Do you know how many hourly jobs GM has laid off from 2006 to July 2008? Take a guess. How about 34,000? And now, they’re talking about another 5,500 layoffs. And now they’re asking you and your government for a bailout to end their troubled, outdated, low quality, wasteful production system. But, let’s not focus on fixing GM’s problems with an infusion of cash. There’s something even deeper going on here that’s really wrong.
OK, here’s a better question. How many hourly jobs has Toyota’s American production system laid off in the same time frame? Zero. That’s right. ZERO. How? Isn’t Toyota experiencing the same slow down in auto sales as GM is? Yes, it is. And yes, Toyota has halted production at its Texas and Indiana plants for the past 3 months. But the 4,500 people who work at those plants have not been laid off. What!?!?! How? Why?
The answer: Toyota has a special culture, deep-rooted values, and respect for their workforce. Toyota’s tradition is to NOT lay off employees during hard times. This tradition hasn’t really been put to the test until now. And Toyota has stuck to its guns and its values.
“This was the first chance we’ve really had to live out our values,” says Latondra Newton, general manager of Toyota’s Team Member Development Center in Erlanger, Ky. “We’re not just keeping people on the payroll because we’re nice. At the end of all this, our hope is that we’ll end up with a more skilled North American workforce.”
Interesting. But what does that last line mean? “At the end of all this, our hope is that we’ll end up with a more skilled North American workforce.” It means that while these employees were not manufacturing automobiles, they were in training. They were doing safety drills, participating in productivity improvement exercises, attending presentations on material handling and workplace hazards, taking diversity and ethics classes, attending maintenance education and taking a stream of online tests to measure and record their skill improvements. Toyota is shifted the Texas and Indiana workers temporarily to Toyota plants whose assembly lines were moving at full speed, such as the Camry assembly plant in Georgetown, Ky. In addition to all of this, the workers also spent some time painting the plants and even helped build Habitat for Humanity homes. And they were getting paid.
Wow! So what is this costing Toyota? The estimate is at least $50 million dollars, plus the loss of revenue of shutting down production. Why is this value and tradition worth so much to Toyota? Why would they be willing to spend $50 million rather than lay people off? It’s because Toyota believes that its people, yes, its PEOPLE are its greatest investment and its greatest asset. You hear so many companies say that, but would they really put their money where their mouths are when the rubber hits the road (no pun intended)? In Toyota’s case, the answer is yes they would.
So what does Toyota get out of this? When, not if, the plants return to full production, Toyota will have well trained employees on the front line, ready and able to meet the demand for their vehicles. And not only will they be well trained, they’ll be happy and motivated to work. Because Toyota is willing to go to the mat for their people, their people will be willing to do the same for Toyota.
The lesson here: Unlike their counterparts GM and Ford, Toyota has always taken a long-term strategic view about their employees. Toyota understands that laying off thousands of employees for slowdowns or plant retooling is counter productive. They wisely utilize the time to redistribute their workforce to understaffed plants, provide additional training for the new products, and leverage their workforce to speed the transition for newer products. Their philosophy has avoided labor disputes and staffing shortages. It has kept the company as a leader in quality and profitability over its shortsighted competitors.
So, the message for you in all of this: Really commit to upholding the value that your people, let me repeat that, your PEOPLE are your greatest asset. Treat them with respect and dignity. Do everything in your power and your imagination to keep them on the payroll during the rough times. If you don’t, you may not find those people again on the upside of the downturn. And if you do, you’ll have hyper-productive, motivated teams delivering quality because they’re committed on a deeper level to your company.
Note 1: If you really want to understand why the Big 3 are losing big time compared to Toyota in terms of market share, take a listen this excerpt from Public Radio International’s “The World” report from last Friday (Nov. 14, 2008) describing why Toyota and other Japanese manufacturers seem to have a leg up on their American counterparts (for the complete report, from The World, click here). After reading this post, you might not be so surprised when you hear that the employees being laid off by the Big 3 are now working at Toyota. Click here to listen to the excerpted report.
Note 2: From Forbes online: At American companies, finance guys and marketers rise to the top. Not at Honda. Read the whole article here.
Note 3: Another Japanese leader shows the way to be a true leader: When Japan Airlines JAL slashed jobs and asked older employees to retire early, their CEO cut every single one of his corporate perks, and then for three years running slashed his own pay. In 2007, he made about $90,000 U.S., less than what his pilots earn. Compare that to United Airlines CEO Glenn Tilton: In 2006, Tilton’s compensation alone exceeded $39.7 million ($38 million in stock and options) in a year the company emerged from bankruptcy and employees were forced to accept painful cuts! Read the rest of the story about JAL and United here.
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168 Responses
November 17th, 2008 at 7:46 am
There is a huge comment stream with over 450 comments happening on Reddit.com concerning this post. Check it out there or leave a comment here.
Reddit link: http://www.reddit.com/r/business/comments/7dvkv/what_toyota_knows_that_gm_doesnt/
November 17th, 2008 at 7:52 am
“And now they’re asking you and your government for a bailout to end their troubled, outdated, low quality, wasteful production system.”
Thanks for making your ignorance and extraordinary bias evident right at the outset of the article. Saves having to read the rest.
The efficiency of the various car makers is virtually a toss up. Right now the most efficient automaker is actually Chrysler, but then it’s a minute difference to the other makers.l
November 17th, 2008 at 8:07 am
Build the things people really need not necessarily what they want or tell you what they want.
The “Build it and they will come” business model is great when there is not a lot of choice i.e. buying a car in the 50’s or when “needs” can be subliminated into high concepts (bigger, faster, sexier) by advertising and subsidised by cheap credit..
But the decision matrix facing a consumer in the current economic environment collapses back to requiring the essential need for a reliable, functional and economic solution for getting from A-to-B.
November 17th, 2008 at 8:08 am
@Dennis Forbes: If you had read the rest of the article you would not look as stupid as you do right now.
November 17th, 2008 at 8:17 am
Chris:
Easy! One thing is Six-Sigma is used throughout their processes and procedures. This has been done for many years, long before GM ever experimented with it, and everyone at Toyota is grounded in Six-Sigma. There are other factors, but I will comment on this one.
