Toyota Wants To Learn From Nissan

by Bertel Schmitt

Published: November 8th, 2011

None of the approximately 100 journalists that packed Toyota’s basement meeting room in Tokyo today was surprised when the midterm results of the current fiscal year were announced, and there was an operating loss of 32.6 billion yen ($417 million). The loss was a little higher than expected, but expected it was. If you lose 689,000 units in sales, then you are bound to lose some money. The surprise came in the form of an unexpected new benchmark: Nissan.

Usually, no competitor is mentioned in public by name. Today, Toyota’s CFO Satoshi Ozawa named Nissan at least twice as an example worth following. Looking at the way Nissan handled the earthquake and the floods in Thailand, Ozawa said:

“It seems that Nissan has run their operations wiser than Toyota has done. If there is something we can learn from their example, then there is some homework for us to do.”

Five minutes later, Ozawa admires Nissan again:

“In terms of what happened after the earthquake or the Thai flooding, it seems Nissan suffered less than Toyota. If there is something there to learn from, we’d like to do that.”

Unsaid, but evident: There is a much bigger disaster which Nissan handles better than Toyota: The soaring yen. Toyota makes 3 million cars in Japan, and more than half of them are exported. Nissan also exports more than half of its Japanese production. However, this is down to a million units annually. Despite earthquake and yen, Nissan recorded an operating profit of 309.7 billion yen (US $3.88 billion) in the first six months of the fiscal, while Toyota lost money.

Nissan’s Ghosn had taken the lead in rallying against the “abnormal yen.” On Monday, Japan’s manufacturer association JAMA joined in. At a JAMA press conference, Akio Toyoda, who is also vice chairman JAMA, urged the government to immediately address the strong yen, and said the government “must do something to stop the manufacturing base from collapsing.”

Nevertheless, Toyota is sticking to the concept of making 3 million cars at home, literally at all costs. Complicated calisthenics are needed to maintain that level. Currently, 1.3 million cars are sold domestically, and 1.7 million are exported. In the future, the relationship is planned to go to 1.5 million sold at home and 1.5 shipped abroad. Toyota is looking to the Japanese government for a lower vehicle tax to crank up flagging domestic sales. Currently, most power trains are made in Japan and shipped abroad. “We will make more efforts to produce them outside of Japan,” Ozawa said.

For the second time this year, Toyota did not make a forecast for the rest of the year. The first time was after the March 11 tsunami. This time, Toyota is unable to fully quantify the effects of the Thai floods. As of the end of this week, the floods in Thailand will have cost 150,000 unproduced cars.

#BertelSchmitt #Floods #HalfYear2012FiscalResults #Japan #Thailand #Toyota

Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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15 of 23 comments

Mike978 on Nov 08, 2011

Bertel - you write "Nevertheless, Toyota is sticking to the concept of making 3 million cars at home, literally at all costs." Why is Toyota so fixed on producing 3 million in Japan? Is it to do with saving face, or national pride, or....?

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- Psarhjinian on Nov 08, 2011
  
  Possibly they recognize that gutting their home market of useful, paying jobs because of (potentially) short-term exchange-rate issues and for a few quarters of profit is not a good long-term strategy?
  
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- Alluster on Nov 08, 2011
  
  Toyota enjoys unparalleled loyalty in Japan with 45% market share. This in a country where 90% of the cars sold by all manufacturers have the same dimensions, design, engine capacities and fuel economy numbers. There is really not much different from any car sold other than the badge on it. 99% of them sold are either white or silver. Toyota does not want to ruin this god like status by moving production outside. Besides, they have faith that the Japanese govt. will interfere often to keep exchange rates low. They have already intervened four times in the last 7 months to the tune of 300B dollars.
  
