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Updated:2007-03-21 00:17:58
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Why Toyota Is Afraid of Being on Top






Ask consumers why Toyota may soon be the largest automaker in the world, and they will point to the Camry. Or the Prius. Or the RAV4. (It's the cars, stupid.) Ask manufacturing geeks, and they'll tell you it's about just-in-time production and a maniacal focus on constant improvement. (It's the engineering, dummy.)

But there's another drama behind the carmaker's tire-squealing momentum. It's a story that might be called: How Toyota is winning the hearts and minds of America.

With a deft combination of marketing, public relations and lobbying, Toyota has done a remarkable job over the past 20 years of selling itself as an American company. That drives the Big Three to distraction. Here's Chrysler communications chief Jason Vines: "The thing I resent is Toyota wrapping itself in the American flag," he says. "We still employ more people and contribute more to the economy."


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Other auto articles from Businessweek.com:

Who cares what Detroit thinks? Well, strange as it sounds, Toyota does. Its executives may privately relish victory at the expense of General Motors, Ford, and Chrysler, but here's the truth: Toyota is afraid to be No. 1 -- or at least what that implies. And not just because one of its slogans is "Run scared." It's because the extra scrutiny could undo much of the hard work of the past 20 years. "We constantly need to think about the potential backlash against us," Toyota CEO Katsuaki Watanabe tells BusinessWeek in an exclusive interview. "It's very important for our company and products to earn citizenship in the U.S. We need to make sure we are accepted."

A 17.4 percent retail market share should signal acceptance. But Toyota is not admired from sea to shining sea. Yes, the company has won the coasts. But one-third of car buyers are biased against imports, says Harris Interactive. And most of those Ford- and Chevy-loving holdouts live in the Midwest and Texas. In those precincts, Toyota still has a lot of persuading to do. Which explains why it launched the full-size Tundra pickup -- a red state vehicle from its aggressive hood to its brawny haunches -- and is building it in San Antonio.


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Here's the thing: The Tundra amounts to an assault on the last redoubt of Big Three profits. But Toyota doesn't want to be seen as the one that pushes Detroit over the edge. So to prevent a backlash, the company is amping up the charm -- launching literacy programs in San Antonio, vowing to share technology with Ford, and pouring money into lobbying, more than doubling since 2002 the amount it spends each year, to $5.1 million. Says Jim San Fillippo, an analyst with Automotive Marketing Consultants Inc.: "Toyota is the best at going native."

In the early '80s, Toyota sold nine models and had 6 percent of the market. But the company was winning converts with fuel-efficient, reasonably priced cars like the Toyota Corolla. Detroit, meanwhile, was beginning to endure the agonies that continue to this day. Japan was ascendant, and xenophobia was in full cry.

Toyota Scion's Shoichiro Toyoda needed to boost sales in the U.S. but feared angering consumers and Washington politicians. So in 1984, he hired a Ford pr guy named James Olson. Dr. Toyoda summoned Olson to Nagoya and exhorted him to undertake genchi genbutsu ("go and see").


What Olson found wasn't terribly surprising: With just one U.S. factory -- and a joint venture with GM, at that -- Toyota was widely viewed as a foreign interloper. At Olson's urging, the company began playing to local sentiment. In 1986, Toyota announced a new plant in Kentucky. In the same year, it rehired many of the 3,000 laid-off GM workers to staff the joint- venture plant in Fremont, Calif. George Nano ran the United Auto Workers local at the time, and recalls company executives and plant bosses eating in the same cafeteria as the rank and file. That never happened when GM was running the factory.

That same year, a Ron Howard comedy called Gung Ho appeared; it contrasted the American and Japanese work ethic at a car plant operated by an Asian company called Assan Motors. (Toyota later used the film as an example of how not to manage Americans.)

Toyota escalated the pr offensive. In 1991, it started funding the National Center for Family Literacy and other do-good works. It was textbook corporate philanthropy. But Toyota also did something few American corporations would consider: dispatching efficiency gurus to companies like Viking Range Corp. and Boeing Co. and to local hospitals. All this was an effort to help make these places work smarter -- and build goodwill.


