Toyota Economic and Recall Crisis - Research Paper Example

? Toyota Economic and Recall Crisis al Affiliation Toyota Motor Corporation is one of the world`s largest and most preferredautomobile manufacturers. It also is a leading advocate eco-friendly and technological cars. The company was established in 1937 by Kiichiro Toyoda. Toyota has 522 subsidiaries, more than 320,000 staff worldwide, more than 12 Japanese factories, and more than 51 locations in 26 countries. As of 2009, Toyota faced a crisis that almost brought about its down fall. The company had earlier faced an economic crisis that started in 2007 spreading across auto industries worldwide. Consequently, in March 2008, the company recorded its first ever loss after 70 years. Other problems that have faced Toyota include the problem with acceleration in 2009 that led to a recall of millions of vehicles. As a result of this, consumer attitudes towards the brand changed. In January 2010, complaints from customers continued and the number of recalls continued to rise. This continued through April 2010, causing a further drop in customer’s feelings towards the brand. In an attempt to retain its customers, and maintain its position as the number one global auto industry, Toyota changed its motto to “Moving Forward!” Through this, the company communicated its desire to create a new and better beginning. Gradually, the company has been gaining positive disposition from its customers. Today, Toyota has been able to rise again, even though it has lost its number one spot. Keywords: Toyota, Toyota Motor Corporation, Toyota Production System, Manufacturers, Crisis, Automobile, Auto-maker, Gas Pedals, Acceleration, Recalls For many years, Toyota Motor Corporation has been the biggest automobile manufacturer in the world. It also is a leading advocate eco-friendly and technological cars. The company has exported millions of vehicles worldwide. Through this, it earned the reputation of being the best automobile manufacturer and exporter. Since 2007, the company has however faced a number of problems affecting both its reputation and positive customer disposition. Today, the company has however gradually regained its reputation. Toyota Motor Company was established in 1937 by Kiichiro Toyoda. In 1952, the company rapidly grew becoming successful (Borowski, 2010). Initially, the company exported its vehicles to South America. After five years, it was able to penetrate markets in North America. Having sold its products in North America, Toyota was able to penetrate the United States market in the business of exporting automobiles. Borowski (2010) points out that “In 1982, Toyota Motor Company and Toyota Motor Sales Company joined forces to Toyota Motor Corporation (TMC)” ( p.3). “The company now has 522 subsidiaries, 320,808 staff worldwide and is producing not only in the 12 Japanese factories but also in 51 other locations in 26 countries” (Borowski, 2010, p.3). In 2007, Toyota Motor Corporation had the highest share price value among all car-manufacturers. In, 2008, Toyota made an annual turnover worth billions of United States dollars after selling millions of vehicles.. Consequently, the company gained the status of being the biggest manufacturer of automobiles. This has however changed due to the financial crisis that began in 2007, damaging Toyota’s image, and also due to over sticking gas pedals that led to many recalls worldwide. According to Ohno, a structure of theories and procedures for improving collaborative strength known as the Toyota Production System is used at Toyota to maintain the company’s productivity, and at the same time, ensure that customers are satisfied with the quality and efficient delivery of vehicles (1998). The production of Toyota automobiles evolved from Henry Ford’s historic manufacturing systems. Herny Ford manufacturing system thus paved way for the foundation of the Toyota Production System. Due to conditions in Japan, there was inherent need to make considerable improvements to Ford’s system of manufacturing. After the 1973 oil shock, Toyota Motors Corporation developed the Toyota production system that was henceforth adopted by Japanese companies. Founded in the1930s, the Toyota Motor Corporation began by assembling approximately five trucks each day. Fujimoto points out that “In 1950, it produced only about ten thousand units; but by the 1980s, this Japanese company had evolved into one of the largest automakers in the world, producing 3 to 4 million cars and trucks domestically” (1999, p.3). During the late 1990, Toyota enjoyed a huge growth of overseas production that boosted its annual world production to approximately 5million units. Since 1963, Toyota has led the domestic passenger car market. For years, the company did not record any operating losses since it began measuring profits. Over the past years, Toyota has gained the reputation of being one of the world`s best producer and performer in both manufacturing quality and productivity. Toyota is governed by a group of shareholders. In Toyota, shareholders meet in June every year for the general meeting, and they vote at the general meeting for the company`s president. Its executive body comprises of 26 directors “these are the Chairman, Vice Chairman, President, 8 Executive Vice Presidents, 13 Senior Managing Directors, Honorary Chairman, and a Senior Advisor” (Borowski, 2010, p.4). The board consists of four committees namely; the Corporate Philanthropy Committee, the Labor Management Council, the Toyota Environmental