Toyota Remakes its R&D Efforts to Speed Decision Making and Reduce Costs

The Wall Street Journal reported this week that Toyota is in the process of streamlining its R&D process:

TOYOTA CITY, Japan—Toyota Motor Corp. 7203.TO +1.51% said Monday that it has reorganized its vehicle-development system in order to speed decision making, cut costs and better appeal to car buyers world-wide.

The changes to core engineering and design programs bolster the authority of the company’s chief engineers, consolidate research and development into three groups based on geographical regions and limit final design decisions to smaller teams. Toyota, Japan’s largest car maker, dubs the effort its new “global architecture.”

Mr. Uchiyamada said a major challenge for Toyota is cutting costs while improving product design, a seeming contradiction that he aims to resolve by using more common parts and working more closely with key suppliers.

“We won’t feel we’ve succeeded until we raise the use of standardized parts to about 50% among similar-size vehicles in our lineup,” Mr. Uchiyamada said. He added that it will likely take “several years” to achieve that goal.

Using more standard parts reduces the need for smaller lots of dedicated components that can’t be shared among models. Greater volumes of common components help auto-parts suppliers spread out the cost of production.


Actions speak louder than words…

As we have been thinking about how to rebuild trust, I read this morning’s headlines about Toyota being “committed to continue earning the trust and confidence of American consumers.”  It is one thing to tell people that you want to earn their trust but you can’t just tell them, you have to show them.

In the case of Toyota, they will have to build cars that are safe and that can only be proven over time.  That is the essence of both reliability and competence.  Once those are broken, it takes time to prove that you have fixed them permanently.

Maybe a $50 million investment in a safety research facility based in Michigan is a good start–what do you think?


Toyota Destroys Customers’ Trust and Potentially Billions in Market Value as Well

Update 4-14-10:

Toyota will now be halting sales of one of its Lexus SUVs due to rollover concerns raised by Consumer Reports, according to the Wall Street Journal:

Toyota Motor Corp. said Tuesday it will temporarily halt the sale of a Lexus sport-utility vehicle after Consumer Reports magazine raised safety concerns about it.

The move was another blow for the Japanese car maker, which is trying to repair its image after a series of safety recalls. Consumer Reports issued a rare “don’t buy” recommendation for the Lexus GX 460, saying the SUV could roll over in certain situations.

The influential nonprofit magazine already had suspended its recommendations for eight Toyota models recalled in January for sticky-accelerator concerns. In certain conditions, the gas pedal in those models is slow to return to idle.

Update 4-13-10:

Now a feud between family and non-family executives has emerged at Toyota, as individuals blame one another for the quality and safety debacle, according to the Wall Street Journal.

Update 3-11-10:

Human error may contribute to a large percentage of unintended acceleration incidents, according to this op-ed in today’s New York Times by Richard Schmidt:

I looked into more than 150 cases of unintended acceleration in the 1980s, many of which became the subject of lawsuits against automakers. In those days, Audi, like Toyota today, received by far the most complaints. (I testified in court for Audi on many occasions. I have not worked for Toyota on unintended acceleration, though I did consult for the company seven years ago on another matter.)

In these cases, the problem typically happened when the driver first got into the car and started it. After turning on the ignition, the driver would intend to press lightly on the brake pedal while shifting from park to drive (or reverse), and suddenly the car would leap forward (or backward). Drivers said that continued pressing on the brake would not stop the car; it would keep going until it crashed. Drivers believed that something had gone wrong in the acceleration system, and that the brakes had failed.

But when engineers examined these vehicles post-crash, they found nothing that could account for what the drivers had reported.

By the way, we finally received our own recall notice late last week for our 2009 Toyota Camry Hybrid.

Update 2-24/10:

For a different take on the Toyota crisis, which compares it to the Audi unintended acceleration fiasco of the late 1980s, which turned out not to be a defect at all, here is Holman Jenkins of the Wall Street Journal editorial.

Update 2-9-10:

The bad news keeps on coming for Toyota, including the newly announced recall of 2010 Priuses and some Lexus models.  Last weekend’s Wall Street Journal had a terrific feature story, too, on how Japan’s national culture contributes to the secretive corporate cultures of firms such as Toyota.

