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5 Things Toyota Must Do To Recover From Its Crisis

Time for a comeback!
The bad news just keeps on coming for Toyota (TM), the soon-to-be-former biggest carmaker in the world. It still hasn't bounced back from the Great Recall of 2010. The Japan earthquake/tsunami and nuclear crisis have ravaged its supply chain -- Toyota may not be back to full production until late this year. And Toyota just announced a 77% drop in profit for the final quarter of its fiscal 2011 year. Ouch!

The following chart pretty well sums it up. It's no stretch, at this point, to say that Toyota has fallen off a cliff. (See chart below right.)

Oh what a sinking feeling!
Of course, for all the negatives, you have to remind yourself that this is Toyota, dammit! It didn't get to be the dominant global automaker because it completely sucks at what it does. The company, which until the Great Recall hit looked as if it would be on top for a long time, is primed for a comeback. But there's work to be done:

  1. Take the lead in moving away from lean production. Toyota is the poster-child for just-in-time manufacturing. Pre-quake, the Toyota Production System was the envy of the automotive world. Post-quake, not so much. If Toyota hopes to regain leadership in this area, it can either restore aspects of old-school vertical integration, with all the static inventory expenses that entails; or the company could go beyond lean, revamping its supply chain and operations for maximum flexibility. Quick-response custom manufacturing? It's been experimented with elsewhere. I'm not sure it will work in the auto industry. But if anyone could change my mind, it's Toyota.
  2. Solve the PR problem. Toyota's marketing isn't bad and has at times been brilliant (think of Lexus' "relentless pursuit of perfection" tagline). But its communications are terrible. They were terrible before the Great Recall, and worse during and after. Following the quake, it took Toyota weeks to (somewhat) clarify how long its Japanese and U.S. operations would be affected. Other automakers take to teh Interwebs when somebody in south Jersey tweets that their new Ford (F) Explorer is making funny rattling sounds. Toyota needs to retire the bushido attitude on this front and show an increasingly skeptical consumer that it wants to talk. All the time.
  3. MPGs, MPGs, MPGs. Toyota has been pushing fuel-efficiency since... well, ever since it first showed up in the U.S. Despite all it's been through, when people go shopping for a car that's easy on gas, they usually start with a Toyota vehicle. It's just Detroit's dumb luck that Toyota has been taken offline by force majeure at a time when gas prices are cresting $4 a gallon. But with U.S. Corporate Average Fuel Economy (CAFE) standards set to march steadily upwards this decade, Toyota has the product lineup to satisfy both the government and consumers. As soon as it's back on its feet, it needs to press home this advantage.
  4. Electrify. Toyota has been slow to join the cavalcade of electric vehicles that have come to market in the past year. This is understandable: Why would you undermine a huge advantage in gas-electric hybrids? A plug-in hybrid Prius, due out next year, is a step in the right direction. But Toyota needs to move more aggressively into this space.
  5. Normal cars, not supercars. In the annals of bad timing, the introduction of the Lexus LFA supercar, a $375,000 fantasia of high-velocity carbon fiber and monumental arrogance, was the wrong car at the worst possible time. Okay, sure, the new CEO, Akio Toyoda, a performance enthusiast, demanded it. But nobody thought about Toyota as a high-performance brand before the crises struck. A few more do now. But they're not the ones who need to return to buying Camrys and Corollas.
Toyota -- it's fixable! But some re-invention will be required. As well as much more flexible management overall.


Photo: Toyota Media
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