committee, and the Stock Option Committee. The primary aim of the Toyota Production System “is to eliminate through improvement activities various kinds of waste lying concealed within a company” (Monden, 2012, p.3). Toyota may have faced problems previously, but recently, it made profit by decreasing costs using a production system that removes a lot of workforce and inventory. The Toyota Production System is a good method for making vehicles because it is an effective instrument for making profits. By eliminating wastes like massive workforce and inventory, Toyota achieved productivity improvement and a reduction in costs. Toyota production system and total quality control have provided a good source of competitive advantage for Toyota. This is along with its product development capabilities and a productive connection with its suppliers. Japan has a large aging labor force and increasing public demands for environmental protection. However, according to Fujimoto (1999) “Toyota remains one of the most profitable large companies in Japan; internationally, and its manufacturing system is still quite competitive” (p.3). Other auto firms have made bigger profits than Toyota at one time or the other, but in the last few years, Toyota has regained its reputation. The philosophy of Toyota is to add value to the community, society, customers and its associates. This is influenced in all leaders at Toyota; and is the primary principle in the company, among other principles. Through training and experience the leaders of Toyota have learned that following the right process ultimately gives the right results. The Toyota Company creates a stress free work environment and provides all resources to employees. Therefore, the company constantly adds value its employees and partners encouraging them to grow. Learning at Toyota is constantly driven by solving of core problems. To achieve this, Toyota adopted the 4P model as a guide in its endeavors. In 2005 and 2006, Toyota recalled millions of vehicles. The company however announced its plan to improve quality. Even with its enormous profit the company got into a crisis, even with annual sales of over 200 billion dollars and a worldwide total number of 320000 employees, the company has had to work harder for higher market shares (Pride, Hughes, & Kapoor, 2010). In 2007, the global economic crisis began and its effects were felt in the company. In 2008, the president required a review of the internal communication since he believed that some problems resulted due to lack of adequate communication but nevertheless problems arose in 2009, when Toyota learned that a number of vehicles sold in Europe had problems with the gas pedals and this could lead to serious safety problems arising from sudden acceleration. Toyota then decided to send most of its European distributors to solve the problem, but failed to alert the United States about the issue. However, the United States National Highway Traffic safety Administration realized that there were problems with the vehicles and requested Toyota to recall its vehicles. “The crisis deepened in April when US regulators, after reviewing documents turned over by Toyota said they would slap the auto-maker with a multimillion dollar fine for delaying the recall” (Pride, Hughes, & Kapoor, 2010, p.242). Toyota is currently facing stiff competition from companies like Ford, clyster and GM. A November 2009, recall by Toyota was intended to fix a design disfigurement that caused the gas pedal to be trapped under the floor mat. This was as a result of a Lexus Sedan crash that went out of control and crashed into a Ravine near San Diego, killing four of its crew members (“Toyota Motor Corporation,” 2012). The automakers and Government safety officials continued to get reports of accidental acceleration and tight pedals, even after some vehicle’s floor mats had been detached by Toyota. Many questions were raised over whether it occasionally fixed the potential dangerous problems in new models without recalling those already on the road. In January 2012, pressure mounted upon the company and announced it would temporarily stop building and selling eight models in the North American market. In 2010, Toyota recalled more than 11million Lexus and Toyota vehicles worldwide because of sticky accelerator pedals and problems with floor mats. The company also paid fines of $48.8 million, as a result of the Transportation Department demands that the company had acted inappropriately (“Toyota Motor Corporation,” 2012). Toyota engine software and its microchips were thoroughly checked and Government investigators reported in February 2011 that there were no clues of evidence showing that Toyota vehicles had electric problems that caused sudden acceleration (“Toyota Motor Corporation,” 2012). When Toyota Company carried its own investigations, it found stick pedals in some of its vehicles. When regulators seemed to ignore reported problems about Toyota vehicles, an auto safety company said that it sued Toyota to get investigation records of the accidental acceleration involving a Toyota Prius in 2011. Toyota`s collapse was definitely a large determinant in the rise General Motors. A Freedom of Information Act lawsuit was filed by Safety research and strategies against NHTSA in an attempt to find out if the trying to find out if the organization had been concealing information. This could interpret an acceleration incident caused by the electronic system in a Prius. Akio Toyoda, the company`s president and grandson to