Update 2-2-10

Here’s the latest on this total fiasco as reported by the Wall Street Journal:  all Toyota hybrids are now being investigated.

We can hardly be considered biased against the Japanese automakers, even though we both used to work for GM.  We’ve put our money where our mouths are over the years, and own a 2006 Honda Civic Hybrid and lease a 2009 Toyota Camry Hybrid.  I love my Honda (Karen doesn’t like it).  Karen likes her Camry, and it’s been a good sedan to transport our kids and take on vacations.  Nonetheless, I’m darn glad we leased the Camry, as we’ll be turn it back to Toyota when the lease is up based on the company’s horrific response to its defective brake system/electronics.  The news gets worse every day for the largest automaker in the world, and it’s not over yet, according to the Wall Street Journal:

Toyota Motor Corp.’s quality crisis deepened Tuesday, as U.S. regulators accused the company of dragging its feet on fixing defective gas pedals and threatened civil penalties and further reviews of Toyota products.

The move means that Toyota’s efforts to address its biggest-ever safety and public-relations mess are far from over. Last week, the administration indicated it had no issues with how Toyota had responded to the sudden-acceleration reports, which led the company to recall about six million vehicles and have been linked to at least five fatalities.

“While Toyota is taking responsible action now, it unfortunately took an enormous effort to get to this point,” Secretary of Transportation Ray LaHood said Tuesday in a statement. “We’re not finished with Toyota and are continuing to review possible defects and monitor the implementation of the recalls.”

Mr. LaHood said Transportation Department officials flew to Japan in December to meet with Toyota executives and remind the company “about its legal obligations.” The agency, he said, “followed up with a meeting at DOT headquarters in January to insist they address the accelerator pedal issue.”

The  highly respected journalist, Forbes magazine columnist, and one of my favorite writers on the automotive industry, Jerry Flint, had this to say:

Toyota‘s accelerator problem is the costliest car safety issue–and corporate disaster–in automotive history. It certainly dwarfs the sudden acceleration issue that hit Audi long ago, or the Firestone tire problem that destroyed the sales of Ford’s Explorer or those long-ago issues that created Ralph Nader’s book, Unsafe at Any Speed.

And there will be a great cost: incentives to get customers buying Toyota’s again when the problems have been solved at the factory; money to keep the wounded dealers alive, and money to pay for the recall work. We’re probably talking about a cost in the billions–not millions–counting those incentives. That’s money that won’t go to developing new models, new hybrids, new electric cars. And we’re not talking about the lawsuits, which will go on for years.

I may be wrong, and I do prefer my Honda over Karen’s Toyota, but I can’t believe that Honda would act in the same poor manner in which Toyota has.  Honda in my opinion is a nicer, and in this case, definitely more trustworthy car maker.


Toyota acknowledges trust is more important than profits…

The New York Times today reports that Mr. Toyoda, the grandson of the founder, finally had a news conference yesterday where he used the word trust twice.  The first time, he said,

“I deeply regret that I caused concern among so many people,” Mr. Toyoda said. “We will do our utmost to regain the trust of our customers.”

Then later in the conference he added that he takes

“the situation we are in very seriously.” Toyota, he vowed, would “put restoring trust before profit.”

Of course, we agree that trust should come before profits if Toyota wants to succeed and be a successful car company in the long run.  The difficulty with trust is that you cannot just say “trust” and hope that people agree with you.  You have to demonstrate your trustworthiness in your actions so that people understand your intentions to be trustworthy.

So, for Toyota to regain our trust, they will need to

1) Be Reliable: Now that he has announced a new quality committee, keep us updated about their findings

2) Be Open and Honest:  Keep us updated on any new information they have about this recall and how it will affect us and our cars.

3) Be Competent:  Announce a fix to this problem immediately and also figure out if there is something else going on besides a pedal.  Also, be sure to tell us know all models will be changed so that this problem does not recur.

4) Be Compassionate:  Listen to the stories of those who have been hurt by their vehicles and have compassion for their pain.  Prove to the public (and to the Japanese Prime Minister) that Toyota does put consumers first.


