint-venture agreement with United Motor Works Industries Sdn. Bhd., and the following month a distributor agreement with the joint-venture company Sejati Motor Sdn. Bhd., to which it also dispatched one of its staff as a director.

That same October, Sejati Motor acquired Borneo Motors and its subsidiary, Assembly Services Sdn. Bhd., a company that was conducting assembly operations. Then, in February 1983, Sejati Motor acquired equity in Sarin Motors, and in April 1984 it took over Emasturin Automobile's distributor operations. Thus, Toyota's distributor operations in Malaysia became unified.

Also, in February 1983, the Malaysian government announced the National Car Project for producing a "national car." Two years later, in September 1985, the Proton Saga was marketed with support from Mitsubishi Motors.

The Malaysian automobile market suffered a major setback in 1986 owing to a severe recession that hit Malaysia after the bottom fell out of the global market for primary products. At the same time, the rapid appreciation of the yen pushed up prices for Japanese vehicles. As a result, Toyota's annual sales plummeted from 24,000 units in 1985 to 13,000 units in 1986, which made the operation of Sejati Motor more difficult. This led Toyota to consider reconstruction plans, and in June 1987 it channeled more capital to Sejati Motor, increasing its equity from 15% to 18%. The Toyota Group's trading arm, Toyoda Tsusho, also acquired a 10% equity interest in the company. In October 1987, Sejati Motor changed its name to UMW Toyota Motor Sdn. Bhd. and redoubled its efforts to strengthen sales by renovating its facilities and enhancing its customer care activities.


In Australia, Toyota's local content reached 85% in 1980. However, owing to the limited number of vehicles manufactured domestically and the harsh competitive environment, Toyota Manufacturing Australia Ltd. (TMA) and Australian Motor Industries Ltd. (AMI) ran into difficulties in maintaining profitability. In 1982, after the merger in Japan of TMC and TMS into Toyota Motor Corporation, the offices of the two companies in Australia were consolidated. At this juncture, Toyota Managing Director Hideyo Tamura was dispatched to Australia. Through him, Toyota moved to strengthen its ties to local affiliated organizations in order to rebuild the entire production and sales systems.

In the production area, TMA and AMI took measures to apply thoroughly the Toyota Production System, through such steps as introducing the Kanban System to their operations. But AMI, because of its long history as a locally owned company, initially encountered much difficulty and resistance from its employees upon introducing the Toyota Production System. In fact, the introduction process had to begin by establishing the custom of labor-management discussions. Engineers sent by Toyota acted as mediators in extensive dialogues between the labor union and local executives and managers, tenaciously clarifying the various aspects of the Toyota Production System: the use of the Kanban System, working environment improvements with regard to employment conditions, and equipment setup changes for different operations. Toyota was able gradually to win the understanding and cooperation of the union by repeatedly taking immediate steps to make improvements, such as resolving problems in working conditions discovered by shop masters as they made their rounds of the various processes. Quality control circle activities and the suggestion system were also introduced so that all employees would become involved in making improvements. The result was that productivity gradually increased.


However, owing to a decline in business and large increases in product prices caused by rapid depreciation of the Australian dollar, the Australian automobile market dropped sharply from 700,000 vehicles in 1985 to 530,000 vehicles in 1986. In February 1987, Toyota switched its local production from the Corona to the Camry and launched a major advertising campaign. Nevertheless, the overall market shrank again in 1987, to 450,000 vehicles, and Toyota's annual sales, which reached 134,000 units in 1985, sank to just 74,000.

Meanwhile, discussions between Toyota and GM, with whom Toyota already had a cooperative relationship, were proceeding in line with an automobile industry policy announced by the government in 1984. The aim of the policy was to upgrade the international competitiveness of Australia's automobile industry by reorganization of the industry and reduction in the number of models produced. These discussions culminated in December 1987 in an agreement to establish a joint venture, with Toyota and GM supplying one another with locally produced passenger cars.

From the time of the tie-up with GM, Toyota moved to strengthen its production and sales organizations in Australia by consolidating its various affiliates there: 1989 was taken as the target for completion of the process. In particular, there had been ongoing concern about the lack of uniformity in marketing activities for passenger cars, which were manufactured and sold by AMI, and commercial vehicles, which were sold by Thiess Toyota Pty. Ltd. As the first step, in August 1987, Toyota made concurrent takeover bids -- its first ever -- for AMI (renamed AMI Toyota Limited in 1985) and York Motors (Holding) Ltd., a state distributor. Both companies became wholly owned Toyota subsidiaries. Next, in April 1988, the sales function of AMI was consolidated with Theiss Toyota and the production function with Toyota Manufacturing Australia. After the consolidations,


new names were adopted: Toyota Motor Corporation Australia Ltd. (TMCA) for the production company, and Toyota Motor Sales Australia Ltd. (TMSA) for the marketing company.

Meanwhile, in May 1988, Toyota and GM, in accordance with their previous agreement, became equal partners in establishing United Australian Automotive Industries Ltd., which began preparations to start operating in 1989.

In New Zealand, the market had always been dominated by cars from other Commonwealth countries, and there were restrictions on imports of completely built-up vehicles. The task facing Toyota for many years if it were to increase its sales was to have its distributor operate its own assembly facilities and to bolster its sales organization.

In that situation, Toyota acquired a 20% equity interest in Consolidated Motor Distributors Ltd. (CMD) in February 1977 and helped CMD bring its two assembly contractors, Steels Motor Assemblies Ltd. and Campbell Industries Ltd., under its direct operation. In addition, a TMS representative office was set up in Wellington to support the expansion of dealership facilities and other sales-promoting measures. In May 1979, CMD changed its name to Toyota New Zealand (TNZ), and the two assembly companies also changed their names, becoming Toyota New Zealand (Christchurch) Ltd. and Toyota New Zealand (Thames) Ltd.

After that, TNZ achieved steadily expanding sales, and the two assembly companies expanded their plants to increase production output. New Zealand's automobile market, however, began to decline from about 1982, and the business situation of TNZ worsened. Against that backdrop, Toyota in June 1986 raised its equity in TNZ to 33%, sent production engineers to help TNZ rationalize its plants and energetically promoted product campaigns and customer retention programs.


These efforts helped raise Toyota's annual sales in New Zealand to 16,000 vehicles in 1986, making Toyota the second biggest automaker, behind Ford, in terms of market share. Toyota was also ranked the highest in a survey measuring customer satisfaction conducted by the New Zealand Automobile Manufacturers' Association in 1987. TNZ recapitalized in March 1987, with Toyota acquiring 100% of its common shares. It moved immediately to prepare a system for promoting an energetic marketing campaign, but it found itself in a harshly competitive struggle for market share as the New Zealand economy stagnated and sales of Japanese cars slackened because of the yen's sharp appreciation. At the end of 1987, furthermore, the New Zealand government announced a new automobile policy that included lower duties and liberalization of imports of completely built-up vehicles. This led to low-level market stagnation as consumers held back on new vehicle purchases, and a severe competitive situation developed in which the auto companies found themselves struggling for their very existence. In this situation, however, TNZ was able to increase its market share greatly when the new Corolla, marketed in February 1988, became popular and sold very well. This encouraging development motivated TNZ to make even further sales efforts.

In such endeavors to improve the sales position, the importance of bolstering the product line cannot be overlooked. Cases in point include the new Corolla announced at the end of 1987 in New Zealand, which, as mentioned above, proved to be immensely popular even in a highly competitive market, and the Liteace, which was introduced in Malaysia in 1982 and developed into a mass-volume sales model.

A strong product line is especially important in Hong Kong, a "global showroom" where automobiles imported from


around the world can compete on even terms without being subject to import duties. The roads in Hong Kong are hilly, and diesel cars are the mainstream product in the taxi market because of their high torque at low speeds. This prompted Toyota to introduce its Crown diesel model to Hong Kong in 1979, and it succeeded in winning a succession of large orders from fleet users. Next, in April 1982, Toyota introduced the Coaster light bus in Hong Kong, and that vehicle was gradually accepted into the public bus market.

In October 1966, Inchcape Far East established Crown Motors Ltd. as an exclusive Toyota distributor, and afterward TMS, Crown Motors and Toyoda Tsusho, which until then had contributed directly and indirectly to selling Toyota products, concluded a tripartite distributorship agreement that led to vigorous sales activities. Crown Motors now markets an abundant array of Toyota vehicles, comprising nine models each of passenger and commercial vehicles, and it operates an ample aftersales service organization and conducts other marketing activities befitting the "global showroom."

In Singapore, meanwhile, Toyota signed a distributor agreement with Borneo Motors Pte. Ltd. and began all-out exports in 1967. Later, the Singapore government introduced measures to reduce the number of motor vehicles on the road, and importers, who were mainly handling Japanese vehicles, were forced into intense competition. In that situation, Borneo Motors made great efforts to introduce products that closely fitted the needs of the market, and it raised the reputation for reliability of Toyota products by bolstering its after-sales service network. In 1986, in particular, under a slogan of "Together, we must be the best," the company inaugurated a company-wide customer care program. Based largely on those efforts, sales of the new Corolla introduced in July 1987 and the new Corona introduced in April


1988 were highly successful, the sales of these two models greatly exceeding their initial targets.

Strong sales promotion activities on Guam, in Brunei and in Papua New Guinea have kept Toyota products in the leading market position for many years. The distributor on Guam, an affiliate of Inchcape, is Atkins Kroll Inc.; the distributor in Brunei, also under Inchcape, is NBT (Brunei) Sdn. Bhd.; and the distributor in Papua New Guinea is Ela Motors, a division of Burns Philp (PNG) Ltd.

Although Toyota continually endeavors to conform to local conditions in each host country, there have been occasions where a tumultuous situation has forced it to pull back temporarily and then re-enter a market. This was the case in the Philippines, where Toyota's distributor, Delta Motor Corporation, had achieved a high degree of local content by building its own engine assembly plant and had also become the market leader. However, because it had continued making large facility investments, such as constructing a plant for assembly of vehicles of another manufacturer, it accumulated large debts that weakened Delta. This situation was exacerbated by the unprecedented economic crisis, and in March 1984 Delta went bankrupt. Toyota had lost its production and marketing base in the Philippines.

In May 1984, TMC established a representative office in Manila both to provide continued after-sales service to Toyota customers and to look for an opportunity to re-enter the Philippine market. Finally, in May 1988, the Philippine government granted passenger car production approval. In August 1988, agreement was reached to establish Toyota Motor Philippines Corporation, a company founded as a joint venture by the Metropolitan Bank & Trust Company of the Philippines and other local companies (60% equity), Mitsui (15%) and Toyota (25%). Toyota Motor Philippines immediately began preparations to commence production.


Embarking on New Businesses

The 1980s have brought major changes to Japan's industrial structure. Technological innovations in such fields as information, biotechnology and electronics have prompted observers to watch for the growth of new areas of industry. In 1985, Toyota launched a project to study possible expansion into new businesses as part of its long-term growth measures.

This policy reflects the philosophy of Toyota President Shoichiro Toyoda, who had earlier remarked, "Now is the time to nourish the seedlings of new businesses. Today, the automobile industry is wide-ranging and encompasses data communications, electronics, new materials and many other technical fields. New business opportunities arise from these peripheral industries, and they hold endless possibilities."

Based on careful analysis of how the industrial environment is likely to change during the 1990s, Toyota has identified business opportunities in new growth industries and has been evaluating their marketing and technological trends as well as their relation to automotive technology. From these results, Toyota has decided to place particular emphasis on the fields of factory automation, semiconductors, financial services and data communications.

Among these fields, factory automation (FA) is the one where Toyota is most accomplished. TMC has nurtured manufacturing and application capabilities through its in-house manufacture of robots, CAD/CAM systems and other technologically advanced equipment, and it has accumulated experience in building up the software necessary to operate such equipment. In July 1986, through a domestic industrial vehicle sales route, Toyota began domestic sales of an Automatic Guided Vehicle (AGV). To enhance the FA product line, TMC took such steps as adding optical and magnetic guidance circuits to the AGVs'


electromagnetic guidance function and developing a unitized automatic warehousing system.

Japanese manufacturers and warehouse operators have constantly striven to promote automation and reduce labor costs; TMC was, therefore, confident of the market prospects of this type of FA system. Accordingly, it set about establishing a comprehensive organization to bolster all facets of the endeavor from development to sales and services.

In the area of semiconductors, amid the ever-expanding possibilities for application, electronics has become indispensable to automotive manufacture as a means of enhancing the performance and value-added features of motor vehicles. In fact, by 1985, almost half of Toyota's products were equipped with electronic fuel injection systems, and more and more electronic systems were being used in automobile engines, transmissions and chassis. In 1984, Toyota established special development teams in its engineering and production engineering departments to place greater emphasis on electronics-related research and development and the accumulation of expertise in electronics applications. TMC began with the in-house manufacture of an electronic control unit (ECU) used in power-steering systems.

In 1985, Toyota gathered the electronics-related operations that had been dispersed among several engineering departments under the roof of the new Electrical & Electronics Engineering Department, and in 1986 it added the Electrical & Electronics Production Engineering Department. In addition to hiring more electronics engineers, the company also set up in-house training courses in electronics.

Meanwhile, Toyota made preparations in its service organization to enable it to cope with any problems that may be caused by electronic components as the trend continues toward greater sophistication and complexity in the applications of


automotive electronics. These included providing training courses for Toyota dealers all over Japan in the latest automotive electronic technologies and installing state-of-the-art "technolab" systems at dealers' service facilities.

In November 1985, Toyota began manufacturing electronic components in-house. The key was to provide the proper production line equipment and ensure high reliability. Toyota has gradually expanded the sphere of these operations from ECUs to more sophisticated components such as actuators and sensors. Aiming to manufacture its own custom ICs and other semiconductor components used in them, Toyota began in November 1987 to build the Hirose Plant, a new specialized facility for electronic components, in Toyota City.

Concerning financial services, by 1983, Toyota had already established two financial service subsidiaries, Toyota Finance Australia Ltd., founded in June 1982, and the Toyota Motor Credit Corporation, founded in the United States in October 1982. In August 1987, it set up a finance company in the Netherlands, Toyota Motor Finance (Netherlands) B.V., whose main functions included providing financial services to Toyota's overseas affiliates, based primarily on low-interest funds procured by issuing Eurobonds. In April 1988, Toyota also established a sales finance company, Toyota Kreditbank GmbH, in the Federal Republic of Germany, and in November 1988 it established Toyota Motor Finance (UK) PLC in Great Britain.

With regard to the data communications field, specialized committees have been established since 1984 to restructure the information systems of TMC and the Toyota Group, as well as to study the possibility of entering the industry by commercializing the new systems. Against the backdrop of advancements in telecommunications technologies and the easing of legal restrictions on telecommunications businesses, many enterprises began


maneuvering to enter the telecommunications field. Toyota, too, made its move into the field by equity participation in newly established companies, such as Teleway Japan Corporation and International Digital Communications Inc.

Participation by private enterprises in the mobile communications field has been permitted in Japan since 1986. Because of the strong connections with automobiles, Toyota has recognized the need for enthusiastic involvement in this area of industry. It has joined government-sponsored councils and organizations related to the field, and it has equity participation in Nippon Idou Tsushin Corporation, a Japanese cellular telephone company. Toyota is also involved in the research and development of related hardware, such as compact radio equipment suitable for use in automobiles and a voice-controlled dialer, enabling the driver to keep both hands free while dialing, thereby making for safer driving.

While developing such new business possibilities with increasing vigor, Toyota has also continued to work on reinforcing its existing operations. Ever since the oil crises of the 1970s, the domestic industrial vehicle industry had experienced sluggishness because of a drop in the demand for cargo-handling equipment. This had been caused by a shift in the focus of industrial activities toward more sophisticated products, with emphasis on light weight and compactness. In addition, as a result of increasingly powerful product and sales offensives by competing companies, Toyota's share of the forklift market decreased steadily and dealer profits deteriorated. Although Toyota worked to reverse this trend, such as by introducing new models, the main problem was the need for improved basic performance. After the merger of TMC and TMS in 1982, Toyota engineers began participating in product development at Toyoda Automatic Loom Works. From those joint efforts, a new type


of engine was developed, and the forklift product line was strengthened dramatically. From 1983, Toyota's market share rose again. Bolstering the management of the dealers also gradually began to bear fruit, and for the reporting period ending in March 1985, all the industrial vehicle dealers were operating at a profit. The cumulative production of Toyota forklifts amounted to 500,000 units in September 1985.

Overseas activities in the industrial vehicle field also progressed. In October 1974, Toyoda Automatic Loom Works and Toyota established a joint venture in the United States. Known as Toyota Industrial Trucks, U.S.A., Inc., it merged with TMS, U.S.A. in April 1984. After the merger, sales capabilities were strengthened by adding new staff, updating the computer system and making effective use of the substantial managerial resources of TMS, U.S.A. Besides introducing new forklifts mounted with new-type engines, the product line was made more diversified, such as by launching a skid steer loader in 1986.

In Canada, Toyota became the top importer in 1987, a position it consolidated with energetic sales promotion campaigns, tied to new product introductions, and with strong measures for adding strength to the dealer network.

In Latin America and the Caribbean, although a worsening of the economic situation from 1982 onward led to a sharp decrease in the number of industrial vehicles sold, the distributors carried out positive sales promotion measures to halt the sales drop. In January 1975, Vehiculos Industriales Toyota S.A. of Peru and, in August 1985, Servicios de Ensamblaje, C.A. of Venezuela began the local assembly of forklifts. In Brazil, Empilhadeiras Toyota S.A. began the commissioned assembly of forklifts in 1979, and local content reached 100% in 1983.

In Europe, besides Belgium, Switzerland and Spain, distributors were also appointed in Great Britain, France and other countries with domestic forklift manufacturers, thus consolidating


the foundation for expanding exports. In 1980, Toyoda Automatic Loom Works and Toyota both purchased equity in Tomen Transportgerate GmbH (TTG) in the Federal Republic of Germany and then moved to reinforce TTG's financial structure and sales system.

In Southeast Asia and Oceania, the Middle East and Africa, Toyota's forklift distributors moved to develop new customers and bolster their sales networks. Toyota responded to requests from various countries to participate in local content programs, and it began local assembly operations in May 1982 in New Zealand at Andrews & Beaven Manufacturing Co., and in February 1985 in Indonesia at P.T. Swadaya Harapan Nusantara.

Meanwhile, in order to create more solidarity among the distributors in the different countries, Toyota held its first industrial vehicle distributors meeting in May 1982. In May 1986, on the occasion of reaching cumulative forklift exports of 200,000 units, Toyota held the second meeting. At that meeting, all the participants pledged that they would work more closely together as "Team Toyota."

The export environment, however, began to turn severe. In Europe, for example, increases in forklift exports to EEC countries led to forklifts being designated from 1984 as an item for import supervision, and in 1986 forklift exports came under self-restraint. At the same time, Toyota signed a technical assistance agreement with Manitou B.F. of France. Local production was initiated in January 1987 at Manitou's Nantes plant in the west of France, with plans calling for the production of over 1,700 units in 1988. Of the forklifts produced by Manitou, those destined for the domestic French market are sold through Compagnie Francaise de Manutention, the distributor in France. Also, to promote forklift exports from France to the major countries of Europe, Toyota set up a wholly owned subsidiary in September 1987 in


France, Toyota Industrial Equipment Europe, which started exporting in November 1987 with a shipment to Portugal.

In the United States and Australia, dumping charges were brought against Japanese forklift manufacturers in the context of the yen's appreciation, which occurred so rapidly, beginning in the fall of 1985, that local price increases could not keep pace. Toyota considered various measures for responding to the severe export environment, and in October 1988 it decided to produce forklifts locally in the United States. TMC and Toyoda Automatic Loom Works jointly established Toyota Industrial Equipment Mfg., Inc., capitalized at 40 million dollars. The new company has planned to build a plant on an 80-acre (approximately 320,000 m2) site in the suburbs of Columbus, Indiana, with production set at 5,000 forklifts a year, starting in the spring of 1990.

Toyota made initial moves in the area of prefabricated housing in 1975. After marketing the Toyota Home, Toyota moved energetically to develop new products for the upcoming generation of home owners. However, it was a latecomer in the industry, and since the major companies gradually continued to increase their monopoly of the market, it was not easy for Toyota to expand its sales. Although Toyota also suffered under the effects of sharp increases in land prices, it was able to hold its own as the Japanese living standard continued to rise and the Japanese once more turned toward improving their home environment.