the founder travelled to Washington in 2012 to appear before a House of committee, the company has been in serous pain to show its on top of its crisis (New York Times, 2012).In January 2009, Toyota was hit by the world`s economic crisis which was the worst it ever experienced since the great depression and uncertainty surrounded everyone (Turner, 2012). The Toyota plant was idle and all team members felt very uneasy about it. The branch president Steve ST Angelo took the initiative to motivate Toyota employees not to give up. With the positive attitude from executives and the understanding, the company stayed afloat. Although 2009 was a challenging year for Toyota due to the economy, nothing had prepared them for problems in 2010. Toyota has been able to gradually overcome these problems and is slowly regaining its position in the automotive industry. The dramatic crisis that began in 2008 worsened the effects of internal debates on the management of Toyota. After years of brilliant and steady growth, Toyota’s management faced the problems all at once. Not only were they unprepared, but they ended up facing great competition in the market making them weaker compared to their competitors (Ciravegna, 2012). Today, Toyota is facing a hard decision on whether to focus on winning competition in its foreign market in North America, or to allow loss of control over plants located overseas and come up with a new competitive advantage in emerging markets. With the high gas prices and a weak United States economy during the summer of 2008, Toyota reported a double decline in sales for the month of June 2008 (Goel, 2009). For Toyota, these were attributes mainly to slow sales of its tundra pickup, as well as fuel-shortage of vehicles like Prius, corolla and Yaris. The company announced plans to idle its trucks plants, while moving production at other facilities to manufacture in-demand activities. In December 2008, Toyota announced that it had made a loss of $1.7 billion. Toyota’s sales reduced to 33. 9% (Goel, 2009). The president of Toyota Katsuaki Watanabe said the impact of a struggling global economy on the company was faster, wider and deeper than excepted. Due to the losses, the Toyota Company had to get loans from the Japanese government. In June 2011, Toyota recalled almost 10 million vehicles worldwide for defective gas pedals, faulty floors mats, flawed pump writing and problems with braking software. In June 29, 2011, the company announced another recall of 45, 500 highlander hybrids and 36,700 Lexus Rx SUVs. The company also recalled 11,164 units in Japan and 15, 000 in Europe (Hitt, Ireland, & Hoskisson, 2008). Toyota suffered another setback when General Motors withdrew from their joint venture in California NUMMI. Toyota is trying hard to get a grip on the current crisis. Toyota has put hope on its new and relatively young chief Toyoda. Toyoda has made his mark on the company under a strict saving program. After the crisis, he announced the closure of Nummi Venture with General Motors. The crisis forced Toyota to take further, radical cost-cutting measures. In November 2009, the manufacturing company announced that it would not continue with its involvement in Formula 1 racing, a decision that cost 500 jobs in Germany (Wimmer, 2012). It had already abandoned its Japanese circuit to save costs; nevertheless, it acquired Fuji International Speedway, one of Japanese important race. Other than the saving program, the heir to Toyota cut very important tenets out of the Company`s philosophy. Toyoda introduced the five why`s as a problem solving instrument, it was a philosophy that was adapted and finally made into a standard management strategy across many manufacturing industries. Whenever a problem occurred he would ask why five times in order to analyze the cause of the issue and come up with a solution. He would then change the production cycle until a solution was met (Wimmer, 2012). Part of Toyota`s philosophy, “is that a team leader who sees an andon signal intervenes immediately in order to solve the problem with the employee directly, and the employees are excepted to try to recognize the cause of the irregularity themselves and, if possible, propose a solution ”( Wimmer, 2012, p.137). This allowed the workers to stop the production process by the method of built-in-quality. Toyota had to base its expansion and its profits on the market share from the established competitors. For example, Toyota was faced with challenging benchmark in terms of their prices and quality and the Toyota Production System was the only answer to this challenge. The efficiency of Toyota’s implements and sometimes exceeds saving goals became clear in the Emergency Profit Improvement Program. This program brought the giant manufacturing company out of the red in record time (Wimmer, 2012). Detroit, had a strong comeback under way of Sedan and SUV`S Toyota motors, is hoping to rejuvenate its Lexus brand by appealing to young and more adventurous buyers. The company has recovered most of the United States market share, although its Toyota brand lost in 2011 from inventory shortage due to the earthquake and tsunami in Japan. Toyota Lexus brand is gaining steam with a revamped product lineup (New York Times, 2012). Lexus is bringing back interest to the showroom by being advanced in style and performance with their new models in hopes of captivating young demographic. Lexus was the best-selling brand in the United States for 11 years until 2011. Toyota recently established a second