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- Eldard on Nov 08, 2011
  
  With Japan's massive debt (though mostly local) they'll have to pay it one way or another. Guess what'll that do to their currency? Toyota's just thinking long term, silly! :)
  
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- Imag on Nov 08, 2011
  
  Because Toyota literally does not fire people to cut costs. It is company policy. The only time they have laid of a factory full of workers was the NUMMI plant, which GM left them completely holding the bag on. They realize that workers who are worried about thinking themselves out of a job will not have the same level of innovation (or loyalty, for that matter). Commentators can (and do) all can rip on Toyota all they want, but the company has incredible ethics. They always look to who they can learn from, and have even gone way out of their way to teach manufacturers and even their competitors. Their policies have been key to their success. Though they know those policies might drag them down at times, they seem wise enough to take the long view (unlike US companies, which would offshore everything to save a quarter). For that, I think they deserve a bit of respect. And Bertel should know this; I was surprised he didn't bring it up.
  
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- Mikey on Nov 08, 2011
  
  @imag... Wrong ...Toyota uses temps and contract workers,lays them off and calls them back on a regular basis. The domestics and thier unions also worked out an agreement to avoid layoffs. They were called "job banks" and how does that differ from Toyotas policy.
  
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- Imag on Nov 09, 2011
  
  @mikey: Where do you think the willingness came from within GM to set up job banking? From Toyota. Where do you think their modern manufacturing methods came from? Toyota. In fact, if they had listened to Toyota a bit more, they might not have needed a bailout. And I'm sorry, but I don't see a Flint Michigan in Toyota's wake. Toyota may hire temps to avoid hiring people permanently, because when they hire permanently, they mean it. They kept a tiny shop in Southern CA open long after it was profitable because they didn't want to lay the people off. Let me know when a US automaker does that.
  
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Junebug on Nov 08, 2011

They'll pull through, unlike GM they're not on the guv-ment teat and bogged down by the God damn UAW.

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- Kita Ikki on Nov 08, 2011
  
  Not to mention being debt-free and sitting on a massive pile of cash.
  
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- Psarhjinian on Nov 08, 2011
  
  I mean, hey, they only have their own unions and work in concert with their own government to a level that GM barely approaches today. The difference isn't government involvement or the presence (or lack) of a union. It's effective management. Toyota may or may not still have that; GM hadn't had it for at least a half-century, needed the Government to come in and swing the axe, and might not have it yet.
  
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- Thornmark on Nov 08, 2011
  
  Japanese unions are not like US unions. Japanese unions are organized on a company level and will not kill their hosts. US unions are industry wide and regularly kill their hosts. When I was in business school in the early 1980's I predicted the bankruptcy of US automakers as Wagner Act rules allowed monopoly unions which would exact ever higher wages, far in excess of productivity gains. US companies could not resist union demands, none could survive a strike. The only alternative was cheapening the product, which management did.
  
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- Psarhjinian on Nov 08, 2011
  @thornmark US companies could not resist union demands, none could survive a strike GM almost---almost---beat the UAW, and then gave in at the last moment because it would have sacrificed that quarter's sales numbers. That was, I think, the call of one G. Richard Wagoner, Jr. Nice one, there, Rick, way to mortgage the company's bargaining position, credibility, labour relations and financial future for a quarter's sales figures. They could have quite easily survived a strike. They also could have bargained in good faith from the start. The alternative was managing the company in a competent fashion. Let's not mince words: the reason GM (and the other domestics) went down had everything to do with incompetent and/or arrogant management, and not a lot to do with organized labour. Don't let them off the hook.
  
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- Wsn on Nov 08, 2011
  
  thornmark: "US companies could not resist union demands, none could survive a strike. The only alternative was cheapening the product, which management did." Simply false. Of the 8.5 million cars produced by GM last year, 2.2 million was in USA (1M+ WuLing anyone?). If the UAW goes on strike in full force, GM will lose 26% total output. Not desirable. But not unbearable either.
  
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- Mikey on Nov 08, 2011
  
  @psar.... Right you are, Flint 98..The UAW was a matter of days away from throwing the towel in. Rick W blinked.
  
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- Eldard on Nov 08, 2011
  
  @thornmark They may lose 26% of total output, but more than that on revenue. As you all know, GM dominates unsophisticated markets.
  
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