Randy
Blog: http://randylewiskemp.wordpress.com
November 17th, 2008 at 8:23 am
Chris,
Toyota does not know anything that GM does not already know. you are not matching apples to apples. GM got stuck with the UAW and all the BS that comes with having to avoid strikes if they do not get what they want.
If the union is ever able to force it’s self in the Toyota or Honda Plants, give them 25 to 50 years and the same will happen.
The saying that the Japan does not create or invent things, but just copies them is somewhat true in this industry. They took the automobile made it cheaper and better using lower wages, very little benefits and other tactics to get where they are today. Right or wrong, that is the facts.
As we saw with Chrysler, Mercedes could not turn them around or make a better product which shows the strength of the UAW.
You can come up withe the best designs, faster and better vehicle, but if it is not profitable the share holders will not approve. If you have followed the JD Powers ratings, you will see that even the top end cars are having more issues every year. One could probably trace many of the issues to US plants. Having pride in your job and your position regardless what you do is very hard to find today. Something that the overseas people take very serious (could be due to threat of lost job, embarrassment to family name, etc.).
If you have ever worked in a US auto plant (I have worked in 2), you would have a better picture or better experience of what goes on in there that causes US vehicle to have the issues that they have.
The talent pool of engineers and skilled workers in each company are the same, it’s the production works attitude or lack of that makes the difference. If gas prices would not have shot up as fast as they did, would GM still be in this issues….yes, to an extent due to the monthly retirement payments they make. However, they would be selling more profitable SUVs that would bring the funds that they need to pay these benefits.
Toyota and Honda’s sales are both down to historic lows, and they have laid off people, just not in mass numbers like GM. They also have 10 times (actually more) the reserves that GM had and can slow down production without the threat of a strike.
Honda has gone public in the past saying that if the UAW were to succeed in forcing representation in their Plants in the US, they would shut them down (Marrysville, Ohio).
So I would say that Toyota knows that the UAW is a bad thing….but GM already know that.
November 17th, 2008 at 8:37 am
Basically their entire line of products, including Lexus, are based on 6 platforms. That is the main difference.
November 17th, 2008 at 8:39 am
I think old school vs. new school is the short answer. I think GM has not been able to pivot as fast in reacting to market fluctuations in demand. Whereas Toyota has always been proactive and flexible. They have predicted the future more accurately. They also handle customers, owners, suppliers much more efficiently.
For instance, Toyota comes out with and markets the Prius. You can buy it, it’s ready. GM advertises the Volt and their hydrogen technology cars as, coming in 2010 or later. All that does is piss people off. I heard a GM radio ad just this morning that said, if you see one of our hydrogen powered trucks on the road, you can’t buy it yet, but you can applaud. What?
I still feel American car companies are a few years away from ‘getting it’.
November 17th, 2008 at 8:47 am
>@Dennis Forbes: If you had read the rest of the article you would not look as stupid as you do right now.
After reading the rest of the article, I have to agree…no, actually, the rest of the article undermines the core point even further.
As they say, none of us is as stupid as all of us, and to read the same herd nonsense again and again gets a little tired. Try thinking for yourself.
November 17th, 2008 at 8:58 am
Toyota knows that car-buying is an emotional decision for most people, and there’s nothing more important than a positive brand image. Toyota, Honda, Nissan, all began as ‘cheap’ import alternatives, but took the time over the last 4 decades to build solid reputations for quality, reliability, and attention to design.
GM and other American car-makers took the buyer for granted, releasing gas-guzzling, unreliable, poorly designed cars until their wake-up call in the 90’s. They’ve been trying to overcome their poor image ever since. Perhaps nothing illustrates that more than simply looking at the odometer of an American car vs. a Japanese car in the late 80’s; most American vehicles had odometers that went up to 99,999 miles; the Japanese cars had odometers that expressed an optimism that you’d actually reach over 100k on your vehicle, and went to 999,999 before resetting. The Japanese car makers knew that people would buy a new car not just because of ‘planned obsolescence’ (a.k.a “build it so it will break and they have to buy a new one”) but because of style and a desire for the latest gadgets.
Now, GM appears more as a follower than a leader. Their opportunity for survival lies in ‘getting ahead’ of the competition, leading the way in new green energy designs. Most people who wouldn’t consider a traditional GM vehicle thanks to their soiled reputation would take a long look at a well-built, technologically advanced hybrid or plug-in.
My recommendations for GM.
- Cut your product line back to 4-6 vehicles.
- Dump all the ‘alternative’ branding, release a car under one name.
- Get green, fast.
- Throw top technology (GPS, Bluetooth, etc.) into all your cars.
- Stop using cheap plastics for your interiors.
- Look at the iPod, not just the body, but the software, integration, business model (what makes people buy a new iPod?) and build it as a car. A futuristic, clean, technologically advanced vehicle.
- Hell, just pay Steve Jobs and Jonathan Ive to design you a car that will actually sell.
November 17th, 2008 at 9:04 am
The first paragraph really got me to read the entire article! The bloated structure of the big 3 is really killing their companies. You hear of worker layoffs but, where are the management layoffs? Toyota seems to take the higher road,which involves more management effort and not the lazy road of easily handing out pink-slips. Management commonly gets lazy and complacent, we all know that!! A company should retrain or relocate before they remove.
November 17th, 2008 at 9:08 am
How to build a quality and good value car that customers want to buy in the most cost effective manner…
November 17th, 2008 at 9:10 am
The one factor of a free-market system that absolutely must be there for it to function is that of companies going under. Bankruptcy lets the worthy assets of these companies be sold and also for the bad assets and failed execs to be out of a job. Competition is allowed to catch up in the interim and then allow more businesses to create jobs and flourish.
A bailout to GM would hurt tesla motors and any other startup with new ideas and, right now, enough room to run.
Go toyota!
November 17th, 2008 at 9:13 am
Chris the analogy extends to the mindset of executives who only see through a bipolar lens; either grow the business from the top or cut from the bottom. They forget that training and nurturing talent in the middle will create a force of loyalty, not to mention agile excellence when business does, in fact pick up. To the contrary, should business not rise, even on a soft curve, these individuals can be the source of new product ideas, efficiencies and drive - paying back the investment the company made in them. As one who is in the OD/Corp Trng world, my argument continually is re-educating leaders to see beyond the next hill and take a chance. See that what they are doing is not working, one would think they might embrace such thinking. But those MBA’s who were trained to follow strict process models and set algorithms are presiding over the demise of many industries.
