By on January 28, 2010

The ongoing kerfluffle over Toyota’s recall of over 2m vehicles for a gas pedal defect which (allegedly) caused unintended acceleration has caught much of the automotive media flat-footed. How could it be, many have wondered, that the automaker most associated in the US market with the concept of quality has slipped so badly? As TTAC’s Steve Lang recently discussed, Toyota has been on a decontenting binge since the mid-to-late-1990s, putting profit above the quality obsession that had defined its operations up to that point. As a result, the current generation of decontented Toyotas and accompanying quality issues and recalls can be seen as the culmination of a long-term trend. But why did that transition take place? Though it’s easy to blame greed and mismanagement for the decline in Toyota’s quality, the decline in standards was actually a natural progression of Toyota’s constantly-evolving, efficiency-obsessed production system.

Since the 50s, Toyota had been introducing management techniques such as kanban (just-in-time inventory management), shusa (heavyweight product managers), and kaizen (continuous improvement at all levels of production, including assembly-line problem solving). In the 1960s, what is now known as the “Toyota Production System” came into its own, as Toyota integrated suppliers into its product development and established Total Quality Control over every area of its operation. These developments led to huge efficiency gains, allowing Toyota to launch its full-scale assault on the US market in the 1970s.

By the 1980s, the principles of the Toyota Production System were well-established, and the global auto industry began to take notice of Toyota as the automaker made increasing gains in the US market and elsewhere. The first half of the 80s saw the introduction of export limits in the US, which limited production expansion but kept Toyota’s profitability high thanks to artificially inflated prices. In 1985 however, a sharp jump in the value of the yen put major pressure on the Toyota system and reduced its competitive advantage relative to US manufacturers.

In the short term, this challenge was masked by bubble-driven Japanese economy, which added another 2m units of annual demand in the late 80s, but as Takahiro Fujimoto writes in The Evolution Of A Manufacturing System At Toyota,

as appreciation of the yen eroded their cost competitiveness, Japanese firms had to increasingly rely on the quality side of their strength. Real-term productivity growth had been slowing since the early 1980s, but total quality continued to increase.

The Japanese market took back its volume gains in the early 1990s as it entered recession, and the yen rose again in 1993-94, putting even more pressure on Toyota’s Japanese production. Though the rise of transplant production is the best-known result of these challenges, it’s no coincidence that Toyota made major changes to its product development philosophy in this turbulent period.

These changes were a response to the emerging concept of “fat product design,” a term that consciously clashes with the “lean” ideals of the Toyota system. The “fat product” critique held that Toyota’s increasing reliance on quality advantages resulted in product “overquality” in terms of design “overquality,” relatively lower component sharing, frequent model changes and product variety run amok. In short, a weakening Japanese market and upward pressure on the yen created conditions in which Toyotas strengths with its customers were systematically turned into a concept that was anathema to the Toyota system: the “problem” of “fat product.”

Fujimoto explains the subtle rise of the “fat product problem” thusly:

…these problems didn’t emerge because the Japanese makers built a wrong set of capabilities in the first place. To the contrary… “overbuilding” of the same capability that created new competitive advantages in the 1980s has been the source of new problems in the 1990s. Overall, the dilemma of fat product designs provides us with new insights about the subtle nature of the capability-building dynamics: effective manufacturing routines are difficult for a firm to acquire, but once it gains momentum to build them, it is also difficult to avoid overrun.

Fujimoto illustrates this dynamic in a number of areas. First, he argues that high product development efficiency aided by supplier integration into the design process (heretofore a competitive advantage) resulted in too much product variety. This efficiency was also measured in terms of shortened development lead times as facilitated by standardized development processes, a phenomenon that Fujimoto maintains was a contributing factor in fat product design as it prevented improvements in design efficiency by emphasizing routine practice. “Heavyweight product managers,” another Toyota innovation that allowed high levels of product integrity (and therefore success in the market) also became overemphasized, creating more unique components and requiring an accompanying increase in prices that could not be sustained when the Yen’s value took off in the mid-80s and early-90s.

Another area of product development “fatness” that is especially resonant in light of recent developments, is Toyota’s emphasis on the consumer satisfaction index (CSI) as a measure of customer satisfaction. The use of CSI results in product development was problematic in the sense that it emphasized the elimination of points of customer dissatisfaction. Fujimoto writes:

elimination of customer dissatisfaction does not automatically mean higher customer satisfaction, as the two are often different dimensions. As a result, the pursuit of the CS technique based on the dissatisfaction list may create high-cost [i.e. “fat”] products that have no problems– but no fun built in, either.

What did “fat product” mean in real terms? Around 1990 Toyota’s global output was about 300k units per month, comprised of no fewer than 60k product variations, 25k of which were assembled only once per month. The worst-selling half of these variations made up only five percent of total sales. This variation proliferation was caused by Toyota’s ability to respond to the market’s demand for product differentiation, but in the cutthroat global car business, this was not a sustainable state of affairs.

In addition to overbuilding variety in response to consumer demand, there is evidence that Japanese firms also overbuilt for quality in this period as well (although this is often difficult to objectively quantify). Fujimoto notes:

When I interviewed a product engineer at a German car maker in the late 1980s, he commented that one of the leading Japanese models was about $500 more expensive that the equivalent German model owing to overquality and excessive designs, other things being equal.

Whether this phenomenon existed across Toyota’s product range is nearly impossible to prove, but one thing is certain: in the early to mid 1990s, Toyota’s managers clearly believed that it suffered from “fat product” and moved aggressively to limit its effects.

In 1993-94, Toyota lost about 100b yen due to currency fluctuation alone, making lean product design a jarring necessity. Over those two years, Toyota saved about the same amount in cost-cutting alone, preventing the need for right-sizing capacity or cutting jobs. Instead, Toyota reduced product varieties, increased component-sharing and generally introduced more “value engineering” into its designs. Again, this was not obviously a product of  cynicism on the part of Toyota’s management, but a realization that reforming Toyota’s super-lean manufacturing system would not yield the kind of savings the firm needed. In Fujimoto’s words, the focus of competition had changed, and Toyota’s response was to de-emphasize individual, product-focused development in favor of multiple project development which would allow greater component-sharing across models, and fewer variations of each individual model.