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BEATING THE TAX
But even the savviest gestures were of little use against rising trade tensions. In 1993, Big Three executives won a sit-down with President Bill Clinton. Why, they wanted to know, could the likes of Toyota flood the U.S. with cars, while domestic automakers were mostly locked out of Japan? "It was clear Detroit was having trouble," recalls Mickey Kantor, who was then Commerce Secretary. So Clinton threatened a 100 percent tax on luxury car imports.

That would have mauled Toyota's 5-year-old Lexus brand. It was time for some Kabuki. In those days, Toyota had no game in Washington. But Toyoda was a friend of Walter F. Mondale, then ambassador to Japan. They made a deal: Toyota would build three plants in the U.S. if Clinton nixed the tax. It seemed like a concession at the time. But one Toyota executive says the company planned to open the factories all along.

Detroit's lobbying had come to naught. Toyota was about to establish a beachhead from which it would double U.S. market share over the next decade. With each new plant, Toyota won friends in Congress, where it began building clout.

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The most interesting line of that article is where Toyota is willing to "share technology with Ford." How interesting.

Meanwhile, Ford is running the TV commercial that starts out by saying "Lately, it's become trendy to say you are built in America" in an ad aimed squarely at Toyota. Then Ford puts out the little video, a la YouTube, where the dweeb goes into a Toyota show and tried to pick apart the new Tundra.

It's also interesting that whenever the domestic automakers run into trouble they always turn to the government to help them out. Note the paragraph that mentions the Big 3's 1993 sit-down meeting with Bill Clinton. And say, didn't the government (taxpayers) bail out Chrysler back in the 80s?

Meanwhile, Toyota has been able to make steady gains in spite of paying higher tariffs/taxes and they've done it in the marketplace - by offering a better product.
 

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shareing technology with ford . wow. ford will cringe reading that. especially concidering there stature in the truck industry. being number one definitely holds you to a different standard. one by which all else is measured. toyota isn't shy. there is no question building a truck plant in texas is like going for the jugular.
 

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The most interesting line of that article is where Toyota is willing to "share technology with Ford." How interesting.

Meanwhile, Ford is running the TV commercial that starts out by saying "Lately, it's become trendy to say you are built in America" in an ad aimed squarely at Toyota. Then Ford puts out the little video, a la YouTube, where the dweeb goes into a Toyota show and tried to pick apart the new Tundra.

It's also interesting that whenever the domestic automakers run into trouble they always turn to the government to help them out. Note the paragraph that mentions the Big 3's 1993 sit-down meeting with Bill Clinton. And say, didn't the government (taxpayers) bail out Chrysler back in the 80s?

Meanwhile, Toyota has been able to make steady gains in spite of paying higher tariffs/taxes and they've done it in the marketplace - by offering a better product.
I agree with everything that you said, but I believe that the Japanese do have some critical advantages over the domestics still. Their favorable exchange rate helps with vehicle costs (just because they're built in the USA doesn't mean that a lot of the parts aren't paid for with yen). The biggest benefit the Japanese companies have over the domestics is health-care costs. Japan's government provides health care and that saves Toyota about $1500 a year per Japanese worker when compared to a comparable US worker.

Please understand, I'm not attacking Toyota here. The domestics created this mess all by themselves. But to say that Toyota has made gains in spite of tariffs, etc., seems to be whitewashing a bit. At least as far as I know...
 

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I agree with everything that you said, but I believe that the Japanese do have some critical advantages over the domestics still. Their favorable exchange rate helps with vehicle costs (just because they're built in the USA doesn't mean that a lot of the parts aren't paid for with yen). The biggest benefit the Japanese companies have over the domestics is health-care costs. Japan's government provides health care and that saves Toyota about $1500 a year per Japanese worker when compared to a comparable US worker.

Please understand, I'm not attacking Toyota here. The domestics created this mess all by themselves. But to say that Toyota has made gains in spite of tariffs, etc., seems to be whitewashing a bit. At least as far as I know...
I'm not sure I follow. I assume you DO realize that Toyota operates eight or nine manufacturing plants in America already. The new plant in Mississippi (for Highlanders) will bring that number to nine. I don't get how a Japanese health care system is impacting these American workers.
 

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Some of you may not remember when Harley-Davidson almost went belly up to the foreign manufacturers. The US government stepped in with tariffs and restrictions to help them back on their feet. Now they are a great and profitable company again.