In this case, playing out from the middle by providing education and ideation principles will create a cadre of multi-dimensional thinkers who can save the organization organically.
November 17th, 2008 at 9:17 am
You know what Toyota doesn’t have? Large legacy costs. GM spends $4b/yr in pension costs alone. Sure GM has made more than their fare share of problems, but you are giving GM far too little credit and Toyota way too much. The 2010 union contracts/pension agreements virtually ’solve’ this issue for GM. Back up 10-15 years ago. You think GM could’ve squeezed these types of concessions from the auto unions? Hardly. The fact is that the unions needed to ber weakened to their current state for GM to get these kinds of agreements. How is that GM’s fault?
Check out jdpa’s initial quality survey and their vehicle dep. study (IQS and VDS) respectively. Look at the history of the all-too-important ‘entry level sedan’ market. You’ll find the Malibu ranks 1st-3rd on either or both or virtually every one for the past 5 years. Find the Camry. Just try. It hasn’t made either list in a decade plus! GM’s biggest hurdle is public perception (a bed they’ve made). Ignorant articles claiming “troubled, outdated, low quality, wasteful production system” w/o any hard numbers from trusted industry metric-gatherer’s (jdpa, pacific, etc). don’t do anything but reinforce the perception-reality gap that GM, Ford, and others face.
You can talk all you want about ‘building vehicles that people want’ - but the facts tell the real story: GM was building millions of full-size trucks and SUV’s and selling them at a profit - for a decade-plus. If you think Toyota ‘reads the marketplace’ and forecasts any better, ask yourself why they brought a massive, 5.7l truck to the market when the full-size market was just starting to crash.
Honda enthusiasts can stop from patting themselves on the back, too. Honda does it no better. Sure, they don’t have a V8, but they’ve juiced their 3.5l V6 engine in the Ridgeline to where it puts out V8-like gas-guzzling numbers; from a truck that is decidedly less-capable (and weighs less) than it’s full-size brethren. As it is, they are still probably to be admired the most; even though each generation Accord and Civic keep getting larger and more bloated. A Civic today is the same size as the Accord 10-15 years ago.
The truth is that all auto-manufacturers were ill-prepared for the all-out collapse that is occuring. The domestics, through their legacy costs alone just don’t have the bankroll to survive.
November 17th, 2008 at 9:23 am
Brian,
How does the UAW keep GM from producing quality vehicles? Is it the pay scale that puts more money into the workers’ pockets versus being able to build cash reserves and put more money into development? It seems to me that if the workers were paid such high wages, then GM could demand more quality in design, hiring only the best most innovative engineers. Please explain.
November 17th, 2008 at 9:27 am
Both Toyota and Nissan in the US physically locate their design, marketing and engineering departments in their largest marketplaces (California and the Northeast). Also, GM, Ford and Chrysler have way too much management, union contracts are breaking their backs plus they all pay far too much attention to Wall St. and not enough to their long-term survival. Finally, they all rely too much on their financing divisions for profits at the top line instead of focusing on bottom-line quality which truly delivers value to customers. Delivering value to customers is far more important than delivering value to shareholders because without customers, there is no cashflow for shareholders.
November 17th, 2008 at 9:28 am
Brian,
What you are overlooking is that GM employees NEED a union to be treated fairly. (The unions often go too far in their demand and give too little effort in return, but that is the pendulum swinging the other way.) Toyota workers apparently do not need a union as badly as GM workers did 50 years ago. Not laying off workers as a first strategy is one heck of an incentive for the workforce!
Just for the record, I have been both management and union. I support unions! I do not support whiney lazy workers who don’t work for their wages and benefits. Once again, common sense can be found, (gasp,) somewhere in the middle, not at either extreme. (My common sense is tingling!)
November 17th, 2008 at 9:32 am
Chris,
This:
http://online.wsj.com/article/SB122688631448632421.html
November 17th, 2008 at 9:32 am
One word: Legacy … look at GM’s issues, trace back to why they exist, understand why they don’t overcome them, and it’s usually that their history (unions, dealers, branding, engineering) has cemented a structure of inefficiency. They chisel away at the cement monstrosity with years of decisions to try to turn it around, but it’s always too slow. The cement boots never allow them to run, there’s always a “good” reason not to change as quickly as needed.
And so they’ll struggle, and struggle, and struggle … bite size improvements when wholesale changes are required to affect the cost equation, new products, and customer focus …
I believe a “bail-out” should be carefully crafted since providing a few meals to those that can’t feed themselves, is a very short term fix.
November 17th, 2008 at 9:35 am
PINGBACK http://blog.emeidi.com/2008/11/wollen-arbeiter-das-wirklich.html
…Quelle: What Toyota knows that GM doesn’t: Bei dieser Firma befürworte ich dieses Vorgehen - nicht etwa wegen meiner grossen Sympathien für japanische Unternehmen, sondern weil die Bude bewiesen hat, innovativ zu sein und Qualitäts-Fahrzeuge auf den Markt zu werfen. Wenn die Rezession durch ist, wird Toyota wieder Tausende von Fahrzeugen verkaufen. Bei GM bin ich mir da nicht so sicher …
November 17th, 2008 at 9:42 am
I think Toyota understands its target customers better than GM does - and it seems far more customer focussed than GM has ever been. So it makes better cars & vehicles that align better with customer needs & aspirations.
November 17th, 2008 at 9:58 am
Wow, Rich. That was a whole lot of buzzwords there. Care to translate into English?
November 17th, 2008 at 10:07 am
Ignore Six-Sigma and all that for a second.
Look at the retirement packages. The ratio of current employees to pensioners is simply staggering. GM paid $4.6 billion in healthcare costs in 2007 making it the largest provider of healthcare. It’s white-collar retired employees have one of the best insurance plans in the US.
The average compensation at GM is $75 an hour; at Toyota it’s $47 an hour.
November 17th, 2008 at 10:09 am
Without getting into a lot of debate on management and manufacturing philosophy, it’s simple - Toyota knows how to build Prius Hybrids and WORK with labor. GM knows how to build Hummers and Cadillac Escalades and FIGHT with labor.