In February 1984, Toyota moved all-out to strengthen its Housing Department with investments of personnel, technology and funds. Under the new system that resulted from those investments, business became brisk. From 1985, a series of new products was launched, including high-class houses and those based on a free planning system, which gave great floor-planning flexibility to the buyer. Gradually, a broad line of products took form.


Toyota also developed software for a CAD system that let salespeople respond in the showroom to the individual wishes of customers. Salespeople could offer various plans, and customers were able to alter the floor plans as they liked. More salespeople were added, and the education and training system was boosted in order to raise the sales and design engineering capabilities of the sales force.

Because of these untiring efforts, the sales of Toyota Homes increased steadily. The production and procurement systems were also reviewed at about this time, and cost cuts were achieved. Formerly, the production of Toyota Homes had been divided between Toyota and Kanto Auto Works Ltd. Toyota carried out production at a facility near the Head Office; however, that plant had not been originally designed to specialize in producing prefabricated housing, and production efficiency was low. As a result, Toyota purchased land for industrial use in Kasugai City, not far from Nagoya, and built the Kasugai Housing Plant there. The new plant, fitted with an automatic press line, arc-welding robots, a CAD/CAM system and other up-to-date facilities, was completed and began operations in April 1987.

Progress was made in boosting the sales network, as a large number of salespeople were hired at the same time that specialty outlets, called Toyota Home Dealers, were set up in major cities throughout the country for exclusively selling Toyota Homes. The timing was good because business had begun to show an upward swing, with the government emphasizing the expansion of domestic demand. The number of housing starts increased, and with the preparations Toyota had made to boost its production and sales organizations, the sales of Toyota Homes increased dramatically. In July 1988, as part of its plan to build a system for producing and selling 5,000 units a year, Toyota began building a second plant in Tochigi Prefecture, to supply products to the Greater Tokyo metropolitan area.


Expanding Public Service Activities

Following the merger of TMC and TMS in 1982, Toyota introduced energetic measures for advancing domestic sales and at the same time also promoted its overseas projects. As a result, its business performance improved and the role the company played in the overall Japanese economy grew in importance. The company's corporate social responsibility also increased in parallel with its business growth, and Toyota was called upon more and more to act in ways befitting its prestigious position.

In May 1984, Chairman Eiji Toyoda was elected a vice chairman of the Federation of Economic Organizations (Keidanren). At that time, as an expression of the positive manner in which he intended to involve himself in various activities in the business world, he said, "The time has come to think about the tasks of the overall Japanese economy; it is now necessary to take action." President Shoichiro Toyoda, meanwhile, was elected chairman of the Japan Automobile Manufacturers Association (JAMA) in May 1986. He chose as the theme for his tenure, "Toward harmony and togetherness in the industry." Since assuming office, he has proven himself a leader in the industry by confronting many difficult problems, such as trade friction issues, the appreciation of the yen and the hollowing out of Japanese industry.

In addition to its industrial growth, Toyota has also taken on a greater role as a corporate citizen. Since its establishment, Toyota has enthusiastically participated in activities contributing to social progress in keeping with its corporate motto, "Creating an affluent society through the automobile." Since establishing the Toyota Traffic Environment Committee in 1968, Toyota has adopted an organized and systematic approach in its everwidening sphere of social-aid activities. Examples of such activities include contributing to traffic safety campaigns for young children, assisting with the installation of wide-area traffic


signal control devices, and conducting surveys and other research activities to improve existing transportation systems and develop new ones.

In October 1974, Toyota established the Toyota Foundation. The purpose of this foundation is to "contribute to future progress in social welfare by supporting academic research and other related undertakings." Since the beginning, this foundation has functioned as an open source of social aid and has not been limited to assisting particular categories of recipients. The foundation's endowment has steadily grown over the years to 11.4 billion yen. During fiscal 1987, the Toyota Foundation provided an aggregate sum of 530 million yen in grants to 238 recipient groups, and since its establishment it has contributed 5.82 billion yen to a total of 1,988 projects. As a participant in Japan's internationalization, the foundation has provided assistance to overseas researchers and has developed the "Know your neighbor" program to deepen mutual understanding between Japan and its Southeast Asian neighbors. This program includes funding to support translations of literature from these nations into Japanese and of Japanese literature into the languages of Southeast Asia.

Toyota has also developed close ties with academic institutions, such as the University of London, Harvard University, Massachusetts Institute of Technology, Columbia University, the University of Michigan, Rockefeller University and the Art Center College of Design. It has also supported the activities of centers for Japanese studies and established Toyota professorships at several universities. In addition, TMC has widened the sphere of its activities to promote international understanding, such as by sponsoring visits to Japan by foreign students and businesspeople.

In Indonesia, the Toyota & Astra Foundation has become steadily more active in community service since its establishment in 1974.


In September 1987, the Toyota U.S.A. Foundation was established to mark the 30th anniversary of TMS, U.S.A. The activities of this foundation, centered on the theme "In pursuit of excellence," have included contributions to education, medicine, and national and regional social-assistance activities.

Toyota Canada Inc. celebrated its 20th anniversary by establishing the Toyota Canada Foundation in 1985, with an endowment of 200,000 Canadian dollars. Soon after, the foundation set up an annual scholarship fund for students pursuing automotive-related studies at two Canadian universities.

In Japan, Toyota's other social-assistance activities have included Toyota Community Concerts to support amateur orchestras and the development of Friendmatic cars designed for handicapped drivers. In celebration of its 50th anniversary, TMC completed the construction of the Toyota Memorial Hospital in Toyota City to boost significantly its medical support activities for the region. In addition, Toyota began building an automobile museum in the suburbs of Nagoya to house an extensive collection of historically famous car models from around the world.

Toyota has always poured considerable energy into the development of its human resources, and to help keep abreast of today's rapidly paced technological progress, the Toyota Technological Institute was established in Nagoya in January 1981. The founding of this institute reflects Toyota's philosophy that the cultivation of technologists who have developed a richly humane and creative intellect not only serves to foster the development of homegrown technologies but also benefits the world by contributing to the international flow of technology. This philosophy will help Japan fulfill its role as a member of the global society.

Enrollment at the institute is open to anyone who has been employed for at least two years continuously at a Japanese company. For young working people with issue-awareness and the


desire to learn, the institute offers a scholarship program that provides them with the opportunity to further themselves in study. The faculty, which includes a wide range of seasoned professionals from Japanese industry and scholars with strong backgrounds in joint-research projects stretching across industrial and academic lines, is thoroughly oriented toward practical education. The institute takes an innovative educational approach, aiming at an eclectic assortment of interdisciplinary studies, including mechanical engineering, electronic data-processing engineering and materials engineering. Besides conducting experiments and practical exercises, the students are sent to production facilities to acquire on-the-job training.

In 1984, Toyota added a graduate school to the institute to facilitate the fostering of human resources with highly specialized skills. This graduate school is especially noted for its emphasis on interdisciplinary research skills that help researchers keep abreast of rapid technological progress and its Master's Program in Engineering with a major in Research in Basic Production Engineering, which is a comprehensive degree covering mechanics, electronics, information, materials and other engineering fields.

Toyota also conducts activities that contribute to the longterm economic development of its overseas partners and customers. For example, although Toyota received large orders for motor vehicles from the People's Republic of China (PRC) in 1984 and 1985, orders subsequently dropped sharply because the PRC's foreign currency reserves ran low. Despite this unfavorable economic situation, however, Toyota continued working with the PRC to help promote its economic development. In the 1980s, the PRC's open-door policies began in earnest. In 1985, Toyota accepted an invitation by the State Economic Commission to participate in the planning and execution of a joint-research project


for formulating national policy to promote the domestic automobile industry. This project, which also studied the industrial policies that facilitated Japan's motorization and had the benefit of Toyota's own experience, continued for two years. In May 1987, the results of the joint project were presented to China's State Council. To assist in improving the environment for automobile use in the PRC, Toyota opened training centers in Beijing and Guangzhou in November 1985 to train automobile repair technicians; it also began setting up Toyota-certified service stations all across the country. To help Chinese drivers learn top skills, Toyota also cooperated in starting a fully fledged driving school, which opened in Beijing in June 1987. Specifically, Toyota provided such materials as vehicles, textbooks and other educational equipment, and it helped the school adopt the latest training techniques.

Looking Toward Toyota's Next Half Century

For Japan, 1988 was a year in which gradual progress was made toward resolving a host of controversial issues, ranging from the yen's appreciation and trade friction to ongoing industrial restructuring, expansion of domestic demand and tax reform. However, it was also a year of constant volatility in the exchange rate, which had caused confusion and concern since the yen's rapid appreciation began in the wake of the September 1985 "G5" conference, attended by the finance ministers and central bank presidents of the five leading Western economic powers. From its peak in February 1985 of 260 yen to the dollar, the dollar's value against the yen had fallen over three years by half, to 129 yen, by February 1988. Meanwhile, abundant low-cost labor and rising levels of technology in several NIEs had put them close on the heels of Japanese industries, including the automobile industry.


Faced with this situation, Japan's automobile industry has entered a major period of transition. Toyota's list of imperatives for the future is extensive: It must give priority to setting mid-and long-range goals rather than implementing short-range rationalization measures; it must plan and develop products that have more value added qualities; it must cope with the hollowing out of Japanese industry resulting from the shift of production overseas; it must develop its operations energetically after positioning itself properly in the contemporary environment; and it must reaffirm and act according to its basic corporate philosophy of moving forward with society.

In announcing Toyota's corporate policy at the beginning of 1988, President Shoichiro Toyoda noted the following:

This year, Toyota takes a strong first step into its next half century. But the times are difficult; more so today than ever before, the Japanese automobile industry is confronted with a severe test as it becomes internationalized, while facing fierce competition at home and overseas. Still, it is precisely at such times that we must rise above conventional thinking and behavior, and we must bravely challenge the future with the courage needed to adapt ourselves and the boldness needed to pioneer a new era.

Toyota's corporate policy for the 1988 business year stressed six points: (1) develop strategic overseas activities; (2) bolster domestic sales strength; (3) improve price competitiveness and product strength; (4) achieve and maintain the top position in terms of customer satisfaction; (5) enhance the production and distribution organizations; and (6) strengthen the procurement organization. In general, Toyota employees were urged to raise


the company's overall strength within the harsh domestic and overseas business environments and maintain profitability, consolidate the domestic base, develop effective overseas strategies, and boost Toyota's competitiveness as an international corporation.

These imperatives were reflected in Toyota's slogan for 1988, "Innovative ideas and decisive action are the foundation for Toyota's global future."

Toyota has already begun to paint a new future for itself on the canvas of history. Ever since the merger in July 1982, TMC has continued to explore new directions for the future. It has selected a number of important themes as viewed from a long-term perspective, and since 1985 TMC has promoted overseas activities, the development of advanced technology and new businesses as particularly important projects. Each of these projects has gradually produced fruitful results.

One of the important areas, the promotion of overseas projects, has led to redoubled efforts to expand and enhance local production activities. In North America, Europe and throughout Southeast Asia and Oceania, plants have successively begun operations.

In the United States, construction has been completed on the new passenger car plant in Georgetown, Kentucky. On October 6, 1988, President Shoichiro Toyoda and other Toyota officials attended the dedication ceremony at the plant, joining President Kaneyoshi Kusunoki and Executive Vice President Fujio Cho of TMM, all the plant employees, Kentucky Governor Wallace G. Wilkinson, many other guests and visitors from the local community, as well as representatives from parts makers and other suppliers. President Toyoda asserted at the ceremony, "I'd like to say that I firmly believe Toyota Motor Manufacturing will without any doubt surpass your expectations. We pledge as


a good corporate citizen to contribute toward a bright future together in Kentucky and the United States."

The theme of "Toyota -- Moving forward with America" was emphasized at the ceremony, thereby expressing Toyota's strong desire to contribute to the growth of the American economy and of the local society. The plant held an open house on the weekend following the dedication ceremony, and over 60,000 Kentucky citizens attended. Prior to the dedication ceremony, a tour of TMM was arranged for the Toyota dealers assembled for the annual Toyota dealers' meeting, thus deepening the mutual understanding between the production and sales sides of the Toyota organization.

A new passenger car plant was also built in Canada, in Cambridge, Ontario. Trial production of the Corolla was begun in June 1988, and preparations proceeded smoothly for the start of commercial production. On November 30, 1988, a line-off ceremony was held for the first Corolla produced at TMMC. Participating in the ceremony were Chairman Eiji Toyoda and other top executives from TMC, President Kaneyoshi Kusunoki of TMMC, President Susumu Yanagisawa of Toyota Canada, and President Yukiyasu Togo of TMS, U.S.A.

During the ceremony, after Vice President William J. Easdale of TMMC greeted the assembled group, Executive Vice President Akio Iwabuchi announced the winning slogan, "Quality -- our driving force," from among entries submitted in a contest open to all TMMC employees. Announcement of the slogan motivated all present to renew their determination to build high-quality vehicles at TMMC.

In congratulating the TMMC employees on the birth of the first Canadian Corolla, Chairman Toyoda said, "The real congratulations for this achievement go to you Team Members. You have demonstrated a pioneering spirit in the successful merging


of manufacturing ideas and practices from two nations, Canada and Japan. I am confident you will continue building a new and unique tradition of success here in Cambridge."

In Taiwan, Toyota began producing a Toyota utility vehicle called the Zace in June 1988, and preparations were under way at the time of writing for passenger car production to start in early 1989. Meanwhile, the distributor has already completed setting up new dealerships, and Toyota began importing American-made Corollas to Taiwan in August 1988.

Product development is the prime force behind corporate development, and Toyota is currently developing world-class luxury and high-performance automobiles. For the testing of high-speed performance, Toyota in May 1988 completed the expansion of its Shibetsu Proving Ground in Hokkaido, originally built in 1984. The track is 10 km long and tests are possible at speeds exceeding 250 kph.

Toyota is likewise making great strides in boosting domestic sales, partly owing to an unexpectedly strong expansion of domestic demand and brisk sales of new Toyota models. In June 1981, when Shoichiro Toyoda became president of TMS, he urged everyone in the Toyota organization to pull together to achieve a domestic sales goal of 2 million vehicles per year, and this goal became achievable in 1988. Behind this impressive accomplishment is Toyota's emphasis on customer satisfaction and its fast-paced improvement of its sales outlets and service organization. Sales in Japan of luxury cars were brisk indeed, as indicated by the 95% jump in sales in the period of January to June 1988 versus that of January to June 1987. Meanwhile, the Japanese market share for imported cars, which had long remained at about 1%, grew to about 3% in 1988 as Japan's automobile market opened.

Partly to take advantage of the appreciated yen, meanwhile,


Toyota searched widely overseas for attractive parts and materials to import and gradually increased the volume and widened the range of procurements from overseas suppliers. Besides general-use items such as tires, glass, carpet and headlamps, it also began importing for the first time items such as shock absorbers, spark plugs and clutch disks. The increased procurements resulted from close cooperation between Toyota and the overseas suppliers, which enabled the latter to overcome difficulties related to technological capabilities, production cost, product quality and delivery schedules.

Thanks to its progress in moving production overseas, Toyota has increasingly been able to contribute to the economies of various countries through the international distribution of its operations. For example, TMC has imported parts to Japan from overseas affiliates and arranged for overseas affiliates to export to third countries in response to local requirements. It imports aluminum to Japan, cylinder heads and cylinder head covers from Australia and aluminum wheels from Canada. As examples of tripartite trade conducted by TMC, Australian-made Camrys and Camry wagons are exported to New Zealand, as are Venezuelan-made Corollas and Land Cruisers to Panama, Guatemala and other countries.

Toyota imports, however, much more than auto parts: Other import items range from machine tools and testing and research equipment to medical equipment used at Toyota Memorial Hospital, American-made Bell helicopters and sundry goods marketed via Toyota's Seikyo chain of cooperative stores. In addition, in January 1988, Toyota acquired equity in Japan Flying Service Co., Inc., which began marketing small aircraft imported from the United States. The small-plane market in Japan is still far from large, but it is expected to grow in the future, and Toyota's decision to invest in Japan Flying Service also reflects its


desire to help correct Japan's external trade imbalance.

As of the fiscal year ending in June 1988, Toyota recorded its highest domestic sales volume ever of over 2 million units. Exports remained at approximately the same level as the previous year, about 1.8 million units, with the result that overall sales reached a new peak of 6.69 trillion yen. Although Toyota continued to incur foreign exchange losses owing to the yen's progressive appreciation, in-house rationalization and sales efforts helped raise ordinary profits to 520 billion yen, the first increase in three years. At the general shareholders meeting held in September 1988, Toyota made extensive personnel changes of officers to create a new management team led by Chairman Eiji Toyoda, President Shoichiro Toyoda and Executive Vice Presidents Tsutomu Ohshima, Masami Iwasaki, Shiro Sasaki and Tatsuro Toyoda.

Toyota celebrated its 50th anniversary on November 3, 1987. During those 50 years, an era which spanned half of the century of automobiles, Toyota has succeeded in becoming one of the world's major automakers. This has been achieved thanks to many, but most especially thanks to its customers, its distributors and dealers, and its affiliates.

On the occasion of the company's 50th anniversary, Chairman Eiji Toyoda, a man who has been with Toyota since its founding 50 years ago, wrote with the next generation in mind:

Today, the world is undergoing great changes as it attempts to establish a new international order. Amid the increasingly severe global competition it now faces, the automobile industry is about to enter an especially turbulent period. Toyota Motor Corporation, which set sail with its sights on


catching up with Western automakers, must now traverse uncharted waters.

You, the younger generation of Toyota employees, are inheriting a fine tradition of achievement going back to the company's founding. And it is up to you to exercise your creativity to develop trailblazing products for the new era, further strengthen our management base and refine the company into one that meets the needs of global society.

Backed by the superb products and services developed through the hard-won achievements of their predecessors, everyone at Toyota, working as citizens of the world to gain the confidence of people all over the world, has truly begun to widen the circle of mutual trust.



Toyota Motor Corporation first asked me four years ago to assist in editing this English edition of its official 50-year history. Although four years is not a long time, the circumstances surrounding the automobile industry have changed considerably during that period, and Toyota itself has made notable progress in developing its managerial strategy and business operations.

Changes related to the rapid appreciation of the yen have been especially notable, including steps taken by Japanese companies to offset the effects of the higher yen, adjustments in Japan's industrial restructuring and efforts to expand domestic demand. One major trend that has also emerged has been a powerful strengthening of international links within the world economy. That trend has affected Toyota as well as other companies, and Toyota has taken steps toward consolidating its position as an international business.

It was against that general backdrop that Toyota celebrated its 50th anniversary in November 1987. The twin goals of publishing this English edition of the company's official history are, firstly, to commemorate the company's founding and, secondly, to convey its development and activities by reviewing its history, thereby presenting the company to people around the world in a way that will let them understand Toyota better, both as a Japanese corporation and an international business. To accomplish these twin goals, the authors and editors decided to move beyond a straightforward year-by-year narration of Toyota's history since its founding. Our story does, in fact, start well before the actual founding of the company and it outlines clearly the development of the management philosophy that came to be practiced in Toyota from its earliest days and is still in practice today. We describe not only the principal events in the company's history, but also the socioeconomic background of particular stages in its


growth, the kind of problems it faced and how it resolved them. We felt it was necessary to relate all this comprehensively and systematically across a wide spectrum of domestic and overseas activities, including production, labor, procurements and financial matters.

Compilation of the corporate history of a company such as TMC requires a good deal of cross-checking by specialists, both individually and as a team. Professor Tsunehiko Yui of Meiji University was responsible for supervising and reviewing the sections of this book describing Sakichi Toyoda, the inventor, and his son, Kiichiro Toyoda, the founder of Toyota, as well as the company's early history, and I had the same responsibility for the sections covering the postwar period. Associate Professor Mariko Tatsuki of Teikyo University and the Editorial Staff at Toyota in charge of the company history wrote the original Japanese manuscript. Also, a powerful backup organization was established inside Toyota, which included the Toyota 50-Year History Editorial Committee, headed by Vice Chairman Gentaro Tsuji, and the Editorial Cooperation Committee, whose members included general managers from throughout the company. The manuscript also benefited greatly from the suggestions of Susumu Yanagisawa, president of Toyota Canada, the Staff at Toyota Motor Sales, U.S.A., and the American staff of TMC's International Public Affairs Department.

