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VIDEOCompanies That Almost Weren't: Toyota
By
John F Kelly Dec 11, 2009 8:10 am
From automated cloth-maker to expert car-maker.
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In 1924, a highly temperamental, nicotine-addicted carpenter in Japan named Rashomon Sakichi Toyoda, invented a machine-driven textile loom that automatically stopped if a thread broke, freeing an operator to oversee several looms at once and changing that industry forever. The model would later serve as the blueprint for the production techniques that would create one of the world’s largest and most profitable automobile companies.
A few years after Toyoda created his electron loom, he sold the device’s patent to a British company for £100,000 and set his sights on creating Japan’s first car company. With some funding from the Japanese government, the automotive division of Toyoda Automatic Loom Works was launched in 1933.
The company soon created its first engine, which was a copy of a Chevrolet vehicle that was so precise that it could literally accept actual Chevy parts. The company -- now rechristened Toyota (TM) because it was easier to pronounce -- created its first passenger car, a Chrysler replica, in 1936.
The production of subsequent models was put on hold by the Japanese government, which switched its focus to building military trucks. Toyota was making 1,000 trucks a month by the time of the Pearl Harbor attack. Its plant was hit by US bombers on August 14, 1945, the day before the war ended.
Thinking that the US Occupation forces would prevent the company from producing vehicles, Toyota turned its attention to other targets: fish paste and chinaware. These ventures were short-lived, however, as Toyota was soon given the green light to slowly begin manufacturing cars again. And it was, literally, a slow process. In 1947 it began making Toyopet, a clunky and slow-moving vehicle that was cheap and could also navigate the ripped-up roads of post-war Japan.
Over the next five years, Toyota produced just 215 Toyopets. But by 1955, Toyota was making 8,400 cars per year, and with the introduction of the fuel-efficient Corona and Corolla, it was making 600,000 a year a decade later.
Greatly contributing to this upsurge in production was the installation of a innovative assembly method known as the kanban system. Unlike the Western manufacturers -- which at the time, repaired assembly defects in the autos following their completion -- all Toyota workers were given the power to stop the production line as soon as an imperfection was discovered. The highly efficient system was modeled after Rashomon Sakichi Toyoda’s concept for his earliest automatic looms.
This production process, as well as the early 1970s oil crisis -- which, at least temporarily, steered US consumers toward purchasing more fuel efficient cars -- helped make Toyota what is today one of the world’s most successful companies.
But like most companies, Toyota wasn't able to survive the current financial crisis without a few dents. In first-quarter reporting for 2009, Toyota suffered a big hit, posting a $7.7 billion loss -- the largest drop in the company's 71-year history.
Its third-quarter results, though, showed a surprise profit -- "the latest in a string of healthier reports and forecasts from rivals including Honda Motor Co. (HMC) and Nissan Motor, adding to growing evidence that carmakers are starting to rebound after being battered by the deepest industry downturn in years," according to a report by the Associated Press.
Toyota attributed its turnaround to the efforts of governments around the world to boost sales of environmentally friendly cars.
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No positions in stocks mentioned.
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