November 17th, 2008 at 10:14 am
I think there is a huge difference in overall craftsmanship and quality in US made vs Foreign made cars. Not sold on that? Get into a car that 3-4 years old. A Toyota/Honda/Nissan still feel good, very few squeaks, little rattling, the engine still performs well. Now get into a US built car. It feels old. That is also reflected in BlueBook values. The foreign made cars hold their value much better than any US made car/truck. Even the small things like buttons, seats, radios, plastic, doors feel and work better in a Toyota/Honda/Nissan. And we wonder why we owe more than the car is worth after just 2 years?
November 17th, 2008 at 10:23 am
2 things they need to do:
-Make cars that run on batteries and/or solar or else natural gas.
-Make cars and driving safer. 40,000 people die a year in car accidents just in the US alone.
Ralph Nader showed how dangerous cars are 40 years ago and 30 years ago we saw that our dependency on foreign oil was not sustainable, but like the smoking industry, the auto industry has done little to address these problems. So perhaps like the smoking industry they need to be left for the wolves.
The Big 3 have also been acting like a monopoly, stifling competition for decades. See the movie Tucker for example: http://www.imdb.com/title/tt0096316/
November 17th, 2008 at 10:25 am
In addition, Toyota also clearly knows how to hire, train and motivate a work force. Even though the cars they, and other foreign carmakers, make are often referred to as imports, they produce many cars here in the USA, with American workers who produce excellent products.
Some pundits try to reduce that issue down to one of “Union vs. Non-union”.
But that’s far too simplistic. Sure, Detroit automakers suffer from legacy costs related to past union contracts, but their current problems are also greatly attributed to senior management right here in the present that’s just plain bad.
November 17th, 2008 at 10:28 am
Randy, David, & Don all have valid points. The question now is whether an infusion of taxpayer cash would be effective in turning the GM/UAW ship around or whether GM and the UAW, with temporary financial support, would be willing to make the changes necessary to build a new, viable GM.
November 17th, 2008 at 10:31 am
long ago and far away … in the wake of foreign import quotas, foreign companies learned how to efficiently build cars in the US … and a recent article:
Dumbest People’ Industry Image May Cost Wagoner Job
http://www.bloomberg.com/apps/news?pid=20601109&sid=ap8pS2oslvn0&refer=home
a couple quotes from above:
“There’s the feeling that next to financial services, automotive execs
are the dumbest people in the world”
“It’s pretty clear that management has made some pretty bad decisions
over the last 20 years”
“Toyota generated pretax profit of $922 per vehicle on North American
sales in 2007, while GM lost $729″
… snip …
November 17th, 2008 at 10:42 am
two huge differences imho
1. typical short term profit thinking by GM to satisfy share holders on a monthly basis vs. long term planning of Toyota (and other Japanese firms)
2. innovation and speed of execution
November 17th, 2008 at 11:07 am
Toyota has for many years concentrated its production efforts into smaller engined and more economical cars. GM has ignored market trends and continued to pursue production of SUV’s, large engined uneconomical vehicles and trucks.
Where are we today? SUV sales are down 54% since July 2007, truck sales are down 33% since July 2007. People are moving away from these and buying the smaller economical vehicles produced by Toyota and other Japanese makes.
GM has also severely suffered having a highly unionised workforce offering voluntary redundancy to 74,000 workers. Toyota does not have a unionised workforce and has not been exposed to huge labour costs.
Therefore Toyota are much more isolated and benefiting from the current market trends and GM & Ford are bearing the brunt.
GM posted record losses of $39billion in 2007 and this year similar is expected. GM is expected to be out of cash by mid 2009 and is facing survival problems which I don’t believe they can do without being acquired or by the government bailing them out.
November 17th, 2008 at 11:34 am
Giving them money, loaning them money, etc. would only delay the inevitable: the Big 3 need to get out from under their crushing labor contracts and obligations and restructure into competitive entities, not entities that make cars so as to afford to pay their obligations.
I’ve been trying to find information, but it doesn’t seem like any of the Big 3 have any plan to become profitable any time in the near future, let alone survive the next 2-3 years. As far as I can tell giving them money now would then require more money in 6 months, 12 months, etc.
November 17th, 2008 at 11:49 am
The author is sorely misinformed. When GM first started losing market share they agreed to pay employees full wages to report every day and do nothing in the “jobs bank” that still exists today. The logic was very simple — they valued their workers and their ability to perform many skilled tasks.
This is no different than Toyota’s program today. It’s also basic knowledge for anyone involved in the auto industry. The real test will be when Toyota’s sales reflect a need to cut 10,000 jobs.
November 17th, 2008 at 12:11 pm
Not to unionize. The main problem with the Big 3 are the Auto Maker Unions. They negotiate for non-merit raises, pensions, etc. Whereas Toyota, Honda, and the other Asian players give only merit increases in pay and give you a 401k. Makes a huge difference.
November 17th, 2008 at 12:17 pm
I’ll give you one example of what works with Toyota.
A friend of mine bought an FJ-Cruiser last year. Within a week of driving off the lot, he was invited to join a group for FJ-Cruiser enthusiasts. The invitation came with a fairly expensive scale model of the car he bought. He joined the group because he is into the car. He told me he gets updates and information a couple of times a month, along with news from the dealership and the salesman that sold him the car.
So, Toyota might not sell him another vehicle for several years, but because of their customer relationship management, they are keeping themselves top of mind with him.
I’ve had the same experience with a Honda I purchased two years back. I get letters from the SALESMAN four or five times a year, not to mention the monthly communication I get from the dealership. I know that when the time comes to buy another car, Honda will definitely top the list.
I’m sure there are individual salesmen and dealerships within the Big 3 that operate the same way, but it is not something corporate is encouraging (or requiring).
I would be disappointed if any of the Big 3 went bankrupt (it’s about the repercussions and the psychological impact more than anything), but am very ambivalent about a bailout. Here’s three companies that sold pickups and SUVs while lobbying against CAFE standards.
I’m with recent WSJ and Thomas Friedman editorials requiring the car makers to change their ways if they accept bailout money.