In researching Toyota's history, we turned to a broad range of reference sources, including Toyota's official histories in Japanese, other in-house and external publications and materials, the histories of other companies, and documents and statistics related to the automobile industry. Where the need arose, we also systematically interviewed Toyota's top management and related individuals in all areas of operation.

Although the 50 years covered by this book do not represent a long period in historical terms, the editing work was accom


panied by many more difficulties than we had originally expected. This was due partly to the complicated manner in which historical changes have been interrelated since the 1930s. During this period, for example, the Second World War occurred, followed in Japan by the chaotic immediate postwar years, economic reconstruction, "miraculous" economic growth and then, in the 1970s, two oil crises, followed by stable economic growth and, more recently, the yen's rapid appreciation and Japan's internationalization. In addition, the automobile industry has rapidly developed into one of Japan's key industries, and its relationship with other industries has become complex. Another difficulty in editing this book was the many concepts and terminology peculiar to the automobile industry, in fields such as research and development, production engineering, marketing and after-sales service; in addition, in recent years, there have emerged technological changes related not only to automotive products but also to their production processes and changes in the form of business undertakings and the development of strategies.

Rather than merely presenting the reader with one fact after another, we saw our task to be one of presenting vivid portrayals of the central figures in Toyota's history, beginning with Sakichi and Kiichiro Toyoda, and spotlighting the key strategic decisions made by Toyota in terms of its business history and the general flow inside the company, relating to corporate organization and management control. A corporate history should not be primarily a public relations effort but should rather include sufficient balance and perspective to be considered an objective work. It is for the reader, in his discernment, then, to determine whether or not we have succeeded in achieving our goals.

In this Afterword, I would like to describe the points we understand to be the distinctive characteristics of Toyota and its corporate culture. I also wish to clarify certain expectations we


have concerning the kind of company we would like the future Toyota to become.

The first distinctive characteristic that deserves mention is Toyota's constant pursuit of creativity and ingenuity, a spirit that can be traced back to Sakichi Toyoda. An attitude pervades the entire company -- not just top management and certain specialists, but all employees -- whereby individuals identify, using their own initiative, the particular problems they should be involved in; they then pour their entire efforts into resolving those problems. The same spirit is reflected in Toyota's attitude toward research and development, in which the company has consistently sought to develop its own technology.

A good example of this spirit being expressed appeared in January 1987, in a New Year's interview with Chairman Eiji Toyoda printed in one of Toyota's in-house journals.

Ever since the days of Sakichi Toyoda, those in Toyota have followed the principle that you learn a skill only by struggling to master it yourself. The traditional way of thinking at Toyota is that a person acquires skills in the process of experiencing various difficulties. Trying something yourself and failing really means you have learned what you failed at, and, at the same time, why you failed. That is why you must try to do things yourself.

In fact, one of the Toyoda Precepts that derives from Sakichi Toyoda encourages employees to "Be at the vanguard of the times through endless creativity, inquisitiveness and pursuit of improvement." This dictum is a clear expression of the corporate climate evident in Toyota even today, which encourages employees to cultivate a spirit of creativity and innovation, to develop respect for in-house technology and, thereby, always to remain at the leading edge of progress.


This corporate climate is most clearly evident in Toyota's product development activities. Needless to say, product development is the cumulative result of marketing experience that responds precisely to market needs and design capabilities to achieve a total technological balance among the elements comprising an automobile, including the engine, and the fusion of production technology and parts engineering at a high technical level.

Market needs and the competitive environment both change extraordinarily fast. Stimulated by the company's emphasis on understanding the current local situation, Toyota's directors make frequent visits to distributors and dealers in an effort to assess in what way the various markets are changing. Despite these efforts, however, it is still not always possible to develop products that respond to such changes ahead of the competition. In fact, Toyota itself has occasionally introduced products that failed because they did not fit current market trends. When such cases occurred, however, the company made all-out efforts to pinpoint the causes of the failure and avoid repeating the same mistake. It is this type of attitude that has heightened Toyota's product development capabilities.

With Toyota, it is important to remember, too, that in its product development a system exists that gives widespread authority to its chief engineers. In that system, the company decides on the basic development strategy for a new product, and then the chief engineers move forward with their development. As required, the engineers hold discussions and exchange ideas with personnel in production engineering, purchasing, marketing and other related departments.

In addition, because the skills related to technological development accumulate at each process in the plants and in the production engineering departments, it is possible through discussions to achieve a flexible, speedy product development


process. There are no barriers between departments and everyone involved respects the leadership role and the creativity required of the product development department. This flexible system is what has made it possible over the years for Toyota to achieve so many successes in developing new vehicles and introducing new mechanisms.

The second distinctive characteristic is the Toyota Production System. The Toyota Production System emphasizes the rationalization of production and is based on the concept of the complete elimination of waste. It comprises two principal ideas: Sakichi Toyoda's concept of jidoka for producing quality products at lower cost, and Kiichiro Toyoda's Just-in-Time System. Jidoka refers to building quality into the production process by using machines on the line that stop automatically when they produce anything that is defective, ensuring that defects are not sent on to following processes, and taking immediate measures to prevent the recurrence of defects so as to have the line moving smoothly again. The Just-in-Time System is a flexible means of production that replaces the rigid conventional system oriented solely toward speed and large-scale production. It responds to market changes by producing only the items needed, when they are needed, in the volume needed.

Kiichiro Toyoda felt that in order to produce items as efficiently as possible in a situation where the company had only limited funds and production facilities, a system had to be achieved whereby parts and semi-finished products could be turned over to each production process at exactly the right time they were needed, i.e., "just in time." However, bringing about the Just-in-Time System was not easy; for example, the work operations at all processes had to be performed without any waste or mistakes; later, the same methods gradually had to be introduced to the parts makers. Although introducing the system


was a major challenge, everyone at Toyota, from top management down to individual team members at the worksites, pulled together as a group and met the challenge successfully. The parts makers eventually obtained the same success. Today, the Just-in-Time System is practiced throughout the automobile industry, and the idea has spread to other industries -- even to other countries, where it is widely known as the JIT revolution. At present, Toyota is moving energetically toward making the Just-in-Time System more sophisticated and more creative, keeping pace with current developments in factory automation and information technology.

One of the factors supporting the Toyota Production System, an important factor that also contributed much toward Toyota being able to develop into the company it is today, is stable labor-management relations. Not that such relations were always stable, however; back in 1950, in the context of poor business conditions and moves by Toyota to reduce the size of its work force, a labor dispute broke out. It was the bitter experience of that dispute that subsequently stimulated both parties to make ongoing efforts to achieve a true harmony in their relations. At Toyota, labor-management relations do not simply operate at the level of negotiations between the two parties; they are considered to signify cooperative efforts being made toward the creating and developing of human resources and encouraging of human respect. To achieve those aims, a labor-management council was established in Toyota and meetings at that level have continued over the years. In particular, after the Toyota Labor-Management Declaration in 1962, and the clear expression therein of a spirit of mutual trust between the two parties, communication between labor and management at Toyota became extremely good. Examples of how both parties at Toyota carry out close communication include advance explanations from management to the labor union about important matters such as production and workers'


allocation plans, and moves to improve the working environment in response to requests from union members. It is precisely because of the cooperative relations between labor and management at Toyota, based on an attitude that stresses human respect, that it became possible to introduce and firmly establish the suggestion system, quality control circle activities and the Toyota Production System.

The third distinctive characteristic is the cooperative relationship between Toyota and its suppliers and dealers. Toyota's most important domestic parts suppliers have plants concentrated within a 50-km radius of the company's major plants. Twelve companies in the Toyota Group form the nucleus of those suppliers, including Nippondenso and Toyoda Gosei, which were originally departments within Toyota that developed after being spun off. Indeed, those companies might have remained as part of Toyota had it not been for Kiichiro Toyoda, who felt strongly that if the overall automobile industry was to develop it was essential that the auto parts industry develop too.

Although the relationship between Toyota and the parts makers who supply it is founded on close ties and long-term trust, there remains in it, at the same time, a tough principle of competition. None of the suppliers was unconditionally guaranteed a firm volume of stable orders. A dynamism thus exists in the relationship, born of a tension that exists because the suppliers must compete for business by satisfying customer needs. For example, Toyota often orders parts from several parts makers at the same time, forcing them to compete with one another. Toyota then selects the suppliers with the greatest technological capabilities, whether they are members of the Toyota Group or not and regardless of whether they are domestic or foreign parts makers. Also, as local production overseas has expanded, Toyota has come to place great expectations on overseas suppliers, and it


is placing more large-volume orders with them. As a result, the technological level of those suppliers has improved rapidly, and the suppliers have moved energetically to introduce innovations in technological areas, such as new materials and car electronics.

As for its relations with its dealers, Toyota was the first among the Japanese automakers to build a nationwide dealer network after the Second World War. The company moved actively at that time to gain knowledge and experience which in later years, as it moved to develop the domestic and overseas markets, became the foundation for placing it in a more advantageous position than other automakers. Toyota's powerful marketing capabilities derive from a combination of a systematic collection of market information, quick feedback of market information tied to product development, flexible pricing policies, bold investing when constructing a sales network, enthusiasm for building systems for improving customer servicing, and steady efforts in the area of after-sales service.

Toyota has also made especially strong efforts to overcome national boundaries and differences in viewpoints so as to build a relationship of close cooperation and trust with its distributors and dealers. As a result, the company has itself drawn closer to its distributors and dealers, and the distributors and dealers themselves have drawn closer and learned much from each other.

Considering Toyota's marketing capabilities, we cannot overlook the historical role played by TMS, which was made independent of TMC in 1950. TMS developed unique marketing activities, built a powerful sales organization and in other ways played a vital role in developing the domestic and overseas automobile markets.

After the two oil crises of the 1970s, however, and with the advent of moves toward globalization, the reasons for keeping the TMC and TMS organizations independent became less


important than they had been previously, and in 1982 the two companies were merged. Still, the separation of the two companies for 32 years had resulted in the creation of two organizations with different corporate structures, and there was some concern about possible internal friction in the new organization after the merger. Despite this concern, the merger enabled the new organization to inherit the superior marketing ability that TMS had developed, and the fusion and unification of the two organizations was successful.

As the foregoing shows, TMC has undergone many changes over the years. And today, even as the company celebrates its 50th anniversary, it continues to face important changes. Based on the corporate ideal of providing the benefits of the automobile to as many people as possible around the world, Toyota has made great efforts not only domestically but also in its overseas activities. The trend toward the globalization of business has become more conspicuous in recent years, however, especially since the early 1980s, and Toyota has gradually turned away from simple exports and taken great strides toward promoting local production overseas. In some regions, in fact, Toyota has built networks for knockdown production and is promoting cooperation in local production by transferring technology. In short, Toyota is now much more than one of Japan's top corporations; it is fast becoming a truly international business.

From the standpoint of having participated in the editing of the 50-year history of TMC, a history marked by the tumultuous changes discussed above, I would like to express several hopes I have regarding Toyota as it continues to do business in the future. The principal hope is that Toyota will globalize itself to a higher dimension, while continuing to contribute to the economic development of countries around the world. Against the backdrop of the rapid improvement in international competitiveness that


Toyota has made so far, however, some adverse aspects of its thrust toward high-level efficiency have come to the forefront. By dint of its corporate structure, for example, it tends to be insulated at times; but because it has grown so large and because of the important role it has come to play on the global stage, it has become necessary for it to revise the framework of its behavior patterns and refashion itself into a more open corporation in international society. To achieve the higher dimension of globalization I refer to, Toyota must adopt a global perspective that rises above the type of thinking that is preoccupied with problems such as how to avoid trade friction or how to respond to the yen's appreciation. Toyota must, in short, devise a grand strategy that will allow it to become a truly international automobile manufacturer.

Although the ultimate goal of efforts by Toyota to globalize itself is to become an automaker that is needed and welcomed in world society, there are still many unresolved problems along the way toward achieving this goal that Toyota must challenge boldly. Certainly, the success of overseas production is one critical trial for Toyota, a challenge it must meet and surmount; at the same time, what about the next step toward meeting other challenges?

The first step is for Toyota to ensure that its overseas plants succeed separately, but in the process it must also, through cooperation with the local content program of each developing country, move to build a global network of Toyota affiliates even as it collaborates with overseas manufacturers.

When viewed from the long-term prospects of the twenty-first century, it is inevitable that the automobile markets in the developing countries, including Asian countries on the Pacific Rim, will expand and that, as a result, those countries will make stronger demands related to developing their domestic automobile industries. And when we consider that more countries


will join the ranks of the developing countries in the future, it will be impossible to avoid the increasing necessity to build an intraorganizational network, one that rises above national borders and ties together production points.

Toyota is currently conducting sales and service activities that have become firmly rooted in many developing countries, and it is promoting a high level of local content of parts and components. In the future, however, it must make increased efforts to transfer technology to those countries, contributing, therefore, to their industrialization. It must also reinforce the business foundation of its local subsidiaries and make the efforts needed to foster the development of local companies. Local companies, which can optimize their host-country characteristics, will play an essential role in Toyota's creation of a global network.

As Toyota progresses toward building a global network, it will naturally need to put into order the conditions that will allow it to have mutually beneficial business ties with automakers of the advanced industrialized nations and to cooperate and compete with them at the same time. In addition, Toyota also must formulate an appropriate logistic strategy and create an international network for procuring parts and components, a network tying together the advanced nations and the developing countries. That will probably mean developing an international version of its Kanban System. Needless to say, Japan's parts makers and the use of top-level parts technology will have to play a concomitant role.

In the final analysis, globalization means not only the hybridization of the management system but also the internationalizing of product development and of management itself. Although Toyota is already making progress in overseas product development and in hiring local engineers, that progress remains at the local level. "Internationalization" has not yet extended to the core of areas such as research and product development.

If Toyota is to become a corporation that is truly trusted and


respected around the world, it must return to the basics with which it started and at the same time continue to include in its corporate structure the new ideas described above.

Having candidly expressed my personal hopes for the Toyota of the future in this Afterword, I would like to reiterate that the four years during which I participated in editing this book were years filled with tremendous changes in the circumstances affecting both Japan and the world in general. In that context, we encountered many difficulties, in addition to deriving much enjoyment, as we conducted our widespread activities to collect accurate information, which included carrying out many interviews overseas. Reflecting now on the project, I must say it was most stimulating to have closely reviewed the automobile industry in Japan and the rest of the world through the history of TMC. I would like to express my special appreciation, first of all, to Chairman Eiji Toyoda and President Shoichiro Toyoda for having kindly responded to requests for interviews. I would also like to thank the many other individuals both in Japan and abroad who cooperated so warmly with us in our efforts to collect information for this book.




Toyota Motor Corporation

1 Toyota-cho, Toyota City,
Aichi Prefecture 471, Japan

August 28, 1937

Areas of business
Automobiles, industrial vehicles,
parts and accessories,
rental and leasing, homes and offices

134,537 million yen (as of June 1988)

Net sales
6,691,299 million yen
(84th term: July 1987 to June 1988)

Net income
238,006 million yen
(84th term: July 1987 to June 1988)

Number of employees
65,926 (as of June 1988)



Eiji Toyoda

Chairman of the Board







Shoichiro Toyoda








Tsutomu Ohshima

Executive Vice President

Shiro Sasaki

Executive Vice President

Masami Iwasaki

Executive Vice President

Tatsuro Toyoda

Executive Vice President









Kiyoshi Kimura

Senior Managing Director

Masaharu Tanaka

Senior Managing Director

Shohei Kurihara

Senior Managing Director

Setsuro Sekiya

Senior Managing Director

Mitsuya Kaneko

Senior Managing Director

Fumio Agetsuma

Senior Managing Director

Toshimi Onishi

Senior Managing Director

Hiroshi Okuda

Senior Managing Director

Yoshiro Kimbara

Senior Managing Director







Masaaki Ohashi

Managing Director

Hiroshi Hasegawa

Managing Director

Eiichi Kumabe

Managing Director

Tadashi Ohnishi

Managing Director

Junji Numata

Managing Director

Akira Takahashi

Managing Director

Iwao Isomura

Managing Director

Kenzo Tamai

Managing Director





Kan Higashi


Tokio Horigome


Shoji Jimbo


Masanao Shiomi


Iwao Okijima


Hiroshi Chiwa


Akihiro Wada


Hideo Ikenaga


Shigeji Tsuji


Masami Konishi


Katsuro Nakamura


Fujio Cho


Iichi Shingu


Kosuke Ikebuchi


Takamitsu Suzuki


Mamoru Kaida


Terukazu Inoue


Shinji Sakai


Kenichi Kato


Shinichi Kato


Akira Yokoi


Katsumoto Fujita


Kanji Kurioka


Tadaaki Jagawa


Hiroshi Kousaka


Junichi Yoshikawa






Board of Auditors




Hideyo Tamura


Yoshitoshi Toyoda


Tamotsu Arashima


Yoshiho Yasuhara


Akira Kisaki







Passenger cars



Various names are used for models marketed overseas; some of the principal names are listed above.



Forklift trucks
Engine-powered and electric-powered forklifts

Shovel loaders
Skid-steer loaders

Shovel loaders

Other industrial vehicles
Towing tractors Aerial work platforms.

Unmanned transport systems
Pallet-type conveyers Tractors

Vehicles for delivery
Burden carries (for in-house use) Hand pallet trucks Manual stackers

Environmental control equipment
Cleaning vehicles Industrial air conditioners Far infrared radiation heaters


Service parts
Mechanical and maintenance parts (spark plugs, oil filters, etc.) Collision parts (bumpers, fenders, etc.) Other general replacement parts

Air conditioners Car audio systems Clocks Mirrors Mud guards

Oil and chemical products
Motor oil Automatic transmission fluid


Rental and leasing
Rental and leasing of Toyota automobiles (including industrial vehicles)


Private homes
Kodachi, Oak, New Aspen, Elm, Cedar, My Life, Serrata, PC

Housing complex
Maison Serrata

Offices and shops
Toyota Offices and Shops

Housing members
Interior products



Canada Office
2000 Argentia Road, Plaza 4, Suite 400,
Missisauga, Ontario, Canada L5N 1W1

U.S. Office
45th Floor, Solow Building, 9 West 57th Street,
New York 10019, U.S.A.

Washington Branch Office
1850 M Street N.W., Suite 600, Washington,
D.C. 20036, U.S.A.

Detroit Branch Office
4000 Town Center, Suite 1550, Southfield,
Michigan 48075, U.S.A.

Lexington Branch Office
771 Corporate Drive, Suite 800, Lexington,
Kentucky 40503, U.S.A.

San Francisco Office
951 Mariner's Island Boulevard, Suite 600,
San Mateo, California 94404, U.S.A.