Foreign countries protect their industries much better than the US does. I have lived in Japan for two years and Korea one and you see very few American or other countries' vehicles there. No, the playing field is not fair much of the time and has hurt our US industries. While many of these countries spend their money trying to promote and protect their business, the US spends billions trying to promote freedom to the rest of the world.

Pray for our troops as they protect our nation so the rest of the world can build their factories here.
 

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Some of you may not remember when Harley-Davidson almost went belly up to the foreign manufacturers. The US government stepped in with tariffs and restrictions to help them back on their feet. Now they are a great and profitable company again.

Foreign countries protect their industries much better than the US does. I have lived in Japan for two years and Korea one and you see very few American or other countries' vehicles there. No, the playing field is not fair much of the time and has hurt our US industries. While many of these countries spend their money trying to promote and protect their business, the US spends billions trying to promote freedom to the rest of the world.

Pray for our troops as they protect our nation so the rest of the world can build their factories here.
Come on, man. For years folks like you were saying that we should not let foreign cars into our country because the manufacturing jobs and economic benefits of those jobs are overseas helping another country, all the while they ship their cars over here and sell them to Americans for dollars that are sent back overseas. Yet we allowed that for many, many years. Today, foreign automakers aren't so foreign anymore. These vehicles are being built in places like Indiana, Texas, Mississippi and Tennessee. The dollars paid to these workers are now turning over in OUR economy. The arguments from the domestic automakers are LAME. Instead of telling consumers "just watch us build better vehicles" they instead say "waah, don't let the bad ol' Japanese in with their better cars." That doesn't cut it. Harley Davidson didn't thrive because of the government; they thrived because they found a business model that worked. Likewise, all the domestic automakers have to do is focus on building better products. That's all Japan has done, but yet the American automakers and their fans try and make it some patriotic thing. It is not.
 

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I can't wait until all the foreign manufactures get all the benefits of American industry such as "unions" and long term health costs, etc. That will dry up their R&D money fast.
 

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Toyota, and the other Japanese manufacturers, learned modern manufacturing from the USA in post WWII. Honda engineered the evo motor for Harley Davidson. The platform they still use. Why? Because it works. We are not at war with Japan. We buy Sony, Hitachi, JVC, Yamaha, Honda, Subaru, Suzuki, Kawasaki, Panasonic, and a host of other brands from over seas. We buy Hyundai, LG, Samsung, and Kia from South Korea. We buy "made in China" stuff everyday. Why? Price consideration for the cheaper things and quality for the expensive stuff. Who will not pay more for quality and reputation? Toyota may not want to be #1 but they are almost there. It will be interesting to see how it all unfolds...
 

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A lot of what Japan learned fron the US was taught to them by a man shunned by US auto companies: W Edwards Deming. If you have never heard of him; read about him sometimes. He is held in high regards by the Japanese.
 

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[." That doesn't cut it. Harley Davidson didn't thrive because of the government; they thrived because they found a business model that worked. Likewise, all the domestic automakers have to do is focus on building better products. That's all Japan has done, but yet the American automakers and their fans try and make it some patriotic thing. It is not.[/QUOTE]

Try to buy a Harley in Japan where they are highly sought after and the price is ridiculous. I am sure if Harley wanted to build a plant in Japan the Japanese would welcome them with wide open arms. Right!
 

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I'm not sure I follow. I assume you DO realize that Toyota operates eight or nine manufacturing plants in America already. The new plant in Mississippi (for Highlanders) will bring that number to nine. I don't get how a Japanese health care system is impacting these American workers.
Right -- I should have been more clear. Certainly, exchange rate and health care costs are smaller advantages now for Toyota since they're basing more operations in the US, but during the years of phenomenal growth, most of their vehilces were produced outside the US. Furthermore, they do still see the benefits of government supplied healthcare because a lot of their support personel, R&D, and corporate management is based in Japan.

Not knocking Toyota or defending the US automakers, but some of Toyota's higher tariff costs etc. were compensated for by Japan's favorable economic system.

Which brings us to discussing nationalized healthcare. :D JUST KIDDING!! This is a TUNDRA forum.

I'll shut up now...
 
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