November 17th, 2008 at 12:19 pm
I’m disheartened by the amount of propaganda that seems to be out there regarding just how devastating it would be to our economy if one of these companies failed. I think it’s important to keep in mind that Toyota is still profitable. For every automaker that fails, there is an opportunity for another to thrive.
Even within GM or Ford there are inherent marketing problems. Brands compete with each other. GM trucks and Chevy trucks, for example. There are just too many models. The chevy cobalt, saturn ion and pontiac g5 compete with each other. For Joe Consumer, the brands don’t mean what they used to. Jeep has been terribly diluted with off-brand vehicles catering more to scrapbooking moms than to outdoor enthusiasts. For the life of me I can’t figure out why the Mercury brand even exists.
I certainly don’t want all 3 of the big 3 to fail, but I believe that we’re at a point where there needs to be some brand consolidation. The foreign automakers will continue to have success with building cars here don’t have the legacy costs that the big three have. And, as David points out, without an alternative to business-as-usual I just don’t think federal money should be put into the automotive industry right now.
November 17th, 2008 at 12:22 pm
@Dave M: Right, the jobs bank. Even if GM did pay people to stay idle, they didn’t offer them training or use the down time to retrain retool or rethink. They did as you said “agreed to pay employees full wages to report every day and do nothing in the “jobs bank” that still exists today.” That’s exactly the problem!
November 17th, 2008 at 12:30 pm
Ten years ago I met with one of the Big Three to pitch them on some marketing consulting services.
I presented information to them to suggest the following:
That they had too many models and the geographic distribution would no longer work in the new economy. Meaning that they should consolidate models to one USP per price point. And that they really needed to think about ONE brand.
That they needed to dramatically change the dealership environment to make it much easier and more pleasant to buy a car.
That they needed to market much better to women who directly purchased or influenced the purchase more than men did.
I got offered employment, but what I really wanted was to see that big change and certainly as one person, I couldn’t have made much difference. I don’t see all that much has changed in 10 years for any of the big 3. Our last 2 cars are Fords — but Volvos.
November 17th, 2008 at 12:30 pm
@ Chris- “If you think Toyota ‘reads the marketplace’ and forecasts any better, ask yourself why they brought a massive, 5.7l truck to the market when the full-size market was just starting to crash.”
They brought a massive 5.7 L Truck into the market, because they wanted to show that they can compete with the US car makers when it comes to bigger trucks. The Tundras are incredible trucks and there is always a need for these vehicles. Perhaps not daily drivers, but people always need work trucks.
As far as the reliability of “American” vehicles goes, look at any transmission shop in the country, and you will see what cars are getting the $2000 repairs. 90% domestic. I personally have know dozens of people that have had to put transmissions in their American Cars under 100,000 miles. I have never put a transmission in any of my Japanese cars.
I would like to buy American cars. I really would. But I can not justify taking on the risk of a potential huge repair bill. I will continue to drive my 8 year old Tundra that drives like the day I bought it, and starts up every time.
November 17th, 2008 at 12:32 pm
yawn. why do we need these articles? Just say “the difference between Toyota and GM is that GM is american” and everybody already knows everything else in the article.
The difference between democracies and a “democracy” that has a higher imprisonment rate than almost all non-democracies? The “democracy” is american.
The difference between a normal democracy and the democracy that has double the violent crime? we only need the word “american” and every one gets it.
Katrina aid fiasco? need only say it happened in america, and everyone understands how & why.
November 17th, 2008 at 12:36 pm
Wow dude, no way man that is CRAZY!
jess
http://www.anon.cz.tc
November 17th, 2008 at 12:38 pm
GM failed to recognize what the customers really need. It has also failed to recognize the direction that fossil fuels (gasoline, diesel) will take on the economy. Toyota has detected the need and hunger for small, fuel-efficient and reliable vehicles. That is their key to success.
November 17th, 2008 at 12:53 pm
This is great in theory but when your “people” are represented by unions that are not remotely concerned about the financial health of the company and concerned solely with getting the best pay and benefit packages for their members, it is easy for management to view the “people” not as assets but as liabilities.
November 17th, 2008 at 1:07 pm
Since Toyota also has SUV’s and trucks in its model lineup, I don’t think we can solely blame the fact that GM has focused on those 2 categories for it failures. I believe that where GM failed beyond question is in QUALITY. Japanese automakers are known for their quality control & how well they support their warranties. When you fail as strongly at this as GM has in the past people are more inclined to speak to others & pass the word on about your failures. I believe the reputations of American car companies are the primary reason they are in the situation they are in. When they improve their quality control processes & personnel people will look to GM as a provider of great quality vehicles & a company that services what they sell. Right now, you can ask nearly anyone, they are NOT viewed in such a manner. YES, their does need to be a rescue plan in place which focuses on GM’s ability to repay the debt & they need new management from the top down. There are plenty of personnel out there with fresh, innovative, profit generating ideas that will be much better suited to help the company grow, repay its debt, & keep it a solid link in the American Automotive Industry chain.
November 17th, 2008 at 1:12 pm
Joy’ll
Toyota does have SUV’s and a very small truck offering but it has not been their focus. Toyota have developed the very well selling Prius and their focus has been on smaller economical eco friendly based engine models. Meanwhile GM has continued to move head long into larger engined and SUV focused models for 3/4 years longer than Toyota.
I also did not blame GM’s troubles solely on the large engine focus. I pointed out their unionised workforce has cost the company huge amounts of cash (74,000 voluntary redundancies & paying workers to stay at home) which has contributed significantly to their own forecast of running out of cash mid next year. Toyota has not implemented any voluntary redundancy programmes that are known publicly.
Quality is a factor but the cost of ownership in heavy fossil fuel GM models and the trend towards ecological friendly models which Toyota has adopted so successfully are major factors. Market research surveys back these facts up.