San Juan Representative Office
Suite 1103, Bankers Finance Tower, Hato Rey,
Puerto Rico 00918

Caracase Representative Office
c/o Compania Anonima Tocars
Edificio Cars, Avenida Los Ilustres,
Los Chaguaramos, Caracas 101, Venezuela

Europe Office
191-197, Boulevard du Souverain,
1160 Brussels, Belgium

Technical Center of Europe Office
Bedrijifspark Weyveld, Hoge Wei 33 1930,
Zaventem, Belgium

Hannover Representative Office
Desbrocksriede 1 3012, Langenhagen,
Federal Republic of Germany

Paris Branch Office
c/o S.I.D.A.T. Toyota France
3 Rue de Normandie, 92601 Asnieres Cedex,

Rome Branch Office
c/o Toyota Italiana S.R.L.
Piazza Pio XI, 62, 00165, Rome, Italy

Porto Representative Office
c/o Salvador Caetano I.M.V.T., S.A.
Apartado 51, 4401 Vila Nova de Gaia Codex,

Madrid Branch Office
c/o Nipauto S.A.
Plaza Canovas del Castillo 4-6A, Planta 28014,
Madrid, Spain

London Office
International House, World Trade Centre,
1 St. Katharine's Way, London E 19 UN,
United Kingdom

Australia Office
c/o Toyota Motor Corporation Australia Ltd.
P.O. Box 63, Altona North, Victoria 3025,

Beijing Representative Office
Room No. 1808, 1809
China Science and Technology Exchange
Center Commercial Building 22 Jianguo Menwai
Dajie, Beijing, People's Republic of China

Guangzhou Office
Room No. 2666, Dong Fang Hotel,
Xicun Gong Lu, Guangzhou, People's Republic
of China

Kuala Lumpur Representative Office
c/o UMW Toyota Motor Sdn. Bhd.
Lot 5, Jalan 219, Federal Highway, 46100
Petaling Jaya, Selangor, Malaysia

Singapore Representative Office
c/o UMW Equipment Systems Pte. Ltd.
47-C Jalan Buroh, Singapore 2261, Singapore

Taiwan Office
9th Floor, No. 142, Chung Hsiao East Road,
Section 4, Taipei, Taiwan

New Delhi Representative Office
Kanchenjunga Building 1st Floor,
18-Barakhamba Road, New Delhi-110001, India

Jeddah Representative Office
P.O. Box 248, 222, Prince Majed Street, Jeddah,
Saudi Arabia

Johannesburg Representative Office
c/o Toyota Marketing Co., (Pty.) Ltd.
P.O. Box 481, Stand No. 1 Wesco Park, Sandton,
Bergvlei, Transvaal 2012, South Africa

Durban Representative Office
c/o Toyota South Africa Manufacturing Ltd.
P.O. Box 26070, Isipingo Beach, Natal 4115,
South Africa




  1. Toyota Canada Inc.
    1291 Bellamy Road, North Scarborough,
    Ontario, Canada M1H 1H9
  2. Toyota Motor Sales, U.S.A., Inc.
    19001 South Western Avenue, P.O.Box 2991
    Torrance, California 90509, U.S.A.
  3. Toyota Motor Distributors, Inc.
    19001 South Western Avenue, P.O. Box 2991
    Torrance, California 90509, U.S.A.
  4. Gulf States Toyota Inc.
    7701 Wilshire Place Drive, P.O. Box 40306,
    Houston, Texas 77240-0306, U.S.A.
  5. Mid-Atlantic Toyota Distributors, Inc.
    Toyota building, 6710 Baymeadow Dr. P.O.
    Box 1030, Glen Burnie Maryland 21061,
  6. Southeast Toyota Distributors, Inc.
    100 N.W. 12th Avenue, P.O. Box 1160,
    Deerfield Beach, Florida 33441, U.S.A.
  7. Servco Pacific Inc.
    2850-A Pukoloa Street, Honolulu, Hawaii
    96819, U.S.A.


  1. Harney Motors Ltd.
    P.O.Box 158, Factory and American Roads,
    St. Johns, Antigua and Barbuda
  2. ORO Automotores S.A.I.C.I.Y.F.
    Goday Cruz 3056 Capital Federal, Buenos
    Aires, Argentina
  3. Equipos y Materiales S.A.C.I.
    Lisandro de La Torre 5475, 1439, Buenos
    Aires, Argentina
  4. Garage Cordia Aruba N.V.
    L.G. Smith Boulevard 114, Oranjestad, Aruba,
    Netherlands Antilles
  5. American British Canadian Motors Ltd.
    P.O. Box N1382, John F. Kennedy Road,
  6. National Automotive Sales & Service Co., Ltd.
    P.O. Box 73, Chepstow River RD. St. Michael,
  7. Simpson's Engineering & Industrial Ltd.
    P.O. Box 1315, Harmony Hall, St. Michael,
  8. The Bermuda Co.
    P.O. Box 454, Church Street, Hamilton 5-23,
  9. Toyota Boliviana Ltda.
    Casilla Postal 3121, Avenida Montes
    Nos 424-444, La Paz, Bolivia
  10. Toyota do Brasil S.A., Indústria e Comércio
    Caixa Postal 3488, Avenida Piraporinha
    No. 1111, São Bernardo do Campo, São
    Paulo, Brazil
  11. Empilhadeiras Toyota S.A.
    Avenida Victor Andrew, 585-CEP 18100,
    Sorocaba, São Paulo, Brazil
  12. Distribuidora Toyota Chile Ltda.
    Clasificador 195, Avenida Américo
    Uespucio Norte 98, Rotonda Pudahuel con, Camino a Ualparaiso,
    Santiago, Chile
  13. S.K. Comercial S.A.
    Casilla 13960, Panamericana Norte 5151,
    Santiago, Chile
  14. Distribuidora Toyota Ltda.
    Apartado Aereo 14024, Calle 13, No. 42-45,
    Bogota, Colombia
  15. Purdy Motor S.A.
    Apartado 2884, Calle 36 y Paseo Colon,
    San Jose, Costa Rica
  16. H.T. Purdy Inc., S.A.
    Apartado 750, La Uruca Frente a Pozuelo,
    San Jose, Costa Rica
  17. Garage Cordia N.V.
    Erieweg 39, Zeelandia, Curacao, Netherlands
  18. SAG Motors Co., Ltd.
    P.O.Box 297, Roseau, Commonwealth of
  19. Delta Comercial C. por A.
    Apartado de Correo 1376, Avenida John F.
    Kennedy, Santo Domingo, Dominican
  20. 471

  21. Casabaca S.A.
    Apartado No. 55-A, Avenida 10 de Agosto
    1865, Quito, Ecuador
  22. "SICO", Sociedad Industrial y Comercial, C.A.
    Casilla 972, 9 de Octubre y Garcia Moreno
    806 Guayaquil, Ecuador
  23. Importadora Tomebamba S.A.
    P.O. Box 896, Gran Colombia y Mariano
    Cueva Cuenca, Ecuador
  24. Morisaenz S.A.C.
    Apartado 625, Avenida 10 de Agosto 6398,
    Quito, Ecuador
  25. Distribuidora de Automoviles, S.A.
    Calle Ruben Dario 1117, San Salvador,
    El Salvador
  26. Nouveau Comptoir Caraibe d'Importation et d'Exportation
    P.K. 2, Route de Boduel, Cayenne 97300,
    French Guiana
  27. Cayman Economy Cars Ltd.
    P.O. Box 1084, Walkers Road,
    Grand Cayman, British West Indies
  28. Steele's Auto Supplies Co., Ltd.
    P.O. Box 406, River Road, St. Georges,
  29. CARMO S.A.
    Rue H. Becquerel, Z/l De Houelbourg-Jarry 97122 Bain-Mahault Pointe-a-pitre,
    Guadeloupe, French West Indies
  30. Cofiño Stahl y Compañia Ltda.
    10a Avenida 31-71, Zona 5, Ciudad de
    Guatemala City, Guatemala
  31. Tecun S.A.
    3a, Avenida 3-21, Zona 9, Guatemala City,
  32. Guyana National Engineering Co., Ltd.
    3-9 Lombard Street, Charlestown,
    Georgetown, Guyana
  33. Hinoto S.A.
    P.O. Box 575-1, 25 Rue Delmas, Port-Au-
    Prince, Haiti
  34. Valentin Flores & Cia, S. de R.L.
    Apartado 96-C, Via Puente, San Jose
    Clonia El Prado, Tegucigalpa, D.C.,
  35. United Motors Ltd.
    P.O. Box 384, 427 Spanish Town Road,
    Kingston 11, Jamaica
  36. Comptoir Caraibe d'Importation et d'Exportation
    Voie No. 2, Zone Industrielle 97232, Lamentin
    Martinique, French West Indies
  37. Montacargas Orientales, S.A. de C.V.
    Diana N.32 Nva Industrial Vallejo 07700
  38. Sales & Services Ltd.
    P.O. Box 437, Dagenham, Montserrat,
    British West Indies
  39. F. Alf. Pellas & Cia.
    Apartado 46, Casa Pellas, Managua, D.N.,
  40. Auto Nica S.A.
    Apartado 1595, Kilometro 3 1/2, Carretera
    Sur Managua, Nicaragua
  41. Transporte y Equipo S.A.
    Apartado 6-595 El Dorado, Via Simon
    Bolivar-Los Angeles, Panama
  42. Ricardo Perez S.A.
    Apartado 2317, Via Brasil y Calle Samuel
    Lewis, Panama
  43. Toyotoshi S.A.
    Avenida Mariscal Lopez 2801/2899,
    Asuncion, Paraguay
  44. Toyota del Peru S.A.
    P.O. Box 4951, Las Begonias 441, 11 Piso,
    San Isidro, Lima, Peru
  45. Vehiculos Industriales Toyota S.A.
    Apartado 4615, Jiron Rebeca Oquendo
    472, Breña, Lima, Peru
  46. Gomez Hermanos, Inc.
    P.O. Box 1288, 573 Muñoz Rivera Avenida,
    Stop 35, Hato Rey, Puerto Rico
  47. St. Kitts Nevis Anguilla Trading and Development Co., Ltd.
    P.O. Box 142, Fort Street, Basseterre,
    St. Kitts
  48. Beachcomber Ltd.
    P.O. Box 930, Vide Boutielle, Castries,
    St. Lucia
  49. F.W. Vlaun & Son N.V.
    P.O. Box 33, Philipsburg, St. Maarten,
    Netherlands Antilles
  50. 472

  51. Star Garage Ltd.
    P.O. Box 144, Grenville Street, Kingstown,
    St. Vincent
  52. CHM Suriname N.V.
    P.O. Box 1819, 2-14 Dr. Sophie, Redmond
    Street, Paramaribo, Suriname
  53. Amar Auto Supplies '85 Ltd.
    177 Tragarete Road, Port of Spain, Trinidad &
  54. Ayax S.A.
    Casilla de Correo 1903, Avenida Rondeau
    1751, Montevideo, Uruguay
  55. Compañia Anonima Tocars
    Edificio Cars, Avenida Los Ilustres,
    Los Chaguaramos, Caracas, Venezuela
  56. Industrias Modicar, C.A.
    Edificio Cars, Avenida Los Ilustres,
    Los Changuaramos, Caracas, Venezuela


  1. Toyota Frey Austria GmbH
    1040 Wien, Wiedner Guertel 2, Austria
  2. Intropa AG Industrie-und Handels-Aktiengesellschaft
    Postfach 89, Mantlergasse 30, A-1131 Wien
    13, Austria
  3. N.V. International Motor Company S.A.
    Culliganlaan 1, 1920 Diegem, Belgium
  4. Toyota Tsusho Europe S.A.
    44 Rue Van Eyck, Bruxelles 1050, Belgium
  5. Dickran Ouzounian & Co., Ltd.
    P.O. Box 1567, Grivas Dighenis Avenue,
    Nicosia, Cyprus
  6. Toyota Danmark A/S
    Dynamovej 10, 2730 Herlev, Denmark
  7. Thrige Industri A/S
    Skibhusvej 42, DK-5000 Odense C,
  8. Korpivaara Oy
    P.O. Box 12, 01451 Vantaa 45, Finland
  9. Société d'Importation et de Distribution des Automobiles Toyota
    3 Rue de Normandie 92601 Asnières Cedex,
  10. Compagnie Française de Manutention
    Zone Industrielle, Boulevard Pierre et Marie
    Curie, 44150-Ancenis, France
  11. Toyota Deutschland GmbH
    Bachemer Landstrasse 2, 5000 Köln 40
    Marsdorf, Federal Republic of Germany
  12. Tomen Transportgeräte GmbH
    Am Wimmersberg 14, 4006 Erkrath 1,
    Federal Republic of Germany
  13. Toyota (Gibraltar) Distributor Ltd.
    22 Devil's Tower Road, REG. No. 4154,
  14. Toyota Hellas A.E.
    168, Kifissou Avenue 121-31 (Peristeri),
    Athens, Greece
  15. P. Samuelsson & Co. HF.
    Nybylavegur 8, 200 kopavogur, Iceland
  16. Toyota (Ireland) Ltd.
    Toyota House, Killeen Road, Dublin 12,
  17. Toyota Italiana S.R.L.
    Piazza Pio Xl, 62, 00165, Rome, Italy
  18. C.I.M.I. S.P.A.
    Via Degli Speziali Blocco 33, 40050
    Centergross (Bologna), Italy
  19. Michael Debono
    Notabile Road, Zebbug, Malta
  20. Louwman & Parqui B.V.
    P.O. Box 212 4940 AE, Steurweg 8, 4941,
    VR Raamsdonksveer, Netherlands
  21. Nederlandse Industrie-en Bouwmachine Maatschappij B.V.
    P.O. Box 269 2800AG, Deventerweg 9,
    2803 MA Gouda, Netherlands
  22. F.E. Dahl & Co. A/S
    P.O. Box 665, Svelvikvn, 59, Tangen, 3002
    Drammen, Norway
  23. Rishaug Maskin A/S
    P.O. Box 1813-Jarlesletta, Haakon Vll's gt.
    23C, 7001 Trondheim, Norway
  24. Salvador Caetano I.M.V.T., S.A.
    Apartado 51, 4401-Vila Nova de Gaia Codex,
  25. Nipauto S.A.
    Plaza Canovas del Castillo 4-6A, Planta
    28014, Madrid, Spain
  26. 473

  27. Europman, S.A.
    Plaza Canovas del Castillo 4-6A, Planta
    28014, Madrid, Spain
  28. Toyota Autoimport AB
    P.O. Box 103, S-17223 Sundbyberg, Sweden
  29. Atlet AB
    P.O. Box 138, S-43501 Moelnlycke, 1, Sweden
  30. Toyota AG
    5745 Safenwil, Switzerland
  31. Toyota (G.B.) Ltd.
    The Quadrangle, Redhill, Surrey, United
    Kingdom RH1 1PX
  32. Liftrucs Ltd.
    Gelderd Road, Gildersome Morley, Leeds
    LS27 7JX, Yorkshire, United Kingdom


  1. Burns Philp (South Sea) Co., Ltd. American Samoa Branch
    P.O. Box 129, Pago Pago, American Samoa
  2. AMI Toyota Ltd.
    155 Bertie Street, Port Melbourne, Victoria
    3207, Australia
  3. Toyota Motor Sales Australia Ltd.
    2-28 Alexander Avenue, Taren Point, N.S.W.
    2229, Australia
  4. NBT (Brunei) Sdn. Bhd.
    P.O. Box 3, Miles 2 1/2, Jalan Gadong,
    Bandar Seri Begawan 1900, Brunei
  5. Pacific Motors Ltd.
    Avarua, Rarotonga, Cook Islands,
    South Pacific
  6. ASCO Motors, Burns Philp (South Sea) Co., Ltd.
    G.P.O. Box 355, Queens Road, Walubay,
    Suva, Fiji
  7. Atkins Kroll, Inc.
    443 South Marine Drive, Tamuning, Guam
  8. Crown Motors Ltd.
    Crown Motors Building, 1063 King's Road,
    Quarry Bay, Hong Kong
  9. P.T. Toyota-Astra Motor
    Jalan Jenderal Sudirman No. 5, Jakarta,
  10. P.T. Traktor Nusantara
    Jalan Laksda Yos Sudarso, Jakarta Utara,
  11. Tarawa Motors, Bairiki Holdings Ltd.
    P.O. Box 36, Bairiki, Tarawa, Kiribati
  12. UMW Toyota Motor Sdn. Bhd.
    Lot 5, Jalan 219, Federal Highway, 46100
    Petaling Jaya, Selangor, Malaysia
  13. UMW Industries (1985) Sdn. Bhd.
    P.O. Box 52, 40700, Shah Alam, Selangor,
  14. Service Importation Automobile du Pacifique
    B.P. 438, Rond-Point du Pacifique (Station
    Total), Noumea, New Caledonia
  15. Toyota New Zealand Ltd.
    P.O. Box 13149, 125-137 Johnsonville Road,
    Johnsonville, Wellington, New Zealand
  16. Andrews & Beaven Industrial Equipment Ltd.
    P.O. Box 23, 151, Corner Lambie and
    Cavendish Drives, Manukau City, Auckland,
    New Zealand
  17. Borry's Pty. Ltd.
    P.O. Box 169, Taylors Road, Burnt Pine,
    Norfolk Island, South Pacific
  18. Microl Corporation
    P.O. Box 267, Chalan Monsignor Guerrero
    Road, San Jose, Saipan, MP96950
  19. Ela Motors, Burns Philp (PNG) Co., Ltd.
    P.O. Box 75, Scratchley Road, Badili,
    Port Moresby, Papua New Guinea
  20. Toyota Motor Philippines Corporation
    Kilometer 15, South Superhighway,
    Paranãque, Metro Manila, Philippines
  21. Philippine Forklift Center Inc.
    2nd Floor JM Building, South Superhighway
    Cor. Rockefeller Street, Makati, Metro Manila,
  22. Borneo Motors (Singapore) Pte. Ltd.
    33, Leng Kee Road, Singapore 0315,
  23. UMW Equipment Systems Pte. Ltd.
    47-C Jalan Buroh, Singapore 2261,
  24. 474

  25. Solomon Islands Investments Ltd.
    G.P.O. Box 140, Hibiscos Avenue, Honiara,
    Solomon Islands
  26. Nippon Automoto
    B.P. 342, Avenue Georges Clemenceau,
    Mamao, Papeete, Tahiti
  27. Ho Tai Motor Co., Ltd.
    13F No. 121, Sung Chiang Road, Taipei,
  28. Toyota Motor Thailand Co., Ltd.
    P.O. Box 520, 180 Surawongse Road,
    Bangkok 10500, Thailand
  29. Toyota Tsusho (Thailand) Co., Ltd.
    P.O. Box 494, 19-1 Asoke-Dindaeng Road,
    Moo 8, Thumbul Samsen-Nai, Amphur
    Phayathai, Bangkok 10400, Thailand
  30. Burns Philp (Tonga) Co., Ltd.
    P.O. Box 55, Taufa'ahau Road, Mailetaha,
    Nuku'alofa, Tonga
  31. Vanuatu Motors, Burns Philp (Vanuatu) Co., Ltd.
    P.O. Box 18, Kumul Highway, Port Vila,
  32. Burns Philp (South Sea) Co., Ltd. Western Samoa Branch
    P.O. Box 1856, Savalalo, Apia,
    Western Samoa


  1. Mir's Service Ltd.
    P.O. Box 3060, Shabodin Maidan, Kabul,
  2. Ebrahim Khalil Kanoo W.L.L.
    P.O. Box 19, Building No. 42, Shaikh
    Mohammad Avenue, Manama 302, Bahrain
  3. Navana Ltd.
    Islam Chamber, 125/A Motijheel
    Commercial Area, Dhaka-2, Bangladesh
  4. Toyota Egypt S.A.E.
    Tarsana Trade Center, Omer El Gizawi
    Street, Mohandesseen-Agoza-Giza, Egypt
  5. Middle East Trading & Engineering Co., Ltd.
    6, lbn Malek street, Giza, Egypt
  6. DCM Toyota Ltd.
    1st Floor, Kanchenjunga Building, 18-
    Barakhamba Road, New Delhi-110001, India
  7. Byford Ltd.
    A-21/18, Naraina Industrial Area, Phase-II,
    New Delhi-110028, India
  8. Ismail Bilbeisi & Co.
    P.O. Box 213, King Hussein Street, Amman,
  9. Mohamed Naser Al-Sayer & Sons Est.
    P.O. Box 485, Plot No. 1157, 4th Ring Road,
    Al-Rai Area, Kuwait
  10. General Machineries Company S.A.L.
    P.O. Box 156, Hazmieh, Lebanon
  11. Toyota Maroc S.A.
    64 Building Zerktouni, Casablanca, Morocco
  12. Forges de Bazas S.A.
    31 Rue de Bazas, Casablanca, Morocco
  13. United Traders Syndicate Pvt., Ltd.
    P.O. Box 233, Toyota House, Lazimpat,
    Kathmandu, Nepal
  14. Suhail & Saud Bahwan
    P.O. Box 6168, A'Romelah Street, Wattayah,
    Muscat, Sultanate of Oman
  15. Pakistan Motorcar Company (Pvt.) Ltd.
    Ground Floor, Baharia Complex Moulvi
    Tamizuddin Khan Road, Karachi, Pakistan
  16. Modern Motors (Pvt.) Ltd.
    P.O. Box 8505, Modern Motors House,
    Beaumount Road, Karachi-4, Pakistan
  17. Abdullah Abdulghani & Bros., Co. W.L.L., Abdullah, Abduljaleel & Abdulghani Al Abdulghani
    P.O. Box 1321, Building No.61, A Ring Road,
    Toyota Round About, Doha, Qatar
  18. Abdul-Latif Jameel Co., Ltd.
    P.O. Box 248, 222, Prince Majed Street,
    Jeddah, Saudi Arabia
  19. Freudenberg & Co., (Ceylon) Ltd.
    P.O. Box 768, 4th Floor Sarathi Building,
    50 Hyde Park Corner, Colombo-2, Sri Lanka
  20. Golden Arrow Co., Ltd.
    P.O. Box 465, Sharie El Zubeir Pasha,
    Next to Acropole Hotel, Khartoum, Sudan
  21. 475