In theory, this sea change in Toyota’s culture could have been effectively managed to prevent the steady decontenting of products and declining quality. And, in the interest of fairness, it could also have led to even more dramatic drops in quality and content. Fujimoto’s analysis of Toyota was published in 1999, when Toyota was still (if only by reputation) the king of quality in the automotive world, a fact that at the time was still attributed to its manufacturing, rather than its product-development system. However, Fujimoto does leave the reader with a warning that should probably have been posted on every bulletin board in Toyota City:

Achieving product integrity and product simplicity at the same time is not an easy job. As of the mid-1990s, there have been some cases in which excessive simplification of the Japanese new models, which apparently resulted in loss of product integrity, lack of product differentiation and perceived deterioration of design quality, have created customer dissatisfaction and loss in market share, despite their competitive prices. This seems to indicate that lean designs actually involve a subtle balancing and that there is always a risk of overshooting– or oversimplifying product design.

Obviously, we need to know a lot more about the specifics of Toyota’s recent quality woes before we can establish causal links between the rise of lean product design in the 1990s and the current rash of bad news. The fact that Denso-built pedals do not appear to suffer from the same problem as CTS-supplied pedals indicates that this might be a supplier-specific problem, rather than the result of a systemic de-emphasis on quality at Toyota. Still, the Toyota practice of working closely with suppliers in the development process indicates that there’s more than enough blame to go around.

The real extent of this cost-cutting, decontenting and “design leaning” won’t be easy to quantify, but the fact that it’s been taking place since the early nineties and is only now yielding negative effects suggests that it’s been relatively well-managed. But Toyota’s reputation was built on those “fat” products of the mid-80s to early-90s, and it won’t be returning to the old practices that created them anytime soon due to their competitive disadvantages. This seems to suggest that, once damaged, Toyota is unlikely to ever recover its former quality halo.

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87 Comments on “Too Good To Be True: How Toyota’s Success Caused Killer Decontenting...”


  • avatar
    Charles T

    This has hints of the Mercedes cost-cutting binge that started in the early to mid-90s. Looks like business have a tendency to follow a rather ballistic path over time no matter where they’re from.

    • 0 avatar
      Runfromcheney

      At least Mercedes noticed the error of its ways and managed to being the quality back before any serious damage to their reputation was done.

    • 0 avatar
      johnny ro

      I agree there is a ballistics path being followed, but the one I see is not company specific, its country specific, since each country has its own currency.

      Japanese gods got better, its economy becomes stronger, its currency grows more valuable relative to others. That hurts companies in Japan.

      China is accused of keeping its currency low with artificial means to avoid traveling on this trajectory. Why can they do this? They are immune to retaliation.

    • 0 avatar
      forever2

      As bad as things are for Toyota, let’s hope this is just not ‘one sign’ of something more widespread in the automotive industry.

  • avatar
    Littlecarrot

    One problem. If you look at the Consumer Reports reliability surveys over ten years, Toyota consistently manufactures the most reliable cars.

    • 0 avatar
      2JZSupRaTuRbo

      definitly true on the reliability aspect. i have a friend who has a 2001 tacoma SR5 that has 105 thousand miles on it and its basically like a 3 year old truck instead of 10. he hydroplaned in it and cracked it up a bit had the bed replaced and some other cosmetic repairs all for free basically under his insurance. it was on the recall list of those tacomas with the frame rot(his wasnt actually that bad ) but they replaced it anyways(15,000) dollars worth of work for nothing. he had a checkup done on it at the local shop, and they said it was in the working order of a 2 year old or less comparable vehicle. not only do toyotas have great reliablitlity they treat the customer very well too..

  • avatar
    bumpy ii

    I blame the Plaza Accords.

  • avatar
    Verbal

    Lesson learned: you cut costs by chasing the inefficiencies out of your processes, not by cheapening your end product.

  • avatar

    lesson:

    GREED WILL DESTROY US ALL

  • avatar
    Gardiner Westbound

    “As of the mid-1990s, there have been some cases in which excessive simplification of the Japanese new models, which apparently resulted in loss of product integrity, lack of product differentiation and perceived deterioration of design quality, have created customer dissatisfaction and loss in market share, despite their competitive prices.“

    No shit, Sherlock!

    Assured there would be minor headlight, grille and taillight changes only, we ordered a new 1995 Toyota Camry prior to introduction. It turned out to be the first of the strippers. Many nice touches were absent; a lousy cheap radio, crappy steel wheels and $5 plastic discs, a wafer thin fiberboard trunk floor that rapidly distorted, even the trunk and engine lights were gone. We asked to be let out but Toyota Customer Care blew us off. Selling 8-zillion cars a year, nobody lost any sleep over us.

    Toyota will soon need every customer it can get. Though ours was an excellent car, we won’t be among them.

  • avatar
    Steven02

    I think the spin in the article is terrible. “It was Toyota’s success that is now causing its failure.”

    No, it isn’t. The reason for the failure is simple, profit. Value engineering is cheap. That is the problem. You get what you pay for.
    Why did GM have the problems it did? Profit. Nothing new here. Just one company becoming big and wanting more $$$ (I don’t have a yen key on my keyboard).

    • 0 avatar
      Sutures

      +1 Steven2

      The Toyota reasoning sounds very much like the much maligned thought process from GM.

      Oh… and did anyone else catch ABC’s newscast tonight? Mid way through the report they talked with someone that had a Prius with “unintended acceleration.” Hmmm… maybe the recall list isn’t quite complete yet.

      Edit to add: Link to ABC story (no video, just transcript so far) The driver of the Prius was Dr. Ostroff, towards the end of the first page.

      http://abcnews.go.com/Blotter/toyota-supplier-sticky-gas-pedals-problem/story?id=9689799

    • 0 avatar

      Perhaps I should have mentioned that US voluntary export restrictions on Japan drove prices up starting in 1981, yielding big profits for almost every automaker with a presence in this market. This certainly helped “fatten” Toyota’s products. Guess what year they went away? 1994. If Toyota knew the limit was coming down, the making an issue out of “fat product” would be better interpreted as an attempt to maintain profit levels (and gear up for a huge bump in exports).
      This contrasts sharply with the example of GM, which profited even more from VER and yet was never accused of devoting too many resources into product development. Maryann Keller put it best: “Acquiring EDS and Hughes was like the four-hundred-pound woman coloring her hair and doing her nails. It wasn’t tackling the real problem.” That, for me, is far easier to boil down to greed and ego than Toyota’s decontenting.
      That having been said, I haven’t found anything resembling a causal link between the “fat product problem” phenomenon and the current situation involving mats and pedals. The main reason this recall is getting the attention it is is that Toyota has been the undisputed king of quality-by-reputation since, gosh, the early 90s (when it was actually earning it). Now Toyota will be seen as just another Japanese automaker, which seems about fair to me.