generation of hybrid cars, while it also wants to establish a new hydrogen model and it will be in mass production by the end of 2015. The city car will be electronic, while others will travel by the use of hybrid and hydrogen cars (Ciranegna, 2012). Toyota has considered if these measures are eco-friendly for the fuel-efficient vehicles, it will be driven by high fuel prices, increased emission regulation and low hydrogen effective vehicles cost disparities (Smith, 2009). The hybrid vehicle is powered by both a traditional internal combustion petroleum-burning engine and an electric motor. The electronic motor is powered by batteries, which are charged either by engine or what we call regenerative braking. This action occurs as the electric motor applies resistance to the vehicle`s drive, which makes the wheels to slow down. The energy from the wheels converts the motor, which functions as a generator, converting the energy normally wasted during coasting and braking into electricity (Smith, 2009). The energy is then stored in the battery until when necessary. The advantage of the Hydrogen Efficient Vehicles is that they improve the fuel economy, and reduce carbon dioxide and other pollution emissions. These vehicles will get people to where they want, without any harmful effects to the environment. Toyota Motor Corporation has accomplished many goals through its existence, but this has not been easy to achieve, the company had to form a team to achieve its goals successfully. Toyota Motor Corporation has started many techniques that are suitable for the production of vehicles and employees (Borowski, 2010). Toyota is manufacturing cars with the Toyota production System that is based on just-in-time principles. The employees of Toyota Motors are very vital to the company; this is because a line worker has the power to stop a manufacturing line, but this action has its disadvantage. This is because if the employee stops the manufacturing line, there is a risk of incurring high costs. To prevent these mistakes from occurring, Toyota has spent a large amount of money on employee training and development, and by taking this action the employees can apply strength, skills, and opportunities. In conclusion, Toyota Motors Corporation is one of the world`s largest and preferred automobile manufacturer. Over the years TMC has produced eco-friendly cars that have no effect on the environment. TMC was founded in 1937 by Kiichiro Toyoda. Since 1952, the company has grown rapidly to become the most successful manufacturer. It first exported its vehicles to South America and then started venturing the United States market consequently opening its branches in North America. In 1982, it merged with Toyota Motor Sales and formed Toyota Motor Corporation. The company had 522 subsidiaries, more than 320,000 employees in more than 12 Japanese factories, and more than 51 locations in 26 countries. Toyota Motor Corporation has the highest share price value of all cars manufacturer. Statistically Toyota total unit sale in 2008 had 8.972 million cars and had an annual turnover of approximately 239.4 billion United States dollars. In recent years, Toyota is no longer referred to as the number one automobile manufacturer, this is because of the financial crisis that began in 2007, and the company`s image that has been tarnished due to the massive global sticking gas pedals. The Toyota Production System is a framework of concept and methods for enhancing corporate vitality. This has enabled the company to achieve a continual gain in productivity, while striving to satisfy customers of quality and quantity. The production of Toyota system started from the historic manufacturing system by Herny Ford. His system gave way to the foundation of Toyota Production system. Toyota Production System was developed by Toyota Motors Corporation and was adapted by Japanese Companies. During the late 1990s, Toyota had a huge growth of overseas production that raised Toyota`s annual world production up to 5 million units. Toyota has led the domestic and international market since 1963. Toyota Production System is a method for making products, this is because it`s an effective tool for producing the ultimate tools like profit. The best way to achieve this goal was by reducing costs and improving productivity. Toyota has faced many challenges that have deteriorated the company`s performance in recent years, Toyota has faced the economic crisis of 2007 and other problems that were experienced in United States. However, the company has remained strong and is working to regain its position as the number one auto manufacturer. Reference List Borowski, Arkadi. (2010). Report on the Toyota company. Norderstedt: GRIN Verlag. Ciravegna, Luciano. (2012). Sustaining Industrial Competitiveness after the Crisis: Lessons from the Automotive Industry. Kirby: Palgrave Macmillan. Fujimoto, Takahiro. (1999). The Evolution of a Manufacturing System at Toyota. New York: Oxford University Press. Goel, Suresh. (2009). Crisis management: Master the Skills to Prevent Disaster. New Delhi: Global India publication Pvt Ltd. Hitt, M., Ireland, D. & Hoskisson. (2008). Strategic Management Cases: Competitiveness and Globalization. Mason: Cengage Learning. Liker, Jeffrey & Meier, David. (2006). The Toyota Way Fieldbook. New York: McGraw-Hill Companies, Inc.  Monden, Yasuhiro. (2012). Toyota Production System: An integrated Approach to just-in-time. Boca Raton: CRC Press. Ohno, Taiichi. (1998). 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