  22. Toksan Dis Ticaret A.S.
    Selahattin Pinar Sokak No. 4/A-B
    Mecidiyekoy, Istanbul, Turkey
  23. Al-Futtaim Motors
    P.O. Box 11052, Room No. 203, 2nd Floor,
    Al-Futtaim Tower, Al-Maktoum Street,
    Jamal Abdul Naseer Square, Deira, Dubai,
    United Arab Emirates
  24. Omer Ahmed Omer Bazara
    P.O. Box 284, 2/21 St., Taiz Road, San'a,
    Yemen Arab Republic


  1. CICA Benin
    B.P. 27, Place du Marche Central Cotonou,
  2. CFAO Benin Agence Centrale
    B.P. 908, Avenue P. Delorme Cotonou,
  3. Compagnie de Distribution Automobile et de Matériel
    B.P. 1317, Rue Brunel, Ouagadougou,
    Burkina Faso
  4. Toyota Burundi S.P.R.L.
    B.P. 960, Avenue Uprona No. 1, Bujumbura,
  5. Cameroon Motors Industries
    B.P. 1217, Rue Pau, Douala, Cameroon
  6. CFAO Cameroon Agence Centrale
    B.P. 911, Rue Joffre et Silvani, Douala,
  7. Blandy Tenerife, S.A.
    Apartado 176, 38080 Santa Cruz de Tenerife,
    Canary Islands
  8. Importaciones Canarias, S.A.
    Eufemiano Fuentes Cabrera, 11 Miller Bajo,
    Las Palmas de Gran Canaria, Canary Islands
  9. Blandy Brothers y Cia., S.A.
    Apartado 24, 35080, Las Palmas
    de Gran Canaria, Canary Islands
  10. CFAO Agence Centrale Bangui
    B.P. 853, Bangui, Rue des Missions,
    Central Africa
  11. Sociêtê Nel Import Export
    B.P. 159, Mamoutzou, lle Mayotte
    (Comoros Islands)
  12. CFAO Congo
    B.P. 247, Avenue du Camp, Brazzaville,
  13. Premoto S.A.
    B.P. 630, 15, Abidjan 15, Côte d'lvoire
  14. CFAO Côte d'lvoire Agence Centrale
    B.P. 2114, Rue Pasteur, Abidjan, Côte d'lvoire
  15. Etablissements Marill
    B.P. 57, 8, Rue Marchand, Djibouti, Djibouti
  16. The Motor & Engineering Company of Ethiopia Ltd.
    P.O. Box 5727, Ros Abebe, Aregai Street,
    Addis Ababa, Ethiopia
  17. SCOA Gabon S.A. Gamatec
    B.P. 31, Boulevard Bessieux, Libreville,
  18. CFAO Gabon Agence Centrale
    B.P. 2181, Oloumi, Libreville,
  19. CFAO Gambia
    P.O. Box 297, Wellington Street, Banjul,
  20. Ghamot Company Limited
    P.O. Box 1644, Ring Road, West Industrial
    Area, Accra, Ghana
  21. J.Da Costa Pinheiro
    Caixa Postal No. 273, Rue de Boé No.12E,
    Bissau, Guinea Bissau
  22. Motor Mart Group Ltd.
    P.O. Box 49794, Motor Mart Building, Uhuru
    Highway/Lusaka Road, Nairobi, Kenya
  23. Elias Brothers Co., Ltd.
    P.O. Box 1, Tubman Boulevard, Sinkor,
    Monrovia, Liberia
  24. Sociêtê Malagasy Distribution Toyota (Raboana & Fils)
    23 Avenue V, Rainibestimisaraka 23,
    Tananarive, Madagascar
  25. Mobile Motors Ltd., Malawi
    P.O. Box 430, Kumuzu Highway, Blantyre,
  26. Distribution Automobile Malienne
    B.P. 1655, Quartier Quinzabougou Bamako,
  27. 476

  28. Compagnie de Distribution Import Export S.A.
    B.P. 4965, Nouakchott, Mauritania
  29. The Beechand Co., Ltd.
    47-49, Brabant Street, Port Louis, Mauritius
  30. Toyota de Moçambique, L da
    P.O. Box 1757, Rua do Lago Amaramba,
    141 Maputo, Mozambique
  31. CFAO Niger Agence Centrale
    B.P. 11546, Zone Industrielle Route de
    l'aeroport, Niamey, Niger
  32. R.T. Briscoe (Nigeria) Ltd.
    P.O. Box 2104, 8, Fatai Atere Way, Matori
    Oshodi Lagos, Nigeria
  33. Elizade Nigeria Ltd.
    P.M.B. 21393, 71, Obafemi Awolowo Way,
    lkeja, Lagos, Nigeria
  34. Soreda-C.M.M.
    B.P. 142, 78, Rue Leopold Rambaud, 97490
    Sainte Clotilde, lle de la Reunion
  35. La Rwandaise.
    P.O. Box 713, Avenue de la Pax, Kigali,
  36. Société de Distribution Automobile Senegalaise
    B.P. 3106, 30, Avenue du President Lamine,
    Gueye, Dakar, Senegal
  37. Allied Agencies Ltd
    P.O. Box 345, Francis Rachel Avenue,
    Mahe, Seychelles
  38. Baydoun & Abess
    P.O. Box 242, No. 38, Kissy Bye Pass Road,
    Kissy, Freetown, Sierra Leone.
  39. Marill Somalia Ltd.
    P.O. Box 902, Bondhere District,
    Mogadishu, Somalia
  40. Toyota Marketing Co., (Pty.) Ltd.
    P.O. Box 481, Stand No. 1 Wesco Park,
    Sandton, Bergvlei, Transvaal 2012,
  41. Saficon Industrial Equipment (Pty.) Ltd.
    P.O. Box 982, 39 Forge Road, Spartan,
    Isando 1600 Transvaal, South Africa
  42. The International Motor Mart Ltd.
    P.O. Box 9060, Sokoine Drive,
    Dar-Es-Salaam, Tanzania
  43. Tchad Motor Industries
    B.P. 455, Avenue Felix Eboue, N'djamena,
  44. Agence Centrale Autos/Mi
    B.P. 1246, 7, Avenue du 24, Janvier, Lome,
  45. CFAO Togo Agence Centrale
    B.P. 1246, Lome, Togo
  46. Walusimbi's Garage Ltd.
    P.O. Box 1148, 13/15 de Winton Road,
    Kampata, Uganda
  47. Agence Africaine de Distribution de Materiel S.Z.R.L.
    B.P. 2200, 17, Avenue Général Bobozo,
    Kinshasa, Zaire
  48. Mobile Motors Zambia Ltd.
    P.O. Box 33438, Chandwe Musouda Road,
    Light industrial Area, Lusaka, Zambia
  49. Mobile Motors (Pvt.) Ltd.
    P.O. Box UA 450, 1 George Drive Msasa,
    Harare, Zimbabwe
  50. Willowvale Motor Industries (Pvt.) Ltd.
    P.O. Box ST 520, Southerton,
    Degenham Road Willowvale, Harare,
  51. Forklift Services (Succrs) (Pvt.) Ltd.
    P.O. Box 4613, Southerton, CNR Lobengula
    Highfield Roads, Harare, Zimbabwe






Sakichi Toyoda born in Kosai, Shizuoka Prefecture




Sakichi Toyoda completes the Toyoda power loom




Sakichi Toyoda establishes Toyoda Spinning & Weaving Co., Ltd.




Sakichi Toyoda establishes Toyoda Spinning & Weaving Works in Shanghai




Toyoda Automatic Loom Works, Ltd. established




Patent royalty agreement signed with Platt Brothers & Co., Ltd. of the U.K.




Automobile Department established within Toyoda Automatic Loom Works




First Type engine completed




First Model A1 passenger car prototype completed




First Model G1 truck completed




The Toyoda Precepts established




Production of the Model AA passenger car begins




Kariya Assembly Plant begins operation




Shibaura Laboratory established




Four G1 trucks exported to Northeast China (first export shipment)




Toyota Motor Co., Ltd. (TMC) established; Risaburo Toyoda appointed first president




Koromo Plant begins operation




The Kyoryoku Kai (Supplier Cooperation Group) established




Toyoda Steel Works, Ltd. (present Aichi Steel Works, Ltd.) established




Kiichiro Toyoda appointed president




Toyota Machine Works, Ltd. established




TMC merges with Chuo Spinning Company




Toyota Shatai Kogyo, Ltd. (present Toyota Auto Body Co., Ltd.)




Toyota Motor Koromo Labor Union formed




Production of the Model SA passenger car begins




Export of BM truck to Okinawa and SA car to Egypt (first postwar export shipment)




Nippondenso Co., Ltd. established




Distributor agreement signed with Ho Tai Company Ltd. of Taiwan
(present Ho Tai Motor Co., Ltd.)




Toyota Motor Sales Co., Ltd. (TMS) established; Shotaro Kamiya
appointed president




Labor dispute erupts




Minsei Spinning Co., Ltd. (present Toyoda Spinning & Weaving
Co., Ltd.) established




Labor dispute ends




First three Model SB trucks exported to Costa Rica (first export
shipment to Latin America)




Taizo Ishida appointed president




First special procurement order, for 1,000 vehicles, received from
the U.S. military




Five-year plan for modernizing production facilities begins




Creative Ideas and Suggestions System established




2,000-ton press begins operation




Model BJ 4WD vehicle marketed




100 Model FX trucks exported to Brazil




Distributor agreement signed with Distribuidora de Automoviles,
S.A. of El Salvador




Model BJ 4WD vehicle named Land Cruiser




Model SKB light truck marketed




Toyota Technical Center building completed




Crown marketed




Distributor agreement signed with Abdul-Latif Jameel Co., Ltd. of
Saudi Arabia




TMS's first overseas posting to São Paulo, Brazil




Contract signed for loan of $2.35 million from the World Bank




Distributor agreement signed with Mohamed Naser Al-Sayer &
Sons Est. of Kuwait




First two Land Cruisers exported to Venezuela




Model LA forklift marketed, Toyota enters the industrial vehicle field




Model SKB light truck named Toyoace




Land Cruisers and other models exported to Burma as part of automobile war compensation




First Land Cruiser exported to Malaysia




First transfer machine begins operation




Distributor agreement signed with Ismail Bilbeisi & Co. of Jordan




First six Land Cruisers exported to Puerto Rico




Distributor agreement signed with Al-Futtaim Motors of Dubai




TMS Bangkok Office opens in Thailand




First 12 Crowns and other models exported to Ethiopia




First six Land Cruisers exported to Peru




TMS establishes Chubu Nippon Drivers' School




First Crown exported to India




Corona marketed




Two sample Crowns exported to the U.S.




Toyota Motor Sales, U.S.A., Inc. established




Toyota do Brasil S.A., Indústria e Comércio established in Brazil




Toyota Motor Distributors, Inc. established in the U.S.




Distributor, agreement signed with Service Motor Company of
Hawaii (present Servco Pacific Inc.)




Sample forklift exported to Thailand




Land Cruiser assembly begins at Toyota do Brasil of Brazil




Distributor agreement signed with Thiess Sales Pty., Ltd.
of Australia




Motomachi Plant begins operation




CKD export contract signed with Planta Reo S/A of Mexico
(terminated Sept. 1964)




Distributor agreement signed with Car Motor Bhd. of Malaysia
(terminated Feb. 1974)




Toyota Central Research & Development Laboratories, Inc.




Corona, Crown and large-truck assembly begin at Planta Reo of Mexico (terminated 1963)




Passenger car exports to the U.S. temporarily halted




Publica (Toyota 700) marketed




Decision made to adopt the TQC system throughout the company




Fukio Nakagawa appointed president




Distributor agreement signed with Toyopet Commercials (Pty.) Ltd.
of South Africa [present Toyota Marketing Co., (Pty.) Ltd.]




TMS establishes Export Headquarters




Labor-Management Declaration signed with Toyota Motor
Workers' Union




CKD export contract signed with Delta Motor Corp. of the
Philippines (terminated March 1984)




Stout assembly begins at Motor Assemblies Ltd. of South Africa
(present Toyota South Africa Manufacturing Ltd.)




CKD export contract signed with Compania Anonima Tocars of Venezuela




Toyota Motor Thailand Co., Ltd. (TMT) established in Thailand




CKD export contract signed with Australian Motor Industries Ltd.
(AMI) of Australia




First Crown exported to Denmark




Land Cruiser assembly begins at Ensamblaje Superior S.A. of Venezuela




Tiara assembly begins at AMI of Australia




Distributor agreement signed with Erla Auto Import A/S of
Denmark (present Toyota Danmark A/S)




Distributor agreement signed with Westlands Motors Ltd. of Kenya




Toyota 700 and Stout assembly begin at Domingo Basso S.A.
of Uruguay




Stout and Tiara assembly begin at TMT of Thailand




Distributor agreement signed with Louwman & Parqui B.V. of the Netherlands




Nagoya Wharf Center completed




Distributor agreement signed with Canadian Motor Industries Ltd.
(CMI) of Canada




TMS Copenhagen Office opens in Denmark (closes in Apr. 1969)




Distributor agreement signed with Korpivaara Oy of Finland




Land Cruiser and Stout SKD assembly begin at Ensambladora
Centroamericana de Costa Rica (ECASA) S.A. of Costa Rica




Distributor agreement signed with Gomez Hermanos, Inc.
of Puerto Rico




First 115 Crowns exported to Canada




Sample Corona exported to the U.S.




Distributor agreement signed with Motor Imports Co. of the U.K.




Distributor agreement signed with Kassidopoulos S.A. of Greece




Kamigo Plant begins operation




TMC awarded the Deming Application Prize




TMS Beirut Office opens in Lebanon (closes Mar. 1976)




Mid-Southern Toyota Distributors, Inc. established in the U.S.




CKD export contract signed with Shin Jin Motor Co., Ltd. of the Republic of Korea




Distributor agreement signed with N.V. International Motor
Company S.A. of Belgium




Distributor agreement signed with Consolidated Motor
Distributors Ltd. (CMD) of New Zealand




TMS enters the rent-a-car business




Equity participation (50%) in Toyota del Peru S.A. of Peru




Takaoka Plant begins operation




Business tie-up agreement signed between TMC, TMS, Hino
Motors, Ltd. and Hino Motor Sales, Ltd.




Distributor agreement signed with Toyota AG of Switzerland




Corolla marketed




Higashifuji Automobile Performance Testing Center (present
Higashifuji Technical Center) completed




Distributor agreement signed with Louis Blanc Automobiles of
France (terminated Sept. 1970)




New offices of Toyota Motor Sales U.S.A., Inc. completed in Torrance, California




Corona assembly begins at Steels Motor Assemblies Ltd., of
New Zealand [present Toyota New Zealand (Christchurch) Ltd.]




TMC New York Office opens in the U.S.




Corona and Stout assembly begin at Toyota del Peru of Peru




Toyota 2000GT marketed




Distributor agreement signed with Abdullah Abdulghani & Bros.
Co. W.L.L. of Qatar




Toyota Nagoya Wharf, TMS export base, completed




CKD export contract signed with Borneo Motors Sdn. Bhd. of Malaysia (terminated Sept. 1982)




Eiji Toyoda appointed president




Business tie-up agreement signed between TMC, TMS and
Daihatsu Motor Co., Ltd.




Toyota (G.B.) Ltd. established in the U.K.




Corona and Corolla assembly begin at Champion Motor Ltd. of Malaysia (present Assembly Service Sdn. Bhd.)




Hilux pickup truck marketed




CKD export contract signed with Lu Ho Automobile Industrial
Corporation of Taiwan (terminated Jan. 1973)




Corolla assembly begins at Campbell Industries Ltd. of New Zealand
[present Toyota New Zealand (Thames) Ltd.]




Sprinter marketed




Miyoshi Plant begins operation




Corona Mark II (Cressida) marketed




Equity participation (10%) in AMI of Australia




CKD export contract signed with Salvador Caetano I.M.V.T.,S.A.
of Portugal (first knockdown export to Europe)




Distributor agreement signed with R.T. Briscoe (Nigeria) Ltd.
of Nigeria




No. 1 Toyota Maru goes into service for export shipments to the U.S.




Southeast Toyota Distributors, Inc. established in the U.S.




Toyota Part Depot Curacao established in Dutch Curacao (closes
Sept. 1973)




Distributor agreement signed with Salen & Wicander AB of Sweden




TMS Brussels Office opens in Belgium




Corona assembly begins at Fattal Vehicle Assembly Ltd. of Ghana




Distributor agreement signed with Premoto S.A. of Côte d'Ivoire




Gulf States Toyota Inc. established in the U.S.




Corolla assembly begins at Thai Hino Industry Co., Ltd. of Thailand




Corolla assembly begins at CMI of Canada (terminated Nov. 1975)




Distributor agreement signed with Ebrahim Khalil Kanoo of Bahrain




Distributor agreement signed with Toyota Italiana S.R.L. of Italy




Mid-Atlantic Toyota Distributors, Inc. established in the U.S.




Land Cruiser assembly begins at National Motor Ltd. of Pakistan
(terminated Aug. 1986)




TMC Brussels Office opens in Belgium




First heat-resistance test conducted in the U.S.




Distributor agreement signed with Deutsche Toyota-Vertrieb
GmbH & Co. KG of the Federal Republic of Germany




Distributor agreement signed with Ernst Frey OHG of Austria




Takahama Plant of Toyoda Automatic Loom Works, Ltd.
begins operation




Carina and Celica marketed




Tsutsumi Plant begins operation




Land Cruiser and large truck assembly begin at Gaya Motor Inc.
of Indonesia




New England Toyota Distributors, Inc. established in the U.S.




Higashifuji Technical Center opens




Distributor agreement signed with Société d'Importation et de
Distribution des Automobiles Toyota of France




Ovar Plant of Salvador Caetano of Portugal begins operation




P.T. Toyota-Astra Motor established in Indonesia




Cressida assembly begins at Amar Assembly Plant Ltd. of Trinidad
and Tobago




Contract signed with Atlas Fabricators Inc. of the U.S. (present
TABC, Inc.) to produce truck beds for Toyota pickups




Equity participation (40%) in Thiess Sales of Australia; Thiess Sales changes name to Thiess Toyota Pty., Ltd.




Equity participation (30%) in CMI of Canada




Equity participation (27%) in Salvador Caetano of Portugal




Distributor agreement signed with Irtoya Co., Ltd. of Iran




Corolla assembly begins at Toyota (Ireland) Ltd. of Ireland
(terminated Dec. 1983)




Starlet marketed




Distributor agreement signed with F.E. Dahl & Co. A/S of Norway




Myochi Plant begins operation




Calty Design Research, Inc. established in the U.S.




Toyota Autoimport AB established in Sweden




Hiace assembly begins at Awami Autos Ltd. of Pakistan




First cold-resistance test conducted in Canada




Labor agreement signed with labor unions




Procurement of parts from overseas begins




First heat-resistance test conducted in the Middle East




Toyota Kuragaike Commemorative Hall completed




Land Cruiser assembly begins at P.T. Multi-Astra of Indonesia




Toyota Industrial Trucks, U.S.A., Inc. established in the U.S.




Toyota & Astra Foundation established in Indonesia




Toyota Foundation established




TMS acquires 100% ownership of Deutsche Toyota-Vertrieb of
the Federal Republic of Germany




Forklift assembly begins at Vehiculos Industriales Toyota S.A.
of Peru




Toyota Team Europe (TTE) established in Belgium




Shimoyama Plant begins operation




Distributor agreement signed with Suhail & Saud Bahwan of Oman




Seisi Kato appointed TMS president




Toyota Office & Shop marketed; Toyota enters the prefabricated
housing industry




Deutsche Toyota-Vertrieb of the Federal Republic of Germany
changes name to Toyota Deutschland GmbH




P.T. Toyota-Mobilindo established in Indonesia




Basic Utility Vehicle (BUV) Tamaraw marketed in the Philippines




Model JA Toyota Home marketed




Equity participation (20%) in CMD of New Zealand




Toyota Manufacturing Australia Ltd. (TMA) established in Australia




Distributor agreement signed with four companies of Nigeria




Toyota Technical Center, U.S.A., Inc. established in the U.S.