    • 0 avatar
      Steven02

      I understand the import restrictions drove up the price, but Toyota also wanted to build locally to get around that and build more volume to get more money. I am just saying this. GM’s problem started with management and greed. What did Toyota’s downfall start with? Management and greed. Bottom line, it is the same cause and effect, just executed differently. And Toyota hasn’t been as bad as GM was at its low point. Don’t get me wrong, Toyota is still every good, but they are absolutely starting to show the cracks that formed from poor management and greed.

    • 0 avatar
      geozinger

      @Edward Niedermeyer- You bring up a quote by Maryann Keller concerning GM’s acquisition of EDS and Hughes in the 1980’s. I think it was a combination of the then-current style of MBA thinking, which was to diversify and actually some forward looking thinking, possibly realizing that electronics, software and telematics would become a large part of the auto industry in the future. I say this strictly as an amateur observer of the industry, not having actually studied any of this, and mostly relying on memories for what took place.

      The D3’s last ditch tactic of decontenting almost worked in a way, as it forced Toyota at least to use the same tactics on their bread and butter cars. I have personally experienced this, as my FIL used to espouse the wonderfulness of his 2nd gen Camry ad nauseum. By the time my FIL bought his 3rd and 4th gen Camrys he was sick of them. And I have to agree, the last one in particular WAS cheap, and had a real 1980’s GM A-body feel to it.

      Regardless of my impressions, I hope there’s a timely remedy for this.

      (As an aside, how many Niedemeyers are on this blog? Should I start posting in German instead?)

    • 0 avatar
      Paul Niedermeyer

      geozingers, last time I checked, just two; Ed and I. Have anymore Niedermeyers shown up?

    • 0 avatar
      geozinger

      @Ed Niedermeyer- no more Niedermeyers have shown up, I find it amusing that with all of the Schmitts, Langs, and other Germanic family names showing up on this site, it’s starting to look like one of my family’s reunions. Viel Spass!

  • avatar
    tech98

    I’m starting to wonder if I’ll be disappointed when I finally replace my late-80s Japanese car with a newer one.

  • avatar
    srogers

    I don’t know if we can pick Toyota apart at this point because of a design (or manufacturing flaw) in one component.

    Maybe it’s just a coincidental convergence of cost-cutting, supplier error and bad materials.

    If Toyota’s design was totally screwed, why do the ND throttle assembles not fail?

    Not that I’m saying that it isn’t all a result of Toyota cheaping out, but it seems that a whole industry has sprung up to tell that all the world’s evil results from Toyota’s blind greed.

    • 0 avatar
      Richard Chen

      On that note, let’s play Mad Libs, substituting car companies, problems, and excuses. For example:

      Chrysler just recalled 5 million cars due to engine sludging. What did you expect from a company that had its engineering talent gutted after being taken over by the Germans?

      General Motors just recalled 5 million cars due to an oil leak and potential fire hazard. What did you expect from a company that was run into the ground by a bunch of insular penny-pinching MBAs without engineering backgrounds?

      and so on.

    • 0 avatar
      John Horner

      I’m skeptical of Toyota’s current spin which tries to lay all the blame on CTS while magically declaring vehicles with Denso sourced pedal widgets problem free. A few months ago floor mats where supposedly THE PROBLEM.

    • 0 avatar
      rnc

      Especially considering the Toyota is one of Denso’s largest shareholders (if I am correct). Toyota has a vested interest in protecting them (as Denso’s stock value flows directly into Toyota’s balance sheet).

  • avatar
    Pig_Iron

    I know this also happened at Chrysler and Nissan around the same time for various reasons and to different degrees. It makes me wonder if this caused problems at Mitsubishi, and other manufacturers as well.

    I’ve seen all manufacturers “decontent” engineering decifications to some degree, especially to make Asian parts suppliers able to supply. Oddly, I don’t remember GM doing this, but they certainly “decontented” adherance to specifications. >:-(

    I once stood my ground and refused to allow a substandard eng spec to be applied; I was willing to lose my job because of the potential risk (it was pretty scary) – the acting chief engineer signed off on the lesser spec instead and the matter was forgotten, except by me.

  • avatar

    I think reports of a substantial decline in Toyota quality are greatly premature. The Consumer Reports Annual Auto issue for 2009 indicates that most Toyotas going back the last six or seven years are at the top of the reliability heap. There may indeed be some unfortunate trends going on, but they certainly haven’t progressed far enough to give Toyota a black eye. A little bruise–***maybe***.

  • avatar
    CarPerson

    Toyota was controlling the message well until they stupidly stopped production instead of just slowing it way down and parking the vehicles on factory land.

    Yes that involves a cost but that cost is far, far less than what it will take to recover from every “news” outlet worldwide blaring that fact in 200pt headlines. This did not slip past under radar.

    Also expect a spike in crashes as people punch the ticket for the insurance check. You get more than selling it on Craig’s list.

    Yeah, hang on. We’re now going for quite a ride with this one.

  • avatar
    richeffect

    I don’t know if this will be much damage to their reputation in the long run, but I do know one thing: This will stick in my mind for a long time and I won’t even consider a new Toyota if I were shopping. My choice was always teetering between Toyota and Honda anyway. This just tips it towards a Honda.

    ouch

  • avatar

    It takes a lot longer to lose a reputation than gain it.

    • 0 avatar
      JeremyR

      Well, fancy seeing you here, Robert!

      That sounds backwards, though. Reputations are built over years, no? But it doesn’t take very many screw-ups to destroy one…

    • 0 avatar
      dkulmacz

      Wow. Welcome back! Never thought I’d type that . . .