November 17th, 2008 at 1:18 pm
With the Big 3 U.S. Automakers circling the drain, here are 10 solutions to the current crisis and none of them involve sticking your head between your legs and kissing your rear goodbye.
http://fastandloud.com/how-to-save-the-us-automotive-industry-in-10-not-so-simple-steps/
November 17th, 2008 at 1:18 pm
Toyota is number 1 in their category because they work harder like they are still number 4 like they were once were. They make cars that are relevant to the American driver and most of all they overcame the stigma that came with being an import brand, especially Japanese. When Chrysler almost went under in 1980, they sort of got it and gave their collective heads a shake and changed how they did business. Ford and GM still act like they are the heavyweight champions of the world and don’t “get it” that their “business as usual” practices will be their death sentence, because they lack meaningful product relevance. The retail component is the biggest hurdle. Going into a dealership has become a toxic experience that most Americans dread and avoid like the plague. That has to change to a climate and landscape that makes the consumer want to engage in the process. The “Death of Detroit” is squarely the responsibility of bad, detached-from-reality, senior management that has squandered decades of responsibility and opportunity to get it right like they used to in the 1950s and 1960s. The workers should not get blamed for fighting for and winning a better deal… The blame belongs to the mismanagement of the Big 3!
November 17th, 2008 at 1:22 pm
JP:
1) I’m not saying that The Tundra isn’t a wonderfully competitive truck. I’m using it as an example that Toyota did no better with their forecasting/product timing than anybody else.
2) The transmission thing I’ll completely dispute you on. Honda’s 5-speed transmission had a 3-year period of it grenading itself. To Honda’s credit, they stepped in as necessary and took care of it - prior to it becoming a public relations issue. GM’s transmissions have been notoriously bullet-proof; really one of the strong points of their powertrain. They supply 5-speed automatics to BMW (and have for years). BTW, the reason GM was ‘late’ to the more-than-4 speed market was an ‘exclusivity’ clause in their arrangement to supply BMW. A huge mistake on GM’s part - and one that was only overcome recently with their 6speeds (something Honda doesn’t have, btw). GM’s common-place car transmission (the 4T65) and the truck transmissions (4L60) origins are both >15 years old: a credit to their original designs. GM’s updated them through the years, but you can’t dispute their longevity. Toyota purchases a bulk of their transmissions from Aisin.
Take GM’s (now-retired) 3.8L mated with the 4T65 could well be expected to last 200,000-300,000 miles with just routine maintenance. It’s a point that could easily be echo’d about GM’s 5.3l/6.0l truck motors and the 4T65’s. I’ve got a friend who I grew up with that became an auto-mechanic. His comment on the 3.8l? “Make sure you like the car a whole lot — you’ll be sick and tired of it long before the powertrain gives you any problems”.
Face it: all manufacturers have had their issues and their successes. GM/ and Ford’s cavalier attitude in the past continues to haunt them today, but if you take a look at the independent studies (jdpa, pacific, harbour, etc); they will all tell you the same thing: whether it be initial quality, durability, or efficiency, domestic manufacturers are competitive and have closed the gap.
November 17th, 2008 at 1:40 pm
We need an infusion of accountability - when the government ‘gives’ money it should come with preconditions, like a turn-around plan. Avoiding chapter 11 to protect the shareholders makes sense. But requiring management to come up with a plan to become economically viable and self sufficient must be a requirement. Otherwise, market forces will prevail and we’re just temporarily staving off the inevitable.
I found it interesting to watch the Saving GM special on MSNBC last night. Some take aways:
Bob Lutz said the biggest thrill he got from driving the new Volt was ‘that it works’ - not ‘that it works so well’ or ‘that it’s even better than I thought.’ He was thrilled merely that it did not FAIL to work. And that says a lot about culture.
Then he got into his private helicopter (true) and flew home …
GM has said ‘our Quality is as good or better than Japan’ regularly since the 1970s - but they want us to believe (the last gasp of the truly desperate) “this time is different.”
GM employees themselves believe that management has lost touch with the consumer and that streamlining - including closing of plants - is inevitable (and even appropriate) for the survivability of the company.
November 17th, 2008 at 2:11 pm
There has been a lot of bashing of the UAW going on inthese comments. However let us remember that itg was the UAW and well as the other industrial unions of the CIO that enabled most of the people reading this blog to do so. Your grandfathers fought long and hard to acquire the benefits that we as the American Middle class take for granted. 70 years ago there were no sick days, no vacation day, no Health Insurance, no care for workers injured on the job. If you got hurt and could not work then you were on the street. If your grandfather got the flu, he was lucky if he had a job to return to when he was better and if he did he probably had to start over at the bottom. The living wages won by the unions before and during WWII caused such prosperity in the 50’s that people who could have never gone to college were able to send their kids to college, who could then get jobs as professionals and form the bases of the Middle class. These worker were for the first time able to buy their own homes, their own cars, move to the suburbs and make the American standard of living the envy of the world. Today’s Unions know that American industry needs to operate more efficiently and economically to remain competitive in today market place. They object however to the entire burden of this effort falling upon the workers while manager are getting multi-million dollar bonus for the sacrifices made by their employees even as the company is falling into bankruptcy. Anyone who thinks Union representation is obsolete should ask the McDonalds worker who got fired for being 5 minutes late once. Ask the farm workers who plant and harvest your food for pennies an hour, ask the children making pennies to sew the clothes you buy at Walmart. Ask minimum wage workers who work as hard as anyone in America only to find themselves falling further into poverty. There is a big todo now about the 15 per cent of the American population with out Health Insurance. Before this was won by the UAW and the other CIO unions this number would have been more like 90%. There was considerable concern in the recent financial collapse about the losses suffered by retirement funds. Before the unions there was no retirement. You worked until you couldn’t then hoped your children would care for you. If not you died. So before you start bashing the UAW you need to look at everything they and the other cIO unions have done for you.
November 17th, 2008 at 2:12 pm
GM has small, economical cars in Europe and Asia that sell well. I saw no valid reason for them not bringing them here.
November 17th, 2008 at 2:37 pm
PINGBACK http://www.techsoapbox.com/clarity-in-times-of-confusion/
…I read this wonderful little article on why Toyota beats the pants off of GM, and the essence is the same - in the context of growing their company, in making better products, and retaining their skilled employees (I’ve only ever had one employee quit in almost 6 years), they are spending their dimes in a way that makes sense. Sure they lose a large chunk of money ($50-100 million according to this), but since they are still making a good solid profit, there was no reason to be reactionary…
November 17th, 2008 at 2:45 pm
PINGBACK http://latenightcoder.livejournal.com/43222.html
…Big news this week is anticipated word of a bailout for the “Detroit 3″, General Motors, Ford, and Chrysler. The notion proposed by these three and their proponents is that they have had falling sales and risk going bankrupt, and that if the government doesn’t fund them with multi-billion dollar loans they will collapse and cost something like 3 million US jobs between them and their suppliers and support economies. When you hear news about “the failing auto industry”, that auto industry is mostly these three, and they are all part of the US United Auto Workers union (UAW)…
November 17th, 2008 at 3:05 pm
“I personally have know dozens of people that have had to put transmissions in their American Cars under 100,000 miles. I have never put a transmission in any of my Japanese cars.”