BUV Kijang marketed in Indonesia




Cars using the three-way catalyst system to comply with the 1978
Exhaust Emission Regulations marketed




Land Cruiser and Stout assembly begin at Associated Vehicle Assemblers Ltd. (AVA) of Kenya




Toyota Kaikan Exhibition Hall completed




Forklift assembly begins at Durab Industrials Pty. Ltd. of South Africa




Toyota Auto Body Thailand Co., Ltd. established in Thailand




Tercel marketed




Kinuura Plant begins operation




Tahara Plant begins operation




CMD of New Zealand changes name to Toyota New Zealand Ltd. (TNZ)




Sadazo Yamamoto appointed TMS president




Distributor agreement signed with Toyota Egypt S.A.E. of Egypt




Equity participation (100%) in Thiess Toyota of Australia




CMI of Canada changes name to Toyota Canada Inc.




Tie-up negotiations begin with Ford Motor Company




Service station completed in Beijing, People's Republic of China




Equity participation (20%) in Tomen Transportgeräte GmbH (TTG)
of the Federal Republic of Germany (industrial vehicle distributor)




Toyota Technological Institute established




Soarer marketed




Voluntary restraints exercised for car exports to the U.S.




Land Cruiser assembly begins at Willowvale Motor Industries
(Pvt.) Ltd. of Zimbabwe




Shoichiro Toyoda appointed TMS president




Land Cruiser assembly begins at Compania Anomima Tocars
of Venezuela




Toyota Home Oak marketed




Camry marketed




First Toyota Industrial Vehicle World Convention held
in Nagoya, Japan




Forklift assembly begins at Andrews & Beaven Manufacturing Co.
in New Zealand




Toyota Finance Australia Ltd. established in Australia




TMC and TMS merge to become Toyota Motor Corporation with Eiji Toyoda, chairman; Shigenobu Yamamoto, vice chairman; and Shoichiro Toyoda, president




Land Cruiser assembly begins at Aftab Automobiles Ltd. of




Toyota Motor Credit Corporation established in the U.S.




Distributor agreement signed with Sejati Motor Sdn. Bhd.
of Malasia




Toyota Motor Sales, U.S.A., Inc. moves into new offices




P.T. Toyota Engine Indonesia established in Indonesia




Hilux assembly begins at Rover (Zambia) Ltd. of Zambia




DCM Toyota Ltd. established in India




Canadian Autoparts Toyota Inc. established in Canada




Taipei Office opens (becomes Taiwan Office in Feb. 1987) in Taiwan




Distributor agreement signed with Nipauto S.A. of Spain




Equity participation in Group Lotus Car Companies plc of the U.K.
(sold to General Motors in Apr. 1986)




Institute for International Economic Studies established




New United Motor Manufacturing, Inc. (NUMMI) established in joint venture with General Motors in the U.S.




Toyota Motor Sales, U.S.A., Inc. merges with Toyota Industrial
Trucks, U.S.A., Inc.




Toyota MR2 marketed




Equity participation (26%) in DCM Toyota of India




Distributor agreement signed with Toksan Dis Ticaret A.S.
of Turkey




First phase of construction completed at the Shibetsu Proving Ground in Hokkaido




First Toyota World Convention held in Tokyo, Japan




Equity participation (10.2%) in the planning and establishment of Teleway Japan Corp.




Hilux assembly begins at Ambrois Y Cia. S.A. of Uruguay




Forklift assembly begins at P.T. Swadaya Harapan Nusantara
of Indonesia




Flexible body line begins operation in Tsutsumi Plant




Tobishima Wharf Center, Toyota's new export base, completed




Dyna assembly begins at DCM Toyota of India




Forklift assembly begins at Servicios de Ensamblaje, C.A.
of Venezuela




London Office opens in the U.K.




Corolla and Hilux assembly begins at Ayax S.A. of Uruguay




Service Training Centers established in Guangzhou and Beijing,
People's Republic of China




Hilux assembly begins at Toyota del Peru




Toyota Motor Manufacturing, U.S.A., Inc. (TMM) established
in the U.S.




Toyota Motor Manufacturing Canada Inc. (TMMC) established
in Canada




Supra marketed




Teiho Plant begins operation




Dyna assembly begins at Kuozui Motors, Ltd. of Taiwan




Corolla assembly begins at Servicios de Ensamblaje of Venezuela




Fung Yong Co., Ltd. established in Taiwan




Equity participation (7.9%) in Kuozui Motors of Taiwan




Stout assembly begins at Manufacturas Armadurias y Repuestos Ecuatorianos S.A. of Ecuador




New model Toyota Utility Vehicle (TUV) Kijang marketed in Indonesia




Equity participation (10%) in the planning and establishment of International Digital Communications Inc.




Forklift assembly begins at Manitou B.F. of France




Toyota Hellas A.E. established in Greece




Equity participation (18.2%) in the planning and establishment of Nippon Idou Tsushin Corp.




Equity participation (100%) in TNZ of New Zealand




Kasugai Housing Works begins operation




Cooperative production agreement for the Hilux signed with Volkswagen AG of the Federal Republic of Germany




Distributor agreement signed with Toyota de Mocambique, Lda.
of Mozambique




Siam Toyota Manufacturing Co., Ltd. established in Thailand




Cooperation in establishment of first full-scale driving school in Beijing, People's Republic of China




Toyota Motor Finance (Netherlands) B.V. established
in the Netherlands




Establishment of new Lexus dealer network for luxury cars
announced in the U.S.




Toyota Memorial Hospital completed




Toyota Technical Center of Europe completed in Belgium




Toyota U.S.A. Foundation established in the U.S.




Toyota Industrial Equipment Europe S.A.R.L. (TIEE) established
in France




Sejati Motor of Malaysia changes name to UMW Toyota Motor Sdn. Bhd.




First export of forklifts produced by Manitou of France for Europe




Construction of the Hirose Plant begins




Equity participation (41.7%) in Japan Flying Service Co., Ltd.




Decision to establish Toyota Design Center of Europe in Belgium




Toyota Kreditbank GmbH established in the Federal Republic
of Germany




Toyota Motor Corporation Australia Ltd. established in Australia




Toyota Motor Sales Australia Ltd. established in Australia




Toyota Motor Corp. and General Motors jointly establish United
Australian Automotive Industries Ltd. in Australia




First Camry off the line at TMM of the U.S.




Shibetsu Proving Ground completed




TUV Zace production begins at Kuozui Motors in Taiwan




Construction of the Tochigi Housing Works begins




Toyota Motor Philippines Corporation established in the Philippines




Dedication ceremony for TMM Plant in Kentucky, U.S.




Toyota Industrial Equipment Mfg., Inc. established in the U.S.




Toyota Motor Finance (UK) PLC established in the U.K.




First Corolla off the line at TMMC of Canada



Toyota 50 Year History Editorial Committee

Gentaro Tsuji, (Vice Chairman of the Board)

Vice Chairman,
Tsutomu Ohshima, (Executive Vice President)


Terukazu Inoue (Director)

Editorial Cooperation Committee


Both committees as of appointment date, March 1, 1988.

Editorial Staff


Note: Many people cooperated with the editors during the compilation of this book by agreeing to be interviewed. Taking precious time from their heavy schedules, they supplied us with invaluable information and treasured anecdotes. Unfortunately, space restrictions prevent us from listing everyone here, so we are forced to name only those--most of whom were directly involved in overseas activities -- who supplied us with particularly important disclosures. Nevertheless, we wish to express our sincere gratitude to everyone, and our apologies to those whose names could not be mentioned.


Members and former members of Toyota Motor Corporation and Toyota Group companies interviewed include the following.


Publication Staff

Manuscript Compilation

Manuscript Rewriting

Appendices Compilation

Translation and Rewriting

Art Direction

Photo Sources

Production Supervision



Company Histories

Aichi Steel Works Company History Editorial Committee (1970) Aichi Seiko 30-nenshi [The first 30 years of Aichi Steel Works]. Aichi Steel Works, Ltd.

Aisin Seiki Company History Editorial Committee (1985) Aisin Seiki 20-nenshi [The first 20 years of Aisin Seiki]. Aisin Seiki Co., Ltd.

Chrysler Corporation (1955) The Story of an American Company. Chrysler Corporation

Daihatsu Motor Company History Editorial Committee (1967) 60-nenshi [The first 60 years of Daihatsu]. Daihatsu Motor Co., Ltd.

General Motors (1983) General Motors -- The First 75 Years of Transportation Products. Automobile Quarterly, General Motors Corporation

Hino Motors Company History Editorial Committee (1982) Hino Jidosha Kogyo 40-nenshi [The first 40 years of Hino Motors]. Hino Motors, Ltd.

Honda Motor General Affairs Division (1975) Honda no Ayumi [The history of Honda]. Honda Motor Co., Ltd.

Isuzu Motors Company History Editorial Committee (1957) Isuzu Jidoshashi (20-nenshi) [Isuzu Motors: The first 20 years]. Isuzu Motors, Ltd.

Japan Automobile Manufacturers Association (1988) Nihon Jidosha-sangyoshi [The history of the Japanese automobile industry]. Japan Automobile Manufacturers Association, Inc.

Kanto Auto Works Company History Editorial Committee (1986) Kanto Jidosha Kogyo 40-nenshi [The first 40 years of Kanto Auto Works]. Kanto Auto Works, Ltd.

Kruk, M., Lingnau, G. (1986) 100 Jahre Daimler-Benz [100 years of Daimler-Benz]. Daimler-Benz AG

Kyoho Kai History Editorial Committee (1967) Kyoho Kai no Ayumi [The history of the Kyoho Kai]. Kyoho Kai

Nippondenso Company History Editorial Committee (1984) Nippondenso 35-nenshi [The first 35 years of Nippondenso]. Nippondenso Co., Ltd.

Nissan Motor Business Research Department (1983) 21 Seiki e no Michi (50-nenshi) [The road to the twenty-first century: The first 50 years]. Nissan Motor Co., Ltd.


Okamoto, T. (1953) Toyoda Boshoku Kabushikigaisha Shi [The company history of Toyoda Spinning & Weaving]. Nisshin Tsusho Kaisha, Ltd.

Sorensen, L. (1978) The Ford Road -- 75th Anniversary: Ford Motor Company 1903-1978. Ford Motor Company

Toyo Kogyo Company History Editorial Committee (1972) Toyo Kogyo 50-nenshi [The first 50 years of Toyo Kogyo]. Toyo Kogyo Co., Ltd.

Toyoda Automatic Loom Works Company History Editorial Committee (1967) 40-nenshi [The first 40 years]. Toyoda Automatic Loom Works, Ltd.

Toyoda Machine Works Company History Editorial Committee (1961) Toyoda Koki 20-nenshi [The first 20 years of Toyoda Machine Works]. Toyoda Machine Works, Ltd.

Toyota Auto Body Company History Editorial Committee (1985) Toyota Shatai 40-nenshi [The first 40 years of Toyota Auto Body]. Toyota Auto Body Co., Ltd.

Toyota Dealers Association Public Relations Department (1977) 30-nen no Ayumi [The 30-year history]. Toyota Dealers Association

Toyota Foundation (1985) Toyota Zaidan 10-nen no Ayumi [The 10-year history of the Toyota Foundation]. Toyota Foundation

Toyota Motor Company History Editorial Committee (1958) Toyota Jidosha 20-nenshi [The first 20 years of Toyota Motor Company]. Toyota Motor Co., Ltd.

Toyota Motor Company History Editorial Committee (1967) Toyota Jidosha 30-nenshi [The first 30 years of Toyota Motor Company]. Toyota Motor Co., Ltd.

Toyota Motor Company History Editorial Committee (1978) Bunmei ni totte Kuruma to wa (Toyota Jidosha Kogyo 40-nenshi) [The meaning of the automobile in civilization: The first 40 years of Toyota Motor Company]. Toyota Motor Co., Ltd.

Toyota Motor Sales Company History Editorial Committee (1962) Toyota Jidosha Hanbai Kabushikigaisha no Ayumi (10-nenshi) [The history of Toyota Motor Sales: The first 10 years]. Toyota Motor Sales Co., Ltd.

Toyota Motor Sales Company History Editorial Committee (1970) Motarizeishon to tomoni (20-nenshi) [Progress along with motorization: The first 20 years of Toyota Motor Sales]. Toyota Motor Sales Co., Ltd.

Toyota Motor Sales Company History Editorial Committee (1980) Sekai e no Ayumi--Toyota Jihan 30-nenshi [Out into the world: The first 30 years of Toyota Motor Sales]. Toyota Motor Sales Co., Ltd.

Toyota Motor Sales, U.S.A. (1977) The First Twenty Years in the U.S.A. Toyota Motor Sales, U.S.A., Inc.

Toyota Motor Workers' Union Editorial Committee (1986) Shin no Yutakasa o Motomete 40-nen no Ayumi [The search for true prosperity: The 40-year history]. Toyota Motor Workers' Union


Works Related Directly to Toyota

Hanai, M. (1980) Watashi wa Mikawajin [Autobiography: I am a man of Mikawa]. Masaya Hanai

Ishida, T. (1968) Jibun no Shiro wa Jibun de Mamore [Protect your castle on your own]. Kodansha Ltd.

Kamiya, S. (1976) My Life with Toyota. Translated by Elliott, T.I. Toyota Motor Sales Co., Ltd.

Kato, S. (1981) My Years with Toyota. Translated by Elliott, T.I. Toyota Motor Sales Co., Ltd.

Kimoto, S. (1968) Hangyaku no Soro [The course of rebellion: Kiichiro Toyoda - a novel]. Mainichi Shimbunsha

Nemoto, M. (1983, 1986) TQC to Toppu Bukacho no Yakuwari; Sei, Zoku [The roles and responsibilities of the top directors and managers in total quality control; 1, 2]. JUSE Press Co., Ltd.

Ohno, T. (1978) Toyota Seisan Hoshiki [Toyota Production System]. Diamond Inc.

Okamoto, T. et al. (1958) Toyoda Risaburo Shi Denki [The biography of Risaburo Toyoda]. Biographical Commission of Toyoda Risaburo

Ozaki, M. (1955) Toyoda Kiichiro Shi [Kiichiro Toyoda]. Jikensha

Tanaka, T. (1955) Toyoda Sakichi Den [The biography of Sakichi Toyoda]. Toyota Motor Co., Ltd.

Toyoda, E. (1987) Toyota: Fifty Years in Motion. Kodansha International Ltd.

Yaegashi, M. (1982) Joyosha no Sutairingu Dezain [Style and design of the passenger car]. Sankaido

General Studies

Asaka, T. (1983) TQC no Kihon [The fundamentals of total quality control]. Japanese Standards Association

Ford, H. (1927) Jijoden: Wagan Issho to Jigyo [My life and work]. Translated by Kato, S. Henrido.

Ishikawa, K. (1964, 1966) Hinshitsu Kanri Nyumon; A, B [A guide to quality control; A, B]. JUSE Press Co., Ltd.

Iwanami Shoten (1984) Kindai Nihon Sogo Nenpyo [A chronology of modern Japan]. Iwanami Shoten

Japan Auto Parts Industries Association (1969) Jidosha Buhin-kogyo Hatten Shoshi [Development of the Japanese auto parts industry]. Japan Auto Parts Industries Association


Japan Automobile Manufacturers Association (1965,1967,1969) Nihon Jidosha-Kogyo Shiko; 1, 2, 3 [Hisotrical account of the Japanese automobile industry; 1, 2, 3]. Japan Automobile Manufacturers Association, Inc.

Japan Motor Industrial Federation (1979) Nihon Jidosha-Kogyo Gyosei Kirokushu [The Japanese automobile industry: Collected records on government policy]. Japan Motor Industrial Federation, Inc.

Masamura, K. (1985) Sengoshi; Jo, Ge [Postwar history; 1, 2]. Chikuma Shobo

Ministry of International Trade and Industry (1961) Nihon no Jidosha-Kogyo [Japan's automobile industry]. Tsusho Sangyo kenkyusha Corporation

Nakagawa, K. (1981) Hikaku Keieishi Josetsu [Introduction to historical comparative management]. The University of Tokyo Press

Rae, J.B. (1984) Amerika Nissan 20-nen no Kiseki [Nissan/Datsun: A history of Nissan Motor Corporation in U.S.A. 1960,1980]. Translated by Akiyama, Y. Sanrei Shobo<.p>

Shimokawa, K. (1977) Beikoku Jidosha-sangyo Keieishi Kenkyu [A historical study of management in the American automobile industry]. Toyo Keizai Shinposha

Silberston, A, et al. (1965) Jidosha-kogyoron [Motor industry]. Translated by Konno, G. et al. Toyo Keizai Shinposha

Sloan, A.P. (1967) GM to tomoni [My years with General Motors]. Translated by Tanaka, Y. et al. Diamond Inc.

Society of Automotive Engineers of Japan (1969) Nihon no Jidosha Gijutsu 20-nenshi [The first 20 years of Japan's automobile technology]. Society of Automotive Engineers of Japan, Inc.

Sorensen, C.E. (1968) Ford -- sono Eiko to Hisan [My 40 years with Ford]. Translated by Takahashi, T. Sanno Junior College Publishing Dept.

Yangida, R. (1944) Jidosha 30-nenshi [The first 30 years of the automobile]. Sansuisha




Abdul-Latif Jameel Co., Ltd., 171, 227, 362

Abdulla Abdulghani & Bros., 227

Abu Dhabi, 227, 290

Accord, 257

Adam Opel AG, 224

Adler, 101

Africa, 172, 229, 291, 364

Africa Rallies, 354

Aftab Automobiles Ltd., 363

after-sales service, 166, 196, 211, 216, 219, 232, 239, 241, 274, 285, 288, 290, 291, 362

Agence Africaine de Distribution de Materiel S.Z.R.L., 229

Aichi Horo Co., 104

Aichi Kogyo Co., Ltd. (see also Tokai Hikoki Co., Ltd.), 97

Aichi Prefecture, 27, 199, 201, 315

Aichi Steel Works, Ltd. (see also Toyoda Steel Works, Ltd.), 96

Aikawa, Yoshisuke, 44

air pollution, 185, 203

aircraft manufacture, 79, 96

Aisin Seiki Co., Ltd. (see also Tokai Hikoki Co., Ltd.), 97

Akai, Hisayoshi, 77, 93, 94, 97

Al-Futtaim Motors, 171, 290, 362

Amar Auto Supplies, Ltd., 231

Ambrois Y Cia. S.A., 366

AMCO Industries, 272

American International Automobile Dealers Association (AIADA), 277

American Motors Corporation (AMC), 170, 277

AMI Toyota Limited (see also Australian Motor Industries Ltd.), 376

Andersson, Ove, 354

andon, 142, 333

Andrews & Beaven Manufacturing Co., 386

antitrust law, 332

Arab-Israeli war (1973), 251

Araki, Nobuji, 168

Argentina, 294

Art Center College of Design, 390

Asaka, Tetsuichi, 155

Assembly Services Sdn. Bhd., 237, 374

Associated Vehicle Assemblers (AVA) Ltd., 291

Astra International, P.T., 236, 300

Atkins Kroll Inc., 380

Atlas Fabricators Inc., 216

atomic bombings, 80

Austin, 135

Austin Motor Co., Ltd., 131, 222, 224

Australia, 169, 170, 235, 238, 375, 387

Australian Motor Industries Ltd. (AMI), 170, 238, 302, 375, 376

Austria, 222, 280, 286

Automatic Guided Vehicle (AGV), 381, 382

automatic transmission, 116, 210, 322

Automobile Acquisition Tax, 252

automobile industry, 39, 40, 92; early attempts at standardization of Japanese, 43; entrance of Big Three in Japanese, 185; five-year recovery plan for, 92; liberalization of, 184; postwar conditions, 92; promotion of machine industry and, 133

automobile museum, 391

Automotive News, 221

Awami Autos Ltd., 290

Ayax S.A., 366


Bahrain, 227

Ban, Kaoru, 44


Bandeirante (see also Land Cruiser), 161

Bangkok, 163, 164, 200, 373

Bangladesh, 363

Bank of Japan, 106

Bankhaus I.D. Herstatt, 282

basic utility vehicle (BUV; see also Kijang, Tamaraw), 298

Batista Rousso & Irmao S.A., 225

Beirut, 228

Belgium, 221, 222, 223, 224, 280, 283, 284, 356, 385

Bell Helicopter, 398

Benz, Karl, 31

Berge y Cia, S.A., 355

Bhutan, 363

Big Three, 40, 168, 185, 196, 212, 253, 269, 272, 345

Bluebird, 138, 158, 202

BMW AG, 224

body technology, 323

Bolivia, 161

Borneo Motors (Malaysia) Sdn. Bhd., 237

Borneo Motors Pte. Ltd., 379

Bourgeois, Joska, 221

Brazil, 160, 161, 162, 230, 294, 295

British Columbia, 350

British Leyland Motor Corp. Ltd., 170, 210, 280

British Motor Corporation, 222

Brunei, 372, 380

Brussels, 226, 240, 283, 354, 358

Burns Philip (PNG) Ltd., 380


C. Itoh & Co., 32, 73

C.H. Masland & Sons, 334

California, 166, 167, 213, 335

Calty Design Research, Inc., 274

Cambridge, Ontario, 338, 343, 350, 396

Cameroon, 172, 364

Campbell Industries Ltd., 239, 377

Camry, 263, 264, 346, 348, 351, 376, 398; development of, 262; engine of, 321; production in the United States of, 342