      I think it’s positive vs negative. It’s easy to gain a bad reputation, and hard to lose it. And it’s hard to gain a great reputation, but easy to lose it.

    • 0 avatar
      fincar1

      Has it not always been the case that one foulup equals ten attaboys?

    • 0 avatar
      johnny ro

      welcome back.

      …but sometimes its the other way, think Bernie Madoff. Reputation built over decades, then zero’d out in one day.

    • 0 avatar
      Robert Schwartz

      Yeah Robert. Don’t be a stranger.

    • 0 avatar
      rocketrodeo

      Losing a reputation is the same as gaining a reputation; it’s just delta-rep. Unless you’re simply no longer in the conversation. I have to assume the irony is intentional.

    • 0 avatar
      Jimal

      Tell that to Tiger Woods (stick with me, there is a parallel here). His long-earned reputation as a moral, family-values (and therefore commercially friendly) type of guy took a hit almost as soon as he did at the hand of his wife. One big run-in with his wife – and a tree – did in an instant what would have taken years of innuendo to accomplish. The press started swarming, skanks started coming out of the wood work. It all went pear-shaped.

      Now apply this to Toyota. There have been comments over the years about decontenting. Nothing glaring, just that aching “Gee, they used to make them better.” feeling. Short term, their good will and reputation for quality trumped all. It would have taken a long time for that reputation to erode on its own from decontenting alone. That is, until this sticky gas pedal issue came up. Now, Toyota’s decontenting trend is out there for the world to see. Lawyers have started swarming, reports (most of which are probably unrelated) of Toyotas taking off on their drivers are starting to come out of the woodwork. Its going all pear-shaped.

    • 0 avatar
      psarhjinian

      Has it not always been the case that one foulup equals ten attaboys?

      Yes and no. It depends on the nature of the foul-up.

      Or rather, there are foul-ups, and then there are profound foul-ups: in the latter category are foul-ups that the customer has to pay for, and for which you do not assume responsibility.

      The sludge issue was almost such a foul-up. This is not.

  • avatar
    skor

    Bottom line: The most unreliable Toyota is still more reliable than the most reliable GM. The death of Toyota has been greatly exaggerated.

    • 0 avatar
      njoneer

      Evidence?

      Can Karesh weigh in on this claim?

    • 0 avatar
      Jimal

      +1 on wanting to see some evidence to this claim.

    • 0 avatar
      renkeyes

      @skor: The most unreliable Toyota is still more reliable than the most reliable GM.

      This is an exaggeration, but not as far off the mark as I originally thought. According to CR’s most recent data (Oct 2009):

      Toyota’s reliability scores ranged from 12% worse than avg to 77% better than avg, with the average Toyota being 39% better than average.

      Buick’s (GM’s best-scoring marque b/c Saab was sold) reliability scores ranged from 21% worse than avg to 12% better than avg, with the average Buick being 5% worse than average.

      So, there is some overlap between the ranges, but not much.

      Summary:
      Toyota: -12% to +77%, mean +39%
      Buick: -21% to +12%, mean – 5%

  • avatar
    reclusive_in_nature

    The fact that Toyota and Honda offer nothing remotely interesting or powerful enough to garner even a tiny bit of my attention is reason enough for me to never own one. The whole unintended acceleration (isn’t ANY acceleration in a Prius unintended?) issue is just a minute impurity on top of a giant heap of boring blandness.

    • 0 avatar
      ajla

      Well, if you have a Tundra (and a few warrantied TRD bolt-ons) you can get something interesting. The Land Cruiser is alright too.

      A few Lexus models are also pretty quick, though lacking in BMW-style sportiness. I personally find the GS450h an intriguing vehicle.

  • avatar
    segfault

    While Toyota is on a recall binge, they should recall all 1997-2001 Camrys for their cheap interior plastics.

  • avatar
    50merc

    OK, but was the pedal linkage / return damper at issue decontented? From what I can tell at this point, the flaw may have been something simple like CTS using washers or cotter pins subject to corrosion instead of rust-resistant parts. Some journalism outfit with deep pockets (say, ABC News) should have the pedal linkages pulled out of a US-built Camry and a Japan-built Camry and studied at an independent lab for significant differences.

    I still wonder if it could be the way the pedal communicates its position to the computer. After all, how many Toyota drivers ever slam the pedal to the metal even once?

    • 0 avatar
      Paul Niedermeyer

      +1;
      It’s exactly what I said to Ed today about having an independent organization evaluate the two different pedal assemblies, and see if they’re even made to the same specs or not, and exactly what is different about it.

    • 0 avatar
      segfault

      Some journalism outfit with deep pockets (say, ABC News) should purchase a US-built Camry and a Japan-built Camry and rig the gas pedal so that it sticks and accelerates the car into an embankment at high speed.

  • avatar

    Wow that was dense.

    Where was the part about starting to build beautiful cars that aren’t bland and ugly?

    Or is Lexus the only Toyota branch that has even middling desingers?

  • avatar
    renkeyes

    Perhaps decontenting has caused some of the issues, but I have to think that shortening product design cycles are involved, as well.

    IIRC, two decades ago, companies spent 30+ months designing a new car model. Many of the automakers are pushing their current design cycles to <18 months. I'm assuming that a significant amount of this time savings has been gained by reducing the duration/number of durability tests.

    No doubt that some of the benefits of physical durability tests can be achieved more efficiently via computer simulation, but simulations are only as good as the thoroughness of the simulation environment. The real world has a tendency to expose unexpected problems, often caused by factors that the designers (and simulation programmers) never considered.

    Since the product development and testing time has decreased radically in the past 2 decades, isn't it logical to assume that consumers are encountering some of the design defects that would have been exposed during the testing phase a generation ago?

  • avatar
    Disaster

    There is a bit of a misunderstanding…or misinterpretation of the facts at play here. There is no evidence that “decontenting” was a cause of the throttle recall.

    First, one must understand the true definition of quality. Quality is not “goodness” or “richness” or “prettiness” or even necessarily “reliability” (though that one almost always is a measure. )

    Quality is meeting the requirements of the customer. You find out what the customer wants and you deliver it. Cost is a big factor. I customer expects more when they pay more. What meets a customers requirements at one price level, is going to be insufficient at a higher level. One way you succeed, is by delivering more to your customer for the same price. You raise the bar. Toyota has been raising the bar for a lot of years and eating up the competition in the process.