My Honda Odyssey blew out the 2nd gear and had to have a full transmission replacement at about 90,000km. I’ve never had to do *anything* with a domestic transmission.
Surely this anecdote can be used as some broadly applicable rule, right? Groan.
November 17th, 2008 at 3:22 pm
John - to the point about the small, economical cars in other markets not sold in the US - It’s my understanding that many of our regulations would require quite an overhaul of these models. Some simply don’t meet our safety standards as is. Also, they wouldn’t be profitably. Just because the size of the vehicle is smaller doesn’t mean that the labor costs in manufacturing the vehicle are smaller. And importing them doesn’t work because of the added costs there.
http://www.businessweek.com/magazine/content/08_24/b4088028586549.htm
I do believe that GM and Ford are now doing more to bring in cars that have been successful overseas. Saturn as that new re-badged Opel, Pontiac has a few models based on their Australian cars, and Ford has the Focus and will soon have it’s Transit Connect van/truck thing. Chrysler, meanwhile, is like the child that isn’t good at academics, or sports, and you’re not sure if they’ll even graduate, but you have to applaud them for getting out of bed every morning and having a positive attitude.
I’m not convinced that the Volt will work here. Cheap 4-bangers sell. Toyota and Honda haven’t been profitable here because of their SUVs and trucks - it’s because of the Avalon, Corolla, Camry, Civic, Rav4, Prius, CR-V, Fit, Accord, etc. Hyundai and Kia have also exploited that niche to their advantage, while the Big 3 largely avoided it altogether.
November 17th, 2008 at 3:30 pm
“Here’s three companies that sold pickups and SUVs while lobbying against CAFE standards.”
You mean like Honda, who also argued against CAFE? Toyota tacitly argued against CAFE by giving their moral support to the automakers who were opposing, basically knowing their input wasn’t even needed.
Really this is all such farce. A lot of people have bought into a lot of mythology about the Japanese car companies, and they’re the classic case of confirmation bias or seeing only what they want to see. Sorry, prior poster, but I find that most Japanese cars feel junky to sit in on *day one*. A Camry feels like a super low end econobox. The Accord, if you get it with the upgrade options, feels nice, but absolutely nothing special. Some of these mythologists will hop in and imagine that they’re sitting in pure engineering bliss, when really it’s just more of the same.
November 17th, 2008 at 3:33 pm
My belief, and this could be widely out of date and inaccurate and border line stereotypical, but I believe Toyota (like many Japanese companies) aim for the market share and employee loyalty. They may be hurting financially at the moment keeping the staff on (I don’t know if they are or not), but when the market picks up who will the staff want to work for and who will get the most out of the staff? They could have also built up larger cash reserves and just know the market and have forecast this months/years ago when other companies were undergoing massive expansive they could have just kept things ticking over.
November 17th, 2008 at 3:43 pm
I agree with this article. Treating people better is the way to win and Toyota is doing a great job. I still think it is important for Americans to buy “Made In USA” products, but we shouldn’t blindly buy from the big three just because they’re made in the states. Toyota is made here, too, and is doing a much better job.
But please, do intentionally spend on “Made In USA” products: http://whybuymadeinusa.com/
November 17th, 2008 at 3:50 pm
“If the union is ever able to force it’s self in the Toyota or Honda Plants, give them 25 to 50 years and the same will happen.”
18 more months till Toyota hits the 25 year mark. My grandmother’s ‘91 Corolla, my wife’s ‘03 Vibe, and my ‘08 Tacoma were all made by UAW workers at the NUMMI plant in California.
According to http://www.nummi.com/us_roots.php
“NUMMI and UAW Local 2244 signed their first collective bargaining agreement in June 1985. Both parties committed to resolving problems together and seeking ways to improve quality, efficiency and the work environment. This commitment to NUMMI’s future continues today.”
November 17th, 2008 at 4:07 pm
there’s actually a LOT more to this story…go to http://www.stuffididlastnight.com
November 17th, 2008 at 4:18 pm
We have a Toyota manufacturing plant in the next county. When they saw the need to change their product to a more successful line they didn’t layoff their workers while they retooled. And they don’t pay them to stay at home and wait either (unlike the Big 3)
They are using the time in a productive way. Go through the factory and you will find workers sitting in classrooms, repainting hazard areas, lifting weights, completing dexterity drills. Keeping them sharp so they will be ready to start up that new line.
Those who were not involved in the actual retooling and weren’t sent to other plants were sent out into the community. That’s right, they did community service. Toyota knows how to market themselves to the community.
This not only benefits the community but also gives the workers a sense of pride and accomplishment.
They know how to make things work.
November 17th, 2008 at 4:37 pm
“GM has small, economical cars in Europe and Asia that sell well. I saw no valid reason for them not bringing them here.”
I believe the reason is that a lot of those cars run on diesel which is more expensive here in North America. I think the perception that diesel is dirty is another reason they don’t bring those cars here. But Saturn did bring one. The Astra, which runs on diesel. It’s a good example of GM making a good quality and relatively stylish vehicle.I was planning to buy an Astra myself, but with GM going bankrupt I will hold off for a while. I’m uncertain if I would lose my warranty if they do go bankrupt or if they would honor it.
Anyways GM and Ford has come a long way in terms of quality, but they’ll never be able to over come poor perception and their huge legacy costs. That’s why I think bankruptcy protection is the best course of action for them now. In fact it’s the only way unless the government is willing to take over the company’s legacy costs, which is definitely not what taxpayers would want their money to be used for. I think when GM and Ford come out of their bankruptcy protection they’ll be smaller yes, but more capable of taking on the Japanese companies. As Forbes said Jdpowers is a good source for information. http://www.jdpower.com/autos/ratings/quality-ratings-by-category/midsize-car/sortcolumn-1/ascending/page-#page-anchor
Looking at the cars I suddenly want to buy a Malibu.