Canada, 170, 217, 278, 337, 338; beginning production in, 396; decision to build plant in, 337, 349

Canadian Auto Parts Toyota Inc. (CAPTIN), 350

Canadian Motor Industries Ltd. (CMI), 217, 218, 219, 279

Canadian Motor Sales Corporation Ltd., 217

Canary Islands, 364

capital market, 184, 196; liberalization of, 184, 196

car carrier, 317

Car Motor Bhd., 237

Car of the Year Award, 324

Caribbean, 359

Carina, 190, 191, 193, 280

catalytic converter method (see also emission control), 206, 207, 208

Celica, 190, 191, 193, 215, 258, 271, 274, 280, 353; development concept of, 190; participation in rallies by, 354; production with Carina, 190; specialty car market, 191

Central Motor Co., 147

Century Highway 1, 317

Century Leader 1, 317

Champion Motor Bhd., 237

Chevette, 274

Chevrolet, 43, 45, 71

Chevrolet Nova, 335, 337

Chiku, Takeo, 115

Chile, 294, 366

China, 28, 33, 35, 75

China, People's Republic of, 233, 392, 393

China Steel Corporation, 367

Chrysler Corporation, 39, 184, 221, 225, 253, 277, 332; joint venture with Mitsubishi Heavy Industries, 184, 185

Chubu Nippon Drivers' School, 151

Chuo Spinning & Weaving Co., 36, 78

Chuo Spinning Company, 78, 81

Citroen, 220

Clean Air Act (Muskie Act), 204

Coaster, 289, 357

Collins, Martha L., 340

Cologne, 284, 354


Colombia, 160, 161

Columbia University, 390

Compagnie Francaise de Manutention, 386

Compania Anonima Tocars, 160, 162, 365

computer-aided design system (CAD), 323, 324, 328, 381, 388

computer-aided manufacturing (CAM), 328, 381, 388

Consolidated Motor Distributors Ltd. (CMD), 377

Consolidated Motor Industries Ltd., 239

Consumer Reports, 270

Contessa, 184

Conveyancer, 201

conveyor system, 42, 70

Copenhagen, 220, 226, 284

Corolla (see also Sprinter), 187, 188, 189, 192, 212, 214, 225, 226, 230, 237, 238, 239, 261, 271, 274, 279, 280, 287, 289, 300, 302, 346, 348, 365, 366, 372, 378, 379, 396, 397, 398; cold-weather specifications, 218; development of, 187; first marketing of, 186, 188; front-engine, front-drive, 352; production at Takaoka Plant, 188; production in Canada, 396; production in U.S.A., 337

Corona (see also New Corona), 137, 138, 139, 145, 148, 152, 165, 186, 190, 202, 214, 218, 225, 233, 234, 235, 237, 239, 289, 376; development of, 137; export model. See Tiara

Corona Mark II, 189, 212; Cressida, 212, 214, 219, 231, 287, 289, 364; marketing of, 190

corporate responsibility, 389

cost management, 118, 158

cost planning, 158

Costa Rica, 160, 161, 230, 293

Cote d'Ivoire, 172

cotton industry, 33

Cressida. See Corona Mark II

Crown, 134, 135, 137, 138, 140, 145, 148, 152, 153, 154, 162, 163, 167, 172, 186, 189, 190, 217, 218, 220, 222, 233, 238, 379; development of, 133, 134; electronically controlled transmission in, 322; first samples sent to U.S.A., 166; Hardtop, 189; introduction in Canada, 217; introduction in Europe, 220; introduction in U.S.A., 166; "White Crown" campaign, 189

Crown Motors Ltd., 379

Cuba, 160

Curacao, 230, 240

Curtis Products Corp., 334

Cyprus, 219


Daihatsu Motor Co., Ltd., 131, 184, 186

Daimler, Gottlieb, 31

Daimler-Benz AG, 224

Dat Motor Co., Ltd., 41, 43

Datsun, 102, 135, 137

DCM Toyota Ltd., 363

De Soto, 48

dealer network (see also Toyota Dealers Association), 63, 136, 184, 211, 213, 219; Auto Dealers, 189; Corolla Dealers, 189; forklift dealers, 199, 200; postwar restoration of, 94, 98, 99; Publica Dealers, 52, 153; Toyopet Dealers, 136, 137; Toyota Dealers, 109, 136; Toyota Home Dealers, 388; Vista Dealers, 265

Delhi Cloth & General Mills Co., Ltd., 363

Delta Motor Corporation, 232, 233, 298, 380

Deming Application Prize, 156, 157, 158

Deming, W. Edwards, 156

Denmark, 219, 220, 222, 226, 280, 355

Department of the Treasury, U.S., 276

Deutsche Toyota-Vertrieb GmbH & Co. KG, 224, 282

Diesel Motor Industry Co., Ltd., 58

direct-link clutch, 322

Distribuidora de Automoviles, S.A., 160

distribution system, 98, 314; in U.S.A., 215

Djibouti, 288

DKW, 68

Dodge Line, 93, 163


Dodge, Joseph, 93, 104

DOHC engine, 191, 321

Domingo Basso S.A., 162

Dominican Republic, 161

Dubai, 171, 290

dumping issue, 214, 276

Dupuis, Hector P., 279

Dusseldorf, 353

Dyna, 225, 300, 325, 357, 363, 365, 369


Easdale, William J., 344, 396

Ebrahim Khalil Kanoo, 227

Economic Rehabilitation in Occupied Areas (EROA), 92

Economic Stabilization Board, 105

Ecuador, 366

Egypt, 170, 290

El Salvador, 160, 161, 293

Ela Motors, 380

electric battery-powered autos, 206

electronic control unit (ECU), 382

electronic fuel injection (EFI), 209, 320, 382

electronic height control, 322

electronic skid control, 322

electronically controlled transmission, 322

Emasturin Automobile Sdn. Bhd., 373

Emil Frey Group, 281

Emil Frey Ltd., 221

emission control, 185, 191, 204, 205, 208, 212, 260, 320, 353; as a national health issue, 204; standards in U.S.A., 212; success of technical efforts to achieve, 207, 208; technical problems of, 206

Empilhadeiras Toyota S.A., 385

Energy Policy and Conservation Act, 253

Energy Tax Act of 1978, 253

Ensambladora Centroamericana de Costa Rica S.A. (ECASA), 162

Enterprise Rationalization Promotion Law, 118

Environment Agency, 204, 207

Environmental Protection Agency (EPA), 253, 269

Erla Auto Import A/S (later Toyota Danmark A/S), 220, 226

Ethiopia, 172, 284

European Economic Community (EEC), 226, 286, 357, 386

Exhibition, National Industrial, 24, 25

export distribution system, 239, 240, 317

export restraints, 277, 278, 279, 329, 331, 345, 347, 386


F.E. Dahl & Co., A/S, 226

factory automation (FA), 256, 327, 328, 381, 382

Familia, 262

Fattal Vehicle Assembly Ltd., 229

favorable taxation zone (FTZ), 341

Federal Trade Commission, U.S. (FTC), 332

Federation Internationale de l'Automobile, 191

Federation of Economic Organizations (Keidanren), 389

Finland, 220, 222, 280, 355

five-year plan (1951), 113

flexible body line, 327, 343

floating exchange rate system, 186, 213

flow production, 72

Ford, Henry, 42

Ford Motor Co., 41, 43, 45, 57, 62, 113, 147, 170, 183, 212, 234, 238, 277, 302, 378; early history of, 39; joint venture proposal of, 329; proposed tie-up with, 113; River Rouge Plant, 113; suggestion system of, 114

Ford Motor Co. of Japan (Ford-Japan), 41, 42, 57, 58, 62, 75; establishment of, 41

Ford-Werke AG, 224

forklift, 199, 200, 201, 282, 385, 386, 387

Four S's, the, 299

France, 222, 223, 286

Frankfurt, 353

Frankfurt Motor Show, 286

Fremont, California, 330, 334

Fremont Plant, 331, 332, 333

Fremont Project Committee, 332

Frey, Emil, 222


Frey, Walter, 222, 223

Friendmatic passenger cars, 391

front-engine, front-drive (FF), 148, 255, 261, 262, 263, 275, 279, 286, 322; overall trend toward, 323

front-engine, rear-drive (FR), 261

Fuji Heavy Industries, Ltd., 131, 184

Fuji Precision Machinery Co., Ltd., 131, 135

Fukada, Benzo, 46

Full Choice System, 191

Fung Yong Co., Ltd., 369


G5 conference, 393

gas turbine engine, 206

gate-line system, 193

Gaya Motor Inc., 235, 236

General Agreement on Tariffs and Trade (GATT), 131

General Electric Co., 198

General Headquarters (GHQ), 91, 93, 95, 97, 102, 103, 104

General Motors Corp. (see also NUMMI), 41, 43, 57, 62, 183, 185, 235, 253, 257, 274, 277, 302, 330, 333, 334, 357, 359, 377; Australian tie-up with, 376; early history of, 39; joint venture with, 329, 330, 331, 332

General Motors Corp. of Japan (GM-Japan), 41, 42, 58, 62, 63, 75; establishment of, 41

Geneva, 353

Georgetown, Kentucky, 338

Germany, Federal Republic of, 130, 147, 200, 223, 224, 282, 283, 286, 354, 355, 358

Ghana, 172, 229

Gibraltar, 355

GM-Holden Ltd., 302

GM Holden's Automotive Ltd., 170

Gomez Hermanos, Inc., 160

Good thinking, good products, 115

Government Aid and Relief in Occupied Areas (GARIOA), 92

Graham-Paige Motors Corporation, 58, 142

Great American Lines Inc., 267

Greece, 222, 356

Guam, 380

Guangzhou Trade Fair, 233

Guatemala, 293

Guinea, 172

Gulf States Toyota Inc., 213


Hahn, Carl H., 358

Hamburg, 354

Hanai, Masaya, 118, 264

Hanazaki, Shikanosuke, 106

Hanover Plant, 358

Harvard University, 390

Hashimoto, Masujiro, 40

Hawaii, 167

Hayashi Telemp Co., Ltd., 334

Hayashi, Asako (see also Toyoda, Asako), 27

Hiace, 192, 230, 282, 290, 292, 325, 357

Higashifuji Automobile Performance Testing Center, 190, 205

Higashifuji Technical Center, 206, 320, 324

Hillman, 135

Hilux (see also pickup truck), 184, 192, 232, 287, 289, 290, 357, 365, 366; production in FRG of, 358

Hino Motor Sales, Ltd., 150, 184

Hino Motors, Ltd., 131, 150, 184, 239, 289, 296, 368

Hinode Motors, 63, 64

Hirao, Osamu, 135

Hirohito's message, 80

Hirose Plant, 383

Hiroshima, 80

Ho Tai Company Ltd. (see also Ho Tai Motor Co., Ltd.), 163

Ho Tai Motor Co., Ltd., 163, 234, 367, 369

Hokkaido, 397

hollowing out of industry, 389, 394

Hollywood Toyota Motors, Inc., 167

Honda Motor Co., Ltd., 131, 186, 204, 257, 345, 349


Hong Kong, 319, 352, 378

Honsha Plant (see also Koromo Plant), 71, 147, 193, 328

Hoover Universal, Inc., 334

Hougham, Kenneth R., 170

housing business, 198

Houston, 213

Hua-chung Toyota Automobile Company, 75

Huang, Lieh Ho, 163


Iceland, 219, 226, 355

Igeta Shokai, 28, 29

Imperial Institute of Invention and Innovation, 37

Import Car of the Year award, 271, 274, 344, 346

improvement teams, 359

Inagawa, Tatsu, 115

Inchcape, 237, 284, 356, 379, 380

India, 35, 363

Indonesia, 235, 298, 370, 371

Industria Venezolana de Maquinarias C.A., 295

industrial vehicle (see also forklift), 199, 200, 201, 355, 384, 385; distributors conference for, 386

Institute for International Economic Studies, 361

International Bank for Reconstruction and Development. See World Bank

International Digital Communications Inc., 384

International Labor Organization award, 337

International Monetary Fund (IMF), 186

International Trade Commission (ITC), 276, 277

Iran, 227, 252, 275, 290

Iraq, 227

Ireland, Republic of, 225, 355, 357

Irtoya Co., Ltd., 290

Ishida, Taizo, 78, 116, 146, 158, 165; beginning of involvement with automobiles, 78; emphasis on development of domestically produced automobiles, 134; investment policy, 139; management philosophy of, 111, 118; presidency of TMC, 110

Ishihara, Tomoo, 135

Ishikawa, Kaoru, 155

Ishikawajima Automobile Manufacturing Co., Ltd., 40, 41, 43, 58

Ismail Bilbeisi & Co., 171

Isuzu Motors Ltd., 105, 131, 135, 185, 329

Italy, 222, 286, 357

Iwasaki, Masami, 330, 399


Jaguar, 221

Japan Air Lines, 220

Japan Automobile Distribution Corporation, 59

Japan Automobile Manufacturers Association, Inc. (JAMA), 202, 205, 291

Japan Development Bank, 133

Japan External Trade Organization (JETRO), 171

Jeep, 160

Jidosha Seizo Co., Ltd., 44

job classification, 332

Johnson Controls Inc., 334

Johnston, Robert H., 238

joint venture, 236; Chrysler-Mitsubishi, 185; GM-Shin Jin Motors, 235; Toyota-GM (see also NUMMI), 330, 377

Jordan, 171

Just-in-Time System, 69, 70, 71, 72, 142, 144, 299; jidoka and, 144; Kanban System and, 144; Kiichiro Toyoda's approach to, 69; Toyota Production System and, 69


K-cars, 253

Kaishinsha, 40

Kamigo Plant, 188, 192, 256, 333

Kamio, Hideo, 236


Kamiya, Shotaro, 62, 63, 94, 97, 158, 165, 166, 214; chairmanship of TMS, 260; customer-first policy and, 98; decision to export to U.S., 165; early career of, 62, 67; founding of Chubu Nippon Drivers' School and, 151; monthly installment system and, 115; presidency of TMS, 106; regain customer trust and, 203; sales expansion policy for small truck, 135; sales philosophy of, 63, 98; trip to U.S.A., 112, 113

Kan, Takatoshi, 46, 48, 67, 69

Kanban System (see also Toyota Production System), 139, 144, 259, 316, 334, 375

Kanegafuchi Spinning Co., Ltd. (later Kanebo, Ltd.), 29

Kanto Auto Works Ltd., 103, 147, 388

Kanto Denki Jidosha Seizo KK., 103

Kanto Earthquake, 41

Kariya Plant, 35, 66, 71, 77, 81; aircraft engines produced at, 79

Kassidopoulos S.A., 355

Kasugai Housing Plant, 388

Kato, Seisi, 63, 158, 166, 233, 260, 274, 329, 345

Kawasaki Aircraft Co., Ltd., 79

Keidanren. See Federation of Economic Organizations

Keller machine, 140

Kentucky, 327, 338, 339, 340, 341, 396

Kenya, 172, 229, 291, 364

Kijang, 298, 300, 301, 371, 372

Kikuchi, Takesaburo, 99

Kikui Spinning & Weaving, 36

Kinuura Plant, 255

knockdown assembly (see also local production), 41, 43, 134, 162, 164, 173, 235, 239, 295, 356, 357

knockdown survey mission, 240

Kobayashi, Hideo, 44

Kobayashi, Tokutaro, 166

Kodaira, Iwao, 214

Kodama, Ichizo, 32

Kondo, Tadashi, 158

Korea, Republic of (ROK), 234

Korean automakers, 347

Korean War, 93, 113; effect on Japanese industry, 110

Koromo-cho, 66, 146

Koromo Labor Union, 97

Koromo Plant, 66, 69, 70, 71, 73, 81, 95, 96, 99, 112, 117, 133, 141

Korpivaara Oy, 220, 284

Koyo Kogyo Co., Ltd., 367

Krohn, Walter, 220

Kuala Lumpur, 374

Kumabe, Kazuo, 44, 68, 77, 97, 101, 107, 109

Kuozui Motors, Ltd., 368, 369

Kusunoki, Kaneyoshi, 339, 395, 396

Kuwait, 171, 172, 227

Kyoho Kai, 99

Kyoryoku Kai, 76, 99

Kyowa Plant, 199


labor agreement, 98, 106, 108, 332, 341

labor relations, 106; award for smooth, 337; dispute of 1950, 108

labor shortage, 193, 194

Labor-Management Declaration, 145

Labor Union Law, 97, 108

Land Cruiser (earlier Model BJ; see also Bandeirante), 112, 160, 161, 165, 168, 169, 171, 172, 217, 218, 228, 230, 237, 287, 289, 291, 295, 357, 363, 365, 398; assembly in Indonesia, 235; popularity in Saudi Arabia, 227

Land Rover, 160

LASRE engine, 324

Law Concerning the Manufacture of Motor Vehicles, 57, 58, 60, 61, 66

lawsuit, in U.S. courts, 276

lay offs, 105

Lebanon, 228

let-off device, 28, 34

Lexington, Kentucky, 339

Lexus, 349

Libby-Owens Ford Co., 334

Libya, 228


line-stop switches, 333

list price system, 151

Liteace, 292, 378

local content, 229, 230, 238, 295, 296, 297, 301, 302, 342, 358, 364, 370, 375, 380, 385, 386

local production (see also knockdown assembly), 229, 234, 240, 241, 293, 294, 295, 296, 301, 314, 329, 330, 338, 346, 358, 359, 363, 376, 386, 395

London, University of, 390

London-Tokyo 50,000-km Tour, 152

Long Beach, California, 211

Longo Toyota, 213, 272, 348

Longo, Dominic, 348

loom, 27; automatic, 166; automatic, perfection of, 27, 35; automatic, perfection of mass production model, 35; Diederichs, 28; Hartmann, 28; Northrop automatic, 31; power-driven, 26; Toyoda G-type Automatic, 35, 39; wooden hand, 26

Los Angeles Technical Center, 273

Lotus, 357

Louwman & Parqui B.V., 221, 223, 284

Lu Ho Automobile Industrial Corporation, 233, 234, 367


machine tools, 70

Macpherson-strut type suspension, 263

Major Industries Control Ordinance, 59

Makino, Isao, 269, 270

Malaysia, 237, 284, 373, 374, 378

Malta, 219

Management Study Committee, 100, 103

Manchurian Heavy Industries Development Corporation, 75

Manitou B.F., 386

Marshall Plan, 92

Marubeni Corp., 201

Maruyasu Industries Co., Ltd., 334

Massachusetts Institute of Technology, 390

Master, 133, 135, 137

Matsumoto, Kiyoshi, 353

Matsushita Electrical Industrial Co., Ltd., 197

Mazda R360 Coupe (see also Toyo Kogyo Co., Ltd.), 131

McCurry, Robert B., 345, 348

Meiji Government, 23

Meishin Expressway, 153

Metropolitan Bank & Trust Company, 380

Mexico, 162, 230

MG, 224

Michelin tires, 286

Michigan, University of, 390

Mid-Atlantic Toyota Distributors, Inc., 213

mid-ship passenger car, 324

Mid-Southern Toyota Distributors, Inc., 210, 215

Midway, Battle of, 78

Military Automobile Subsidization Act, 40, 43

Miniace, 192, 234

minicar, 131, 132, 184

Ministry of Commerce and Industry (see also MITI), 43, 44, 58, 59, 62, 74, 102, 105

