Last updated: 5 may, 2009 - 09:49 GMT

Peter Day's Comment

Car Crash

Global Business - the thing and the BBC programme - is all about change. Particularly about technology crashing into the established way of doing businesses large and small.

Maybe that means that the programme often sounds as though it's repeating itself, even though we spend a lot of time on the move.

Well, this week, we are repeating ourselves, rerunning a programme put out two years ago about the dire straits the American car industry was then in, and how the Japanese auto company Toyota was gradually and inexorably growing to unseat General Motors from its position as No 1 car company in the world.

James Womack of the Lean Manufacturing Institute in Cambridge Massachusetts, tells this compelling story: how the Japanese upstart fused together a bunch of separate production methods to become what he calls "The Machine that Changed the World".

There was nothing hidden about what they did at Toyota: quality, just-in-time, intimate relationships with suppliers, a production technique that could easily turn out different models on the line, one after the other.

Add to that a visceral fear of waste, and workers schooled in the intense art and craft of continuous improvement, and over the decades from 1950, Toyota learnt how to make cars that customers wanted, far removed from complacency of the American big three in Detroit.


And when the Japanese car makers began to invade America, Detroit assumed that Americans would never buy foreign cars. They were wrong. Shackled by increasingly burdensome agreements with the car unions, General Motors (long time No 1), Ford and Chrysler faltered and faded while Toyota moved closer and closer to the top spot, year by year.

That's the story we tell in this Global Business repeat, with an insider's commentary on the story from the chairman of Toyota, Fujio Cho.
This is of interest to far more people than just car industry buffs.

Henry Ford's production line methodology was so successful in the 1910s and 20s that it became the way almost everything was made: and then the way service industries also tried to configure themselves. But it was based on breaking down the production process into tiny steps so that it fitted Ford's unskilled immigrant workers (who probably understood little English).

This factory method uses people like cogs in the machine. It's a terrible waste of brains and individual ability. It is utterly unsuited for the flexible, intelligent production needed to make the things people want today, in an age when robots do the mechanical stuff better than people do.


In this way the Fordist approach to business is becoming a tyranny. That's why the plight of the American car industry is such an important pointer to so many other businesses: the production model they are following may not work any more. Toyota drives its workers very hard indeed, but it also respects their ideas. And needs them to survive.

One of the fascinating things about hearing from the Toyota chairman was his unwillingness to talk much about his company's rise to be No 1 carmaker in the world. There is a good reason for this. Just as Andy Grove, former chairman of Intel the computer chipmaker insisted that "Only the Paranoid Survive" in business, so Toyota worries deeply about the complacency it fears will be induced by being No 1.

And now something else has happened. No sooner has Toyota come out as top global carmaker but it is plunged into losses for the first time in 70 years by the very sharp decline in the world car market.

And its German rival Volkswagen has managed to stay profitable.,.and sell more cars..because of the way it has built a huge business in the burgeoning Chinese car market while Toyota concentrated on the conquest of the USA.

Now it is likely that Toyota will bounce back to pre-eminence when US drivers start buying cars again, though China will obviously have increasing significance.

Being top of the new global car market is now a tussle between two non American car makers, one Japanese, one German. In Detroit that is scarcely believable.

It is a lesson that other mass manufacturers in many other industries need to take to heart.

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