November 17th, 2008 at 4:39 pm
Kudos to Carol. I also think it’s great what Toyota is doing for the community that they are operating in.
November 17th, 2008 at 4:54 pm
I’m Japanese, and even I think this article is stupidly one-sided. The difference right now is that the big three are facing bankruptcy. If Toyota were in the same financial situation, i.e. struggling to survive, they’d throw their values out faster than you could write another article retracting your praise. Good values can’t save a failing company, that’s just ridiculous. They need to produce cars that people will actually buy and turn a profit from it. Good on Ford for deciding to bring the European Fiesta to the states (so long as they don’t uglify it in the process), that’ll eat some of mazda’s and toyota’s market.
Are you trying to land a PR job with Toyota or something? This sentence is utter rubbish:
“…you’ll have hyper-productive, motivated teams delivering quality because they’re committed on a deeper level to your company”
November 17th, 2008 at 5:17 pm
There are a lot of good arguments and opposing views as to why the Big 3 are having their issues but I am going to allie (ally?) myself to Randy Kemp and ToyoDriver’s comments. No matter what name you want to tag onto Toyota their success is based in the manufacturing culture they have created, in both their union and non-union based environments. They have union employees at what once was a GM engine plant (now a Toyota facility/supplier) so they have the same issues to deal with as the Big 3 (NUUMI in Southern California). It doesn’t matter whether you call it Six Sigma, lean manufacturing, or the Toyota Production System it is THE system they have in place and it has been flogging Detroit. All three “buzzwords” are four letter words to both Detroit and the UAW. Putting all 3 together (the Big 3, UAW, and lean/six sigma) is the same as gas, heat, and oxygen. Marginally compatible when separated or even when any two are together but highly volatile when all three are joined to the point they are perceived as completely incompatible and unable to work in conjunction with each other.
Toyota is very people oriented to the point the line operator owns the process he or she does, even to the point of changing it. They do not lay off. They typically do not need unions as they tend to hire for life. You have to decide to leave either by word or action. This could change as times change but historically they have not. There is a lot less stress or need to organize if you know you’ll be working the next day for a decent wage and benefit. They pare from the top down - bonuses, raises, etc, rather than cut from the bottom. They also understand their customer not only from what their forecasted projections are but from what their buyers are telling them. What they do is a marriage of that. They look for the savings you can glean from eliminating the waste in all of their processes (storing inventory and the subsequent multiple handling costs, supplier costs, waiting time, producing anything to no demand, over or excess processing, and refects/rework). Nothing could be further from the truth as saying labor issues are the cause for failure. It could be ONE of a string of things wrong but not a factor by itself. How are they doing with all of the other factors?
W. Edwards Deming is the person that helped Toyota (and Japan) focus this culture in their workplaces following WW II. It was so successful and ingrained into their manufacturing culture that the Deming Award is now the most sought after awards in japanese industry. So much for the history lesson. He went to and told GM what they needed to do as late as the ’90’s before he died. He even held 3 day seminars for thousands of their managers and it was mandatory they attend. They only used the bits and pieces that would immediately benefit them and threw out the rest of the tools. They never tied the whole program together and are paying for it today. They got caught by a combination of poor forecast, unknown or badly applied buyer input, and little in the way of internal cost savings or controls on waste other than labor. Face it - there are a lot of savings to look at other than the labor costs no matter how high or low they are. It was compounded by the unexpected change in fuel costs and the resulting affect on all of the economy and the public’s collective change in purchasing habits. The tools still work even in a world of higher labor costs. They just need to be applied.
I’ve read many articles on how the Big 3 are “restructuring” (plant closures, layoffs, etc) to counter the potentially inevitable bankrupty actions. I have read nothing as to what they are doing to really save costs and subsequently their companies over the long term as survival measures other than to ask for a handout. They never learned to use the model and create the culture of survival. Instead they are still pointing fingers based on the only business model they fully understand.
November 17th, 2008 at 5:44 pm
PINGBACK http://zadpolblog.blogspot.com/2008/11/toyota-vs-gm.html
…So, I drive a Toyota Prius. I am extremely happy with it as a car, but it was not the car that I truly wanted. I wanted a Chevy Prius. No such car existed. Not even stretching my imagination as far as it could go. I just could not get an American car that even remotely fit the bill. So I settled and ended up with perhaps the highest quality vehicle I’ve ever owned…
November 17th, 2008 at 6:01 pm
PINGBACK http://andymatic.com/how-toyota-handles-layoffs/
…Toyota’s hasn’t laid off anyone. “Production has been halted but do you know what the employees are busy doing?”…
November 17th, 2008 at 6:08 pm
Obviously this is post has started quite a convesation… but agree with one of the comments that there is a lot more to this story. I don’t think it’s as simple as Toyota loving its people or that they are in hybrids, or other reasons you hear around the web.
Namely legacy costs associated with Big 3 labor issues, vs Toyota’s move into the US in late 1990s in places with very favorable labor conditions. Not to mention lower pension liabilities, et al.
Glad your post has sparked a conversation— at the end of the day - for me the only way forward is to kill the combustion engine and shift towards a leaner manufacturing platform based on wheel based electric motors - and a combination of energy storage systems based on batteries, fuel cells and capacitors. It’s about how you build the car, not fuel it that matters!
Garry G
Editor
The Energy Roadmap.com
http://www.theenergyroadmap.com
November 17th, 2008 at 6:40 pm
Don’t listen to the guy about them using six sigma. They don’t. They use the Toyota Production System, which six sigma only tries very unsuccessfully to mimic. They value their customers, they value their employees, they use lean manufacturing techniques, they also plan a lot up front before they jump into production which prevents a LOT of waste. Toyota also values training and broad spectrums of skills rather than niche specialties. They also promote engineers with a knack for management. Not management from MBA only programs who only know how to attempt to maximize quarterly profits rather than building a corporation that builds great customer, employee, and management relationships. They value their customer first and that produces the $$’s rather than trying to maximize quarterlies which is short sighted but unfortunately the current trend in business