Ministry of Munitions, 79

Ministry of Railways, 43, 44

Ministry of Transport, 99, 154, 203

Minsei Spinning Co., Ltd., 104

Mishima, Tokushichi, 68, 77

MITI (Ministry of International Trade and Industry), 105, 131, 132, 148, 278

Mitsubishi Heavy Industries, 43, 47, 184

Mitsubishi Motors Corporation, 185, 186, 302, 374

Mitsui & Co., 27, 28, 30, 32, 35, 39, 43, 47, 62, 78, 97, 218, 380

Miyoshi Plant, 192, 256

Model A1 passenger car, 48, 60, 65, 116

Model AA passenger car, 65, 74, 116

Model AB Phaeton, 65

Model AC passenger car, 74, 102

Model AE passenger car, 74

Model BJ, 4WD vehicle (see also Land Cruiser), 112

Model BM truck, 103

Model BX truck, 112

Model DA60 diesel truck, 150


Model DA bus, 64, 65

Model DB70 diesel bus, 150

Model DB75 diesel bus, 150

Model EA passenger car, 74

Model EB passenger car, 74

Model FXL truck, 160

Model G1 truck, 61, 62, 63, 64

Model GA truck, 65

Model GB truck, 71, 75

Model KC truck, 79, 163

Model RH passenger car, 115

Model SA passenger car, 101, 102, 170

Model SB truck, 101, 102, 103

Model SC truck, 102

Model SF passenger car, 115

Model SG truck, 115

Model SKB truck, 135, 136

Model T Ford, 31, 39

Mohamed Naser Al-Sayer & Sons Est., 171, 362

Monte Carlo, 351

Moran, James M., 212

Morris, 224

Motomachi Plant, 146, 193, 256, 260, 299

Motor & Industrial Transport Corporation (Pty.) Ltd., 200

Motor Assemblies Ltd., 173

Motor Imports Co., 223

Motor Mart Group Ltd., 229

Motor Trend, 271, 274, 344

Motor Vehicle Tonnage Tax, 252

Motorcar Control Commission, 59

motorization, 184, 185, 186

Mounier, Jacques, 356

Mozambique, 365

MR2, 324, 346, 353

Muller, Leonhard, 280

Multi-Astra, P.T., 300

multi-machine handling (see also Toyota Production System), 142

multifunctional employees, 258

Mustang, 271

mutual trust, 109, 236, 332, 335, 336, 337, 342, 400

Myochi Plant, 193


N.V. International Motor Company S.A., 221, 223, 224, 284, 356

Nader, Ralph, 202

Nagasaki, 80, 319

Nagoya, 31, 35, 63, 64, 66, 94, 139, 151, 240, 285, 315, 319

Nagoya Wharf Center, 240, 267

Nakae, On, 168

Nakagawa, Fukio, 110, 158

Nakamura, Kenya, 115

Naruse, Masao, 68

Nasmoco Autobody, P.T., 371

National Mobilization Law, 58

National Motors Ltd., 228

Navana Ltd., 363

NBT (Brunei) Sdn. Bhd., 380

Nederlandse Industrie-en Bouwmachine Maatschappij B.V., 200

Netherlands, 200, 221, 222, 223, 280

New Corona, 158, 209, 210, 211, 212, 213, 218, 220, 221, 222, 229, 230, 232, 238; development of, 157

New England Toyota Distributors, Inc., 213, 346

New Jersey, 361

New United Motor Manufacturing, Inc. See NUMMI

New York, 30, 213, 216, 361

New Zealand, 239, 377

newly industrializing economies (NIEs), 313

Newport Beach, Ca., 274

Nicaragua, 293

Nigeria, 291

Nihon Sangyo Co., Ltd., 44, 75

Nipauto S.A., 355

Nippon Idou Tsushin Corporation, 384

Nippon Life Insurance Co., Ltd., 73

Nippon Steel Corporation, 320

Nippondenso Co., Ltd., 104, 107, 208, 289

Nishimura, Kohachiro, 97, 109

Nissan Motor, Co., Ltd., 58, 60, 73, 75, 102, 105, 135, 138, 142, 168, 174, 183, 184, 202, 239, 302, 349; authorized to


produce automobiles, 57; construction of plant in U.S., 257; dealer network of, 99; establishment of, 44

Nisshin Educational & Training Center, 152

North America Project Committee, 337, 339

Norway, 219, 226, 280, 355

NUMMI, 332, 333, 334, 335, 336, 337, 339, 340, 359

Nusa Cendana Harum, P.T., 371


O2 sensor, 208

Occupation, the (see also General Headquarters), 91, 92, 94; business restrictions during, 92; economic revival policy, 92, 93; purge of business leaders, 91; restrictions on Toyota during, 97

Ohbayashi Corporation, 341

Ohio, 257

Ohnishi, Shiro, 106, 158, 168

Ohno, Shuji, 110, 158

Ohno, Taiichi, 141, 142, 143, 294

Ohshima, Risaburo, 46, 60, 61, 67

Ohshima, Tsutomu, 399

oil crisis, 186, 197, 282; first, 251, 252, 253, 254, 261, 262, 269, 275, 278, 280, 293; second, 252, 264, 275, 313

Okamoto, Tojiro, 62

Oman, 290, 362

on-line control system, 188, 259

on-line order system, 191, 316, 327

on-the-job training, 335, 392

Ontario, 338, 340, 343


P. Samuelsson & Co. HF., 226

Pakistan, 228, 290

Panama, 230, 294, 365

Panama Canal, 273

Papua New Guinea, 372, 380

Paraguay, 366

Paris, 353

parts distributor, 196, 317

Patent Law, 24

Pearl Harbor, 59

Pei-chin Automobile Company, 75

Penske, Roger, 348

personnel system, 360

Peru, 161, 230, 366, 385

Peterson, David, 340

Philippines, 232, 298, 380

pickup truck (see also Hilux), 257, 271, 274, 275, 276

Pirelli tires, 286

Planning Council, 78

Platt Brothers & Co., Ltd., 29, 35, 36, 39, 46

Portland, 273

Portugal, 224, 280, 357, 387

Potsdam Declaration, 80

President's 1,000 Club, 272

President's Club, 349

Price Control Ordinance, 100

Prince Motor Co., Ltd., 184

profit planning, establishment of system for, 118

Project 70s Committee, 197

Proton Saga, 374

Publica, 131, 148, 149, 153, 184, 186, 187, 188, 217; Toyota 700, 148

Puerto Rico, 160, 161, 230, 293

Purchasing Rules, 76

Purdy Motor S.A., 160


Qatar, 227

quality control circle (QC circle), 155, 156, 301, 350, 375


R.T. Briscoe (Nigeria) Ltd., 229, 292

raw materials procurement, 75; difficulties of wartime, 76

recalls, 202, 203

Reconstruction Finance Bank, 100, 104

reeling machine, invention of, 27


Renault, 131

reparations, postwar, 95

replacement parts distribution, 268

replacement parts system, 316

Rhodesia, 364

Rice's Toyota World, Inc., 272

robots, 252, 259, 260, 325, 327, 388

Rockefeller University, 390

Rootes Motors, Ltd., 131

rotary engine, 206

Rotterdam, 284

Rover (Zambia) Ltd., 365

Royal Viking Star, 319

Russo-Japanese War, 29, 30


Safari Rally, 354

Safenwil, 280

Sagamihara Plant, 147

Sahara, Gorosaku, 26

Sahara, Tami, 26

Saito, Shoichi, 110, 158

Salen & Wicander AB, 226

Salvador Caetano I.M.V.T., S.A., 225, 357

Sao Paulo, Brazil, 160, 161, 379

Sarin Motors Sdn. Bhd., 373, 374

Sasaki, Shiro, 399

satellite, use of communications, 268

Saudi Arabia, 171, 172, 227, 228, 287, 288, 289, 291, 362

SEAT, 356

Sejati Motor Sdn. Bhd., 374

Semperit tires, 286

Senegal, 172

Servco Pacific Inc., 167

Service Motor Company, 167

Servicos de Ensamblaje, C.A., 385

Shanghai Plant, 75

Shibaura Plant, 77, 81

Shibetsu Proving Ground, 397

Shimoyama Plant, 255

Shin Jin Motor Co. Ltd., 234, 235

Shinkawa Kogyo Co., Ltd., 97

Shonaigawa Dye Works, 36

shovel loaders, 199

shuttle-changing device, 29, 34, 35

Siam Cement Co., Ltd., The, 373

Siam Toyota Manufacturing Co., Ltd., 373

Singapore, 200, 201, 379

Singapore Port Authority, 201

Sino-Japanese War of 1894-1895, 28

skid steer loader, 385

Skoda, 219

Sloan, Alfred P., 39

small-truck market, 130

Smith, Roger B., 329, 330, 335

Soarer, 258, 323, 324, 325

Sociedade Comercial Tasso de Sousa, Lda., 225

Societe d'Importation et de Distribution des Automobiles Toyota S. A. (SIDAT), 224

Soeryadjaya, William, 236

South Africa, Republic of, 173, 200, 222, 229, 364

Southeast Toyota Distributors, Inc., 212, 271

Soviet Union, 92

Spain, 286, 355, 356, 357, 385

specialty car, 191

spinning industry, 24, 32

Sprinter, 189, 330

Stabilimenti Meccanici VM S.p.A., 357

standardized vehicle, 58

standardized work, 299, 301; Kiichiro's early moves towards, 72

Standardized Work Charts, 114

Starlet, 285, 352

Steels Motor Assemblies Ltd., 239, 377

Storage Battery Laboratory, 77

Stout, 173, 211, 230, 291, 366

Subaru 360 (see also Fuji Heavy Industries, Ltd.), 131

suggestion system, 114, 336, 350, 375

Suhail & Saud Bahwan, 290, 362

Sunbelt Dixie, 267

Sunny, 188

supercharger, 321

Superior Coach, P.T., 371

suppliers' cooperative group. See Kyoho Kai, Kyoryoku Kai


Supra, 258, 324, 325, 344, 346, 353

suspension systems, 322

Suzuki Motor Co., Ltd., 330

Swadaya Harapan Nusantara, P.T., 386

Swan of Northern Europe. See Royal Viking Star

Sweden, 219, 226, 280

Switzerland, 221, 222, 223, 224, 280, 282, 283, 385


TABC, Inc., 217

Tahara Center, 267

Tahara Plant, 256, 257, 258

Taiwan, 163, 233, 367, 368, 369, 371, 397

Takahama Plant, 201

Takaoka Plant, 188, 189, 192, 193, 259, 335, 344

takeover bid, 376

Tamaraw, 298

Tamura, Hideyo, 375

Tatung Co., Ltd., 367

team concept, 325, 335, 336, 359

technology transfer, 368, 372

Teiho Plant, 328

Teleway Japan Corporation, 384

Temporary Funds Adjustment Act, 58

Tercel, 261, 262, 275, 279, 285, 346, 351

Thai Hino Industry Co., Ltd., 232

Thailand, 163, 164, 200, 231, 295, 298, 372, 373

Thiess Sales Pty., Ltd., 169, 170, 238

Thiess, Sir Leslie, 169

Thiess Toyota Pty., Ltd., 238, 302, 303, 376

Tiara, 165, 169, 170, 172, 210, 220, 232; introduction in the U.S.A., 167

Tienstin Plant, 75

Tjia Kian Tie, 236

Tobata Imono Co., Ltd., 44, 58

Tobishima Wharf Center, 317

Togo, Yukiyasu, 279, 345, 396

Tohoku Imperial University, 68

Tokai Hikoki Co., Ltd., 79, 81, 96

Tokyo, 61, 68, 347

Tokyo Gas & Electric Industry Co., Ltd., 40, 41, 43

Tokyo Imperial University, 33, 38, 44, 68

Tokyo Ishikawajima Shipyard Co., Ltd., 40

Tokyo Motor Industry Co., Ltd., 58

Tokyo Motor Show, 148, 219

Tokyo Toyoda Motor Sales Co., Ltd., 63, 64

Tokyo Toyopet Motor Sales Co., Ltd., 151

Tokyo, University of, 33, 135, 155

Tomen Transportgerate GmbH (TTG), 200, 386

TOPAS System, 268

TOPIA System, 240

Toronto, Ontario, 339

Torrance, California, 211, 345

Torture Campaign, 152

Total Quality Control (TQC), 154, 155, 156, 372

towing tractors, 199

Toyo Kogyo Co., Ltd., 131, 185, 186, 204, 262

Toyo Menka Kaisha Ltd., 97

Toyoace (see also Model SKB truck), 136, 137, 192, 325

Toyobo Co., Ltd., 73

Toyoda Automatic Loom Works, Ltd., 36, 39, 41, 45, 47, 60, 61, 62, 63, 64, 65, 66, 76, 78, 81, 110, 199, 201, 384, 385, 386, 387; authorized to produce automobiles, 57, 66; establishment of, 35; production of forklifts by, 199

Toyoda Group, 36

Toyoda Machine Works, Ltd., 77, 78, 81, 141

Toyoda Oshikiri Spinning & Weaving Company, 36, 78

Toyoda Physical and Chemical Research Institute, 77, 81

Toyoda Precepts, 37, 77

Toyoda Sangyo Kaisha Ltd., 97

Toyoda Shokai, 29, 30

Toyoda Shoten, 27, 28, 29

Toyoda Spinning & Weaving Co., Ltd., 32, 33, 36, 45, 62, 78, 104, 139

Toyoda Spinning & Weaving Works in Shanghai, 33

Toyoda Steel Works, Ltd. (see also Aichi


Steel Works, Ltd.), 76, 78, 81, 96

Toyoda Tsusho Kaisha, Ltd. (see also Toyoda Sangyo Kaisha Ltd.), 97, 374, 379

Toyoda's Loom Works, 30

Toyoda, Aiko, 32, 39

Toyoda, Asako, 27, 29

Toyoda, Eiji, 68, 94, 108, 110, 158, 199, 330, 331, 335, 338, 345, 358, 396, 399; apperance before Diet, 205; attendance at U.S. groundbreaking cememony by, 340; attitude toward education of, 194; attitude toward labor relations of, 109; chairmanship of TMC, 315; company entrance of, 68; election to vice chairman of Keidanren, 389; fiftieth anniversary message of, 399; joint venture with GM and, 329; launching of new TMC, 314; presidency of TMC, 203; QC Promotion Headquarters and, 156; speech at Toyota World Convention by, 318; visit to Ford by, 113

Toyoda, Heikichi, 27

Toyoda, Kiichiro, 23, 27, 32--34, 36, 37, 40, 42, 44--48, 60--62, 65, 66, 68, 73--76, 78, 94, 96--101, 106, 110, 112, 114, 134, 142, 144, 166, 299; achievements of, 177; apology of, 107; appointed executive vice president of TMC, 67; birth of, 26; chairmanship of Toyoda Physical and Chemical Research Institute, 77; corporate reform policy of, 95; death of, 116; directives on Koromo Plant, 70; early research efforts of, 41; educational background of, 38; emphasis on research by, 67; foreign travel of, 39; personal inspections by, 64; philosophy of, 69, 72; planning for postwar era, 80; presidency of TMC, 77; resignation of, 109; touring plants, 71

Toyoda, Risaburo, 33, 37, 39, 47, 47, 64; adoption by Toyoda family, 32; chairmanship of TMC, 77; death of, 116; decision to enter automobile industry, 45, 46; presidency of TMC, 67; resignation of, 96

Toyoda, Sakichi, 28, 29, 31, 36, 38, 39, 45, 134, 142, 166; attitude toward China of, 33; birth of, 23; carpentry training of, 25; commemoration of, 77; completion of power loom and, 27; developmentof spinning industry and, 32; family background, 24; first invention by (wooden hand loom), 26; move to Shanghai by, 34; perfection of internationally recognized automatic loom and, 35; philosophy of, 30, 37

Toyoda, Sasuke, 29

Toyoda, Shoichiro, 314, 316, 318, 345, 395, 397, 399; attendance at U.S. groundbreaking ceremony by, 340; company entrance of, 177; construction of Motomachi Plant and, 145, 146; election to chairman of JAMA, 389; future corporate policy of, 394; housing business and, 198; new business ventures and, 381; presidency of TMC, 315; presidency of TMS, 265; QC Promotion Headquarters and, 156; remarks at pan-European dealers meeting, 315; speech on decision to build plant in Kentucky, 338

Toyoda, Tatsuro, 335, 336, 399

Toyofuji Kaiun Kaisha, Ltd., 239

Toyopet Commercials (Pty.) Ltd., 173, 229

Toyota 2000GT, 191

Toyota & Astra Foundation, 237, 390

Toyota AG, 222, 224, 280, 281, 282

Toyota Auto Body Co., Ltd. (see also Toyota Shatai Kogyo, Ltd.), 80, 147

Toyota Auto Body Thailand, 296

Toyota Autoimport A.B., 226

Toyota Canada Foundation, 391

Toyota Canada Inc., (see also Canadian Motor Industries Ltd.), 279, 339, 349, 391, 396

Toyota Central Research & Development Laboratories, Inc., 77, 138, 208, 319

Toyota City (see also Koromo-cho), 66, 146, 193, 198, 315, 319, 335, 340, 383, 391


Toyota Community Concerts, 391

Toyota Computer Controlled System, 321

Toyota Creative Ideas and Suggestions System. See also Erla Auto Import A/S), 220

Toyota de Mocambique, Ltd., 365

Toyota Dealers Association, 99

Toyota del Peru S.A., 230, 366

Toyota Design Center of Europe, 358

Toyota Deutschland GmbH, 283, 284, 354, 355

Toyota do Brasil S.A., Indústria e Comércio, 161, 294

Toyota Egypt S.A.E., 290

Toyota Electronic Modulated Suspension, 322

Toyota Engine Indonesia, P.T., 370

Toyota Finance Australia Ltd., 383

Toyota Forklift, 199

Toyota Foundation, 390

Toyota (GB) Ltd., 284

Toyota Group, 33, 38, 66, 78, 103, 139, 198

Toyota Group China Mission, 233

Toyota Hellas A.E., 355, 356

Toyota Home, 387, 388

Toyota Industrial Equipment Europe (TIEE), 387

Toyota Industrial Equipment Mfg., Inc., 387

Toyota Industrial Trucks, U.S.A., Inc., 385

Toyota (Ireland) Ltd., 225

Toyota Kreditbank GmbH, 383

Toyota Manufacturing Australia Ltd. (TMA), 302, 375, 376

Toyota Marketing Co., (Pty.) Ltd., (see also Toyopet Commercials (Pty.) Ltd.), 229

Toyota Maru car carrier fleet, 317

Toyota Maru, No. 1, 240

Toyota Memorial Hospital, 391, 398

Toyota Motor Co. (TMC), establishment of, 66; financial crisis of, 105; founding day 71; merger with TMS, 314; networth proportion of, 117, 197; status at war's end, 81; support for parts makers, 195; wartime supervision of, 73, 79

Toyota Motor Corporation, celebration of 50th anniversary, 399; formation of, 315; organization of, 315

Toyota Motor Corporation Australia Ltd. (TMCA), 377

Toyota Motor Credit Corporation, 345, 383

Toyota Motor Distributors, Inc., 167, 211, 272

Toyota Motor Distributors of New Jersey, Inc., 167, 211

Toyota Motor Finance (Netherlands) B.V., 383

Toyota Motor Finanace (UK) PLC, 383

Toyota Motor Manufacturing Canada Inc. (TMMC), 339, 340, 343, 344, 350, 396

Toyota Motor Manufacturing U.S.A., Inc. (TMM), 339--342, 396

Toyota Motor Philippines Corporation, 380

Toyota Motor Sales Australia Ltd. (TMSA), 377

Toyota Motor Sales Co., Ltd. (TMS), domestic sales network of, 189; establishment of, 106; establishment of Export Heradquarters in, 168; establishment of monthly installment system, 115; industrial vehicles and, 201; merger with TMC, 314

Toyota Motor Sales, U.S.A., Inc. (TMS, U.S.A.), 167, 168, 210, 213, 217, 269, 270, 271, 272, 274, 276, 277, 303, 331, 339, 344, 345, 346, 348, 349; establishment of, 166; establishment of dealerships, 210; incentives program, 216; moving of headquarters, 211; public service activities, 216; relations with dealers, 215; response to yen appreciation by, 344; turning point in activities, 214;

Toyota Motor Thailand Co., Ltd. (TMT), 164, 231, 232, 295, 296, 297, 372, 373

Toyota Motor Workers' Union, 145, 254

Toyota nationwide service conferences, 116