    Toyota has never stopped pursuing quality and reliability. However, due to their costs, they were having more problems delivering as much differentiation in quality as in the past. They were having more problems competing at the lower cost end of the scale.

    One thing that caused Toyota problems, was the complexity of their products. They had huge resources and got in the habit of designing completely new vehicles for every nitch. This was very costly, but also caused a problem with reliability. All new parts have new ways to fail and new interactions with other parts. Toyota realized this and began finding ways to commonize parts from vehicle to vehicle, thereby reusing parts that they had a lot of experience with…parts that were very reliable.

    Toyota’s commonization program was a huge success. It allowed them to deliver supremely reliable products, that looked completely different to the final customer…but that had up to 70% commonality of parts with other products they sold. It lowered their cost and increased their reliability.

    But that wasn’t the only compromise Toyota had to make. They also had to make decisions to “decontent” when the content was not a big factor in the customer’s satisfaction. That allowed them to deliver cars at a competitive price point, but perhaps with a slightly less supple dash material and steel wheels with hubcaps instead of alloy wheels. Most customers didn’t notice or care.

    Their recent problem shows what can go wrong when you a common part goes bad, and you use it over a huge percentage of your lineup. It isn’t clear how this problem happened. Perhaps they allowed a specification to be different with one supplier vs. another. It is definitely their mistake and they will pay for it…in recall costs, and in goodwill.

    However, I it also bears mentioning, Japanese companies, like Toyota, have different relationships with their suppliers than U.S. companies like GM. They have much deeper working relationships. Relationships based more on what the final product is supposed to deliver, and less on part specifications. This can drive an American supplier crazy…but also be a nice change. I suspect, this difference in communication…with a Japanese company and a non-Japanese supplier, contributed to the problem. I doubt a Japanese supplier would claim that it wasn’t their fault because they made the part “to specification.” It just doesn’t work like that.

    Decontening, did not cause the recall. Nor did Toyota’s highly successful commonization program. Communication caused the problem. Communication inside Toyota, and between Toyota and it’s supplier.

    Knowing how Toyota works, I have no doubt they will learn from this lesson and be an even stronger company coming out the other side.

    • 0 avatar
      Ingvar

      That’s a really good counterpoint. You should talk to Ed about making that into an editorial, “In defense of…” I’d love to hear it more elaborated.

    • 0 avatar
      Steven02

      At the same time, your definition of quality was caused by decontenting since the customer defines quality in their requirements. This was caused by desires for profits. Was this the problem that caused the latest recalls? Maybe, maybe not.

      I am also confused about your perception of how Toyota works with suppliers. My understanding is that Toyota is very involved in the engineering and QA with suppliers, which leads me to believe that they are very specific about the specifications instead of saying, build me a gas pedal.

    • 0 avatar
      Disaster

      Quality is ALWAYS defined by the customer. Toyota did not willy nilly decontent. They picked the things that they calculated would have the least negative effect on the customer. Believe it or not, a majority of customers don’t even know that their rims are plastic hubcaps on top of steel wheels…or care for that matter. They don’t care if the torque curve is improved by VCT…just that the car accelerates smoothly and gets good gas mileage. We are skewed on automotive websites and magazines, by autophiles.

      Changing things that the customer can’t see, or most customers can’t see, doesn’t effect quality.

      You are right regarding the first comment. Toyota does get more involved with their suppliers with relative to explaining the “customer” requirements of the product. They do not get as involved with the nitty gritty details of the actual parts. They leave that up to their suppliers. This is very different from the relationships U.S. suppliers have with U.S. auto manufacturers…where hours can be spent discussing and reviewing material specifications and surface finishes, but the supplier might never understand exactly how their part interacts with the customer, or how the tolerances of their part, and their “interfaces” deliver the final important metrics.

  • avatar
    John Horner

    Funimoto sounds like your typical consulting firm spinmeister. The essence of his argument is two fold: Toyota was building too many variations of its vehicles, and Toyota was making its vehicles too well.

    Oddly enough, Toyota seems to have attacked “problem” number two, but has done nothing about the product proliferation and option proliferation noted in problem number one.

    The quote from an unnamed German engineer made me laugh: “When I interviewed a product engineer at a German car maker in the late 1980s, he commented that one of the leading Japanese models was about $500 more expensive that the equivalent German model owing to overquality and excessive designs, other things being equal.”

    Harumph, sounds like said engineer worked for VW. VW has gotten its butt kicked in the US market largely due to quality and reliability problems.

  • avatar
    Lavventura

    The rationale presented in this article is completely one-dimensional.

    In modern MFG sense, none of what Toyota does is unique; cost-saving, JIT (just-in-time) production-supplier closeness, platform/parts sharing, bulk supplier purchases, etc.

    In the current landscape, any recall has the potential to become a massive recall because one crucial component can be fitted to every single car within the brand. Its not about the culture or business methods of Toyota, none of the arguments here present a rational argument for that.

    In the massive verticallity of how modern automotive companies are structured- cars are built in the countries they are sold at- it protects themselves against currency fluctuation, hedges risk, and keeps mfg lean. None of those concepts are wrong, or exclusive to Toyota.

    These production techniques unto themselves do not lead to a drop in quality of product, and the information so far does not indicate a QA/QC issue, it looks to be a design issue related to a poor choice of material. Poor material choice does not necessarily mean cheap, though it also can, but the product itself was being built to specification. Again, not a mfg issue.

    The big-picture issue here is that modern lean mfg has lead to a homogeneity of automotive parts. This has lead to an overall more reliable vehicle, more focus and resource can be placed on each component as getting as the modularity allows for economies of scale, however, as a risk, when a part does go bad (in this case an accelerator pedal) then the costs can be massive.

  • avatar
    reclusive_in_nature

    The challenge every auto manufacturer (or any business for that matter) needs to address at some point is finding the line that seperates greed from ambition. That line is easily defined by one word: cost. To be exact, who/what is it costing? If it’s costing the company’s effort, creativity, or resources it’s ambition. If it’s at the expense of providing less content/quality to the customer for the sake of the bottom lime it’s greed.

  • avatar
    russification

    a big round of applause for getting japans arm right there in the machine where they cant stop…

  • avatar
    don1967

    There is a fine line between quality and inefficiency.

    I have mused many times in this forum about how robustly-built my first Korean car is, compared to my last few Japanese cars which have gotten “cheaper” with every trade-in. ie: Rear bumper skin held on with 8 steel bolts instead of 4 plastic clips.

    Is that quality, or a waste of steel? The “cheap” bumper skin did its job, after all.

    I suppose technology will someday find the answer, when all the components of a car are dirt-cheap, work flawlessly for a number of years, and then spontaneously combust in a puff of non-toxic smoke at the exact same moment.

  • avatar
    shaker

    It’s exactly what caused the potato famine in Ireland – for the sake of efficiency you switch to one potato variant that produces the most food per acre in the local climate – add one disease organism and POW! no more food.
    Efficiency is merely hidden greed: “This supplier can make us 5 million gas pedal assemblies for *this* price!”

    Yes, and they can replicate 5 million errors as well.

    The existence of ND as a second supplier that may have elucidated the problem could have just been dumb luck – Toyota may have been contemplating using CTS (if they had the capacity) for all of their production world-wide – then where would they be?

    The old axiom applies: “Don’t put all of your eggs in one basket”. Ancient wisdom for modern times.

    Edit: Oh yeah – about pathogenic E. Coli in beef AND spinach? Same thing.

  • avatar
    TomH

    Odd that the decontenting story line made no mention of the rise of Korean automakers.

    No longer the low cost manufacturer, Toyota was receiving increasing pressure from Hyundai, Kia, and Ssangyong in several of their “bread & butter” segments. (The fact that two of those three companies virtually drove themselves into bankruptcy only exacerbated the pressure, since Toyota was competing against a non-sustainable business model.)

    Similar to a tacking duel in sailing, the Toyota gang was forced into an error by their competitors. The real question is how they recover.

  • avatar
    Mark MacInnis

    Guys, I lived that decontenting….I worked for the supplier that provided Toyota with most of their switchgear back in the mid-90’s…their designs were very robust, switches were literally designed to last several automotive lifetimes. We received orders from Toyota that our prices were way to high and that we had to VA-VE our way to 10% cost reduction targets.

    Neophyte that I was at the time, I remember being angry….we made the best product in the world and our costs were resultingly high…I didn’t comprehend how we cut cut our prices 10% with the way our cost structure was….now I understand what ToMoCo was going for. Don’t cut manufacturing costs…..make the design lest robust to cut the costs. Thinner metal contacts. Lest robust springs, thinner plastic walls in modules, etc. But Toyota being Toyota, with their great relations with their suppliers (i.e., Keiretsu members) they wouldn’t just dump a cost reduction request on ya, they’d send in engineers to help you think it through. And they offered incentives….

    Life is a series of pendulum swings. One thing I have learned from working for 9 years in Japanese companies and marrying a Japanese woman….Japanese are adaptable, determined and capable, and they will fight this with amazing energy and tenacity. As others have said on this thread, rumors of Toyota’s demise are premature. Other OEM’s planning to make hay while the sun dims on Toyota had better remember one thing…..no one ever got rich by betting against them….

    • 0 avatar
      Robert.Walter

      Mark, your post speaks of less, thinner, less robust … just a clarification if you will … by “less robust” do you mean “less superfluous robustness”, meaning “make it adequately, fit-for-purpose, robust”? I think this is what is meant when I compare the earlier statement “several lifetimes” vs. “less robust” … so, getting a cheaper product but not cheapening the product, its robustness, safety, or percieved value to the customer.

  • avatar
    ern35

    Not too relevant to the current Toyota issue, but more in line with what has happened to the Japanese designed/built vehicles—‘once upon a time’ first-year vehicles were pretty well problem free, but now and recently that seems no longer the case. For example, our ’86 Mazda 323—first-year production had myriad problems, our 2003 Honda Accord—first-year production had a number of issues. This compared to the last-year production of the ’95 Honda Civic; absolutely bullet-proof and still running, and our current ’07 Honda Accord last production year also just excellent up to now! Thorough pre-production testing—once their forte no longer being the norm?

  • avatar
    psarhjinian

    Fujimoto’s analysis of Toyota was published in 1999, when Toyota was still (if only by reputation) the king of quality in the automotive world…

    This is the bit I solidly disagree with. Toyota has been (in fact) leading most quality rankings even through the period of decontenting. The problems rate and total cost-to-own was and continued to decline during and after. By all objective measures they made it through that period and continue to top the rankings and show year-over-year improvement.

    I know that enthusiasts are bothered by materials quality scalebacks and engineering theory, but by the metrics important to the people who actually pay the bills (customers), Toyota (and Honda, and now Ford and Hyundai) are doing quite well.

    I know it makes copy to talk about soft dashboards, thunking doors, cars “built like a tank” and “reputation-only” quality, but the statistics to back up such an assertion aren’t there. The enthusiast groupthink is dead wrong.

    What we have seen is an increase in teething problems, but we see that across the board with every manufacturer except, possibly, Ford.

    • 0 avatar
      FromBrazil

      I see your point psarhjinian, but I suppose there’s an angle here. I mean, it’s a fact that many of Toyota’s core buyers are repeat customers. And enthusiasts or not, these people do notice the sliding standards. And they become dissponted and start looking elsewhere. Mr Sloan’s ladder theory no longer works. A Camry buyer may not want, need or have the financial werewithal (sp?) to move up to a Lexus. By option or not, many people, specially w/ the perception that cars nowadays are very expensive (no use making comparison showing that in today’s dollars you buy a whole lot more car than in the 60s or 70s).

      And I say this because as long time Fiat buyes, I strayed for many year after 2000. I noticed the decontenting, too. And I was upset and angry. So I looked elsewhere. And as a newbie to the new brands I really couln´t complain about decontenting as I had no experience w/ their cars beforehand (at least long term).

    • 0 avatar
      Steven02

      I very much disagree with this. I have seen non enthusiast start to notice the quality of the interiors of Toyota aren’t that good anymore. I think the assumption that the average customer isn’t starting to notice this is dead wrong. Funny you mention dashboards and thunking doors. From people who aren’t enthusiast, two of the biggest complaints I have heard about GM were just that, cheap dashboard materials and flimsy sounding doors.

      The enthusiast group think about this is actually right because I have seen it outside of this group. This type of justification is what Toyota is using, but they are wrong about its use, and it will probably cost them market share in the long run.

    • 0 avatar
      Morea

      Re: Fiat. Why oh why can’t we combine Italian driving finesse and Japanese reliability? I guess the answer lies deep within Italian and Japanese cultures and is the reason I am forced to own both an Italian and a Japanese car.

    • 0 avatar
      psarhjinian

      I think the assumption that the average customer isn’t starting to notice this is dead wrong. Funny you mention dashboards and thunking doors. From people who aren’t enthusiast, two of the biggest complaints I have heard about GM were just that, cheap dashboard materials and flimsy sounding doors.

      Back when Toyota (and Honda) was supposedly making reliable cars, your average Corolla or Civic wasn’t really that much nicer than (and, usually, were pretty “meh”) an Escort, Neon or Cavalier and a good few steps below the Jetta.

      What was different is that the Corolla and Civic didn’t cost their owners much money to keep up. That’s what people cared about. You could forgive how mean and meagre a Tercel or Corolla was because it cost you nothing, while that pretty Jetta got pretty annoying a few years down the road when the bills started to rack up. The Neon or Cavalier? The mechanical problems were made all the worse by not having the interior or dynamics to offset it.

      If people were really grossly offended by this drop-off in materials quality (they’re not) then you’d see it in their sales figures (you don’t). You’d also expect to see an increase in problem rates, cost-to-own and a decrease in satisfaction (you’re not).

      A few people might notice the dash is now hard plastic versus soft. But they don’t care.

  • avatar
    50merc

    There’s a story about a young man who was watching an aged craftsman build a small sailboat. He saw the hardware being installed and the young man spoke up. “Mister, that’s pretty heavy hardware. It’s much stronger than it needs to be.” The old man replied, “Too strong never breaks.”

    “Too strong” has gone out of fashion.

    • 0 avatar
      psarhjinian

      “Too strong” doesn’t break, but it does go out of business.

      Mercedes had this problem: their cars might have been, in absolute terms, more overbuilt than the average Lexus, but it doesn’t matter when both last longer than the product’s expected lifetime. If you overbuild, you overpay, and you’ll get eaten alive by people who sell “good enough” at a lower price.

      Where Mercedes got into real trouble is trying to build a product with the same quality at Lexus’ price point. They couldn’t do it (for all sorts of reasons) and they suffered for it.

      The problem is balancing “good enough”. Toyota, Hyundai, Ford and Honda have more or less hit that sweet spot: where the product’s cost-to-own is where people expect it, the materials and experience as good as they tolerate, and costs low enough that they’re not getting eaten alive.

  • avatar
    wsn

    “Too strong” = “You don’t really understand the mechanics so you add retarded amount of margin to prevent error at the cost of the consumers and environment.”

    Why complain about contenting? 20 years ago, a Camry V6 would cost $30k here in Canada. Now that it’s still $30k. Only now it has ABS, multiple airbags, etc. standard. It’s much roomier and has 260+hp vs. 180 hp.

    Now that it’s 20 years later, houses have went up 200%, banana 150%, etc. But cars are at 0% increase with all that extra goodies.

    Complain all you want, but without Toyota’s “de-contenting”, you will be looking at US$30k Cavaliers that has 5 more hp than the 1990 version.

    • 0 avatar
      Disaster

      Well put. Why should I pay for “too strong” when I can have more features for the same price. It is all about delivering the most product for the least cost. Cars are a much better value now, when you consider how far they’ve come in terms of refinement, fuel economy, power, features and safety.

      Consider this. When you add 10 pounds to the transmission to put in bigger gears that are unnecessarily strong, you have to deal with the extra inertia and extra weight…both which are negatives on performance and reliability (more weight…more fatigue and wear.) Older cars were overdesigned in some areas because the quality variability was very poor and you had to cover the part variability. Now parts are made to much tighter tolerances and designed to live for the life of the car…as opposed to two or three lifetimes.

  • avatar
    50merc

    Hey, loosen up guys. I understand the need to control cost, so “too strong” has indeed gone out of fashion. Ideally, everything on a car should fail simultaneously at the end of its intended service life, like that famous one horse shay.

  • avatar
    golf4me

    I saw a post on Edmunds that indicated that the Denso and CTS pedals are of different designs, both Toyota. It also seems the CTS pedals are used in lower-tier vehicles which leads me to believe that they were cost-designed as the article points out. Toyota is also one of the OEMS that has cut it’s product testing to the bone in the last 15 yrs or so. The Koreans test much more than anyone now and it shows. If you don’t believe me, go to their NA test tracks…

  • avatar
    mtymsi

    CTS has stated the accelerators were built to Toyota’s specifications and Toyota has not said otherwise. Really wouldn’t matter to the consumer who’s fault the problem is anyways. While I don’t see anything near to Toyota’s demise I do see this recall causing buyers to consider other manufacturers (both current Toyota owners and non owners). This recall is going to cost Toyota some marketshare and while I don’t see it has a longterm serious problem consumers that are satisfied with a vehicle are often predisposed to purchase the next one from the same manufacturer. Bottom line is the recall is going to cost Toyota some amount of future business.

  • avatar
    John of Melbourne

    Very interesting article Edward. I used to own a 1995 Australian built Corolla whose build quality could not be faulted in any way. Excellent in every respect- immaculate in fact- lovely car. Very reliable ofcourse.

    In 2003, I bought a South African built Corolla (the dealer lied to me and said it was Japanese built when I asked him)- one of the shock absorbers leaked, all the brake discs had to be replaced (I thought that only happened on Astras). There was (and still is) a depression in the dash board due to poor injection moulding perhaps.
    A very rough car- very disappointing.

  • avatar
    tonycd

    I agree it was the early-90s Camrys and Corollas that cememted Toyota’s already-stellar reputation in this country.

    If you look at that Camry and the legendary ’89-94 Maxima side by side, you’ll see Toyota ripped off the Maxima right down to the creases in the bumper covers and seat fabric. At that time, David E. Davis Jr. quoted an anonymous exec from a rival automaker who’d seen consumer research on the public’s gaga admiration of the car: “”That goddamn Camry is magic. Toyota’s really broken the code.”

    But, like the Maxima, the car was also so expensive to build that they weren’t making much money at the price point. It was TOO good. So, it was reported around that time, Toyota tore down a bunch of Neons, the talk of the industry at that time for a car that was novelly cheap to build. It had fewer parts, fewer fasteners in fewer types and sizes, and other cost-cutting measures that the consumer didn’t see. The results showed up in the next Camry. When I test-sat it at the auto show, my butt (220 pounds over it then) immediately bottomed out through the seat cushion and clearly felt the power-seat box beneath it. I reached up to click on the two overhead spotlights, and found instead a single bar switch that clicked on both. Et cetera.

    Toyota’s U.S. advertising announced the new Camry in elegant script: “Better than ever.” They knew they were trading on the reputation of the old car while selling a cheaped-out new one. Of course, the new Maxima of the same era was even worse — so obvious a gutting, Consumer Reports stood alone in explicitly calling them out on it (“Nissan cheaped out on the seats and suspension”). They aren’t always wrong, you know.

  • avatar
    Tesla Weeps

    Does anybody know what kind of gas pedal asssembly is on a Bugatti or a Rolls? Are Lamborghinis, Ferraris, and Maseratis on DBW systems? Do only Germans believe in electronic overide systems?

    Did the Big 3 put Phil Tucker out of business?

    And will this finally result in more monorails, magnetic freeway systems, the re-emergence of the Stanley Steamer,jet packs,and the final establishment of “the future” that the past got so tragically wrong?

    Can the anti-gravity systems that powered German UFO’s in World War 2 be put into a Kia?

    Was Toyota ever mentioned by Nostradamus?

    “so where dwells the shadow of the cross(“T”) thence will come a great chaos and death..many will then seek the barefoot path..” (walking)
    Quatrain 34:7

  • avatar
    Tesla Weeps

    And is it true that Firestone Rubber and Standard Oil colluded to get rid of the Red Car Trolley System of Los Angeles, California in the 1930’s to condition people away from public transportation and into private ownership of automobiles?

  • avatar
    Facebook User

    I like Toyotas, always have. Back when I was paying a lot of attention to cars, through the 1980s, they were great– the best of the Japanese, overbuilt, fuel efficient, and durable. For 20 years or more, I pretty much recommended three brands of cars– Toyota, Volvo and MB. Starting in 1986, when we had our first kid, we went with Volvos. We’re still there, even though our product line ended in 1993. That means our newest cars (two) are 17 years old. Our oldest (two) are 30 years old. Sort of like Lord of the Rings: One Volvo Model (the 240) to Rule Them All.
    I’ve continued to recommend Toyotas, and will keep doing so. Nothing like a wake up call that costs millions to get corporate to focus.
    But I’ll keep driving 240s. I have not drunk from the kool-aid (seen here and elsewhere) that All Newer Cars Are Better Than All Older Cars– especially when it comes to safety. We wear our seatbelts and we ride in steel safety cages disguised as cars. I’ve seen some incredibly insulted 240s– all of which disgorged their contents alive, if not unbruised.
    But the fact is, not everyone is willing to put up with decades-old cars. Our average ride (we maintain a fleet of ten, for five drivers, including one summer-only car) is more than 20 years old. Some weeks more cars are at the mechanic’s lot than at home. But our overall car-owning cost is less than it would be if we had five new or newish cars, and despite the sometimes inconvenience that comes with running cars with two and three hundred thousand miles on the odometer, I think it’s the way to go. These cars were built before things started getting cheapified and they’re easy to fix when their relatively robust parts pooch.
    Don’t forget that nearly all car makers in the 1980s made the switch to fwd, not because it was better, but because it was cheaper. Blaming an auto maker for trying to cut costs ignores the fact that the entire reason auto makers exist is to make money, not cars. If they don’t make money, they *can’t* make cars….

  • avatar
    ASISEEIT

    I guess we’ll all have to wait until final analysis is complete with regards to the “Toyota Problems” to see what the root cause(s) really are, but there is one thing we should all know for sure! That would be that Toyota’s troubles weren’t caused by the U.A.W. or any other union! Mind you we’re still waiting for conclusion and that may take awhile but NO UNION INVOLVEMENT HERE WITH TOYOTA’S MULTIPLE PROBLEMS!!!! I bet many of you out there are disappointed you can’t bash union workers! Let this be a learning lesson to you, like many of us have written before that “WE” as workers only build and assemble “The Parts” that are placed in front of us. We didn’t design them, we only assemble them. We only build what the COMPANY designs and approves. If those designs and the parts that make up those (Vehicles) aren’t to the publics liking WE HAVE NO SAY! One more question do you think if Toyota has recall after recall this could greatly reduce market share and bottom line? If Toyota pushed it’s large trucks instead of it’s smaller vehicles with high gasoline prices could that have an affect? If you answered the two previous questions “Truthfully” and place those scenarios to our domestic auto makers you might begin to understand the helplessness employees feel about their domestic auto employers.

  • avatar
    Born in 1947

    I don’t know if Toyota’s quality standards have dropped or not. Once upon a time every part of Toyota was made in Japan. All was good.

    Even when they started outsourcing to local countries. (I was in France when the French forced it). Things were pretty good. I kind of doubt that Toyota’s standards have dropped. When GM and Chrysler produced crap time and time and time and time again.

    Americans were supposed to look the other way. My 2000 Camry Le is very reliable and only needs repair due to wear and tear.

    There is NOT a pattern yet. This could be a political thing by the Democrat administration to hurt Toyota and help unions.

  • avatar
    duomax26

    With Toyota’s supplier integration, I would say 100% of the fault lands at their feet. Clearly Toyota chose to put a cheaper part into American Toyotas, and did not sufficiently test integration and longevity. If it were a batch of 100,000 parts with a misapplied coating of some sort, sure, we would all be forgiving — but that imply isn’t the case.

  • avatar
    duomax26

    With Toyota’s supplier integration, I would say 100% of the fault lands at their feet. Clearly Toyota chose to put a cheaper part into American Toyotas, and did not sufficiently test integration and longevity. If it were a batch of 100,000 parts with a misapplied coating of some sort, sure, we would all be forgiving — but that simply isn’t the case.


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