Two Cheers for GM’s Chevrolet Volt

Update 11-19-09:

Here’s a review of the driving experience of the Chevy Volt from the New York Times:

Unlike many electrics, including the Tesla Roadster, the Volt’s electric drive has no whine. The car feels solid and planted on the road. Clicking the Sport button on the dashboard releases a bit more oomph than when in Normal mode; in terms of efficiency, there isn’t much difference between the two except at peak power.

The Low mode— Chevrolet plans a flashier name for it by next fall — is unique in the electric-car world, and a useful feature. While coasting, it applies electric motor braking, then smoothly blends in the regular brakes.

Update 8-11-09:

DETROIT ( — The Chevrolet Volt, GM’s electric car that’s expected to go on sale in late 2010, is projected to get an estimated 230 miles per gallon, the automaker announced Tuesday.

The fuel efficiency rating is based on the EPA’s proposed methodology which GM used in its Volt tests and applies to city driving only. Henderson said GM is confident that when Volt’s combined city/highway mileage average is calculated, it will be over 100 mpg.

Henderson conceded the cost of building a Volt will be expensive, about $40,000 per vehicle. But he said the vehicle will qualify for a $7,500 tax credit, which will reduce the vehicle cost by that amount for consumers.

He also stressed that GM has not set the pricing for the Volt, and conceded the company may have to subsidize the vehicle. The goal: Make enough sales to move the Volt from “first generation” to lower-cost future designs.

“The cost of the vehicle in the first generation is high,” he said.

I’m doubtful with GM’s financial woes as to whether they’ll be able to offer much of a subsidy for the Volt.


Update 3-10-09:

Now comes another reason that GM’s Chevrolet Volt will have a tough time being successful in the marketplace.  It looks like GM’s planners and decision makers didn’t take into account important economic concepts such as marginal utility and marginal cost when designing the Volt’s electric-only mileage range, as reported by Fortune magazine’s auto industry reporter, Alex Taylor:

…one of the main justifications GM offers for its long-term survival, “leadership in advanced propulsion technology,” has been shaken by a report from Carnegie Mellon University.

The study concludes that plug-in hybrids like the Chevy Volt – GM’s most publicized technology project – “are not cost effective in any scenario.” GM says the Volt can go 40 miles on a single charge. But a better choice, according to the report, is a car that goes less than 20 miles on a charge.

But GM made some unusual decisions in designing the Volt. It decided that it wanted the car to go 40 miles on a single electrical charge because that was the maximum distance that it said most Americans travel on their daily commutes. Trouble is, configuring the car for all that electric driving means installing lots of big, heavy batteries.

The Carnegie Mellon study…found that small-capacity plug-ins that get less than 20 miles per charge are more efficient than conventional hybrids. And it said that large capacity hybrids like the Volt that go 40 miles or further on a charge are never cost-effective, because the batteries cost and weigh too much.

A car with the Volt’s range, according to the study, would also be extremely uneconomical traveling fewer miles as it hauls around battery capacity it doesn’t need.

Nearly 50% of U.S. vehicle miles are traveled by automobiles covering less than 20 miles per day, according to the report, and it concludes that 20 miles is a more sensible range. It also notes that as the charging infrastructure in public places becomes widespread, cars will be able to travel shorter distances between charges.

Let’s hope it’s not too late for GM to make some changes in the Volt’s design to reflect the economics and preferences of America’s drivers.  After all, as I learned in college when majoring in economics, they, like all consumers, always make decisions at the margin.

Original Post 9-17-08:

I am rooting for GM to succeed in its quest to give us a radically new vehicle that will help us reduce our dependence on foreign oil and improve our environment.  So, I am glad that it has continued to move forward in its plan to produce the Chevrolet Volt:

However, I’m not glad that GM will likely have to raise the price for the Volt beyond its initial proposed amount.  According to the New York Times this week:

Finally, there are questions about the cost. G.M. executives concede that they are revising the price upward. While the company initially hinted at a $30,000 starting price, executives have recently suggested that the Volt might end up in the mid- to high-$40,000 range.

The higher the entry-level price, the less likely this car will be able to make an impact in the marketplace and on Americans’ driving habits.  Honda has already announced plans for one of its new hybrid vehicles, the new Insight, to underprice the current Toyota Prius:

The new Honda Insight, which goes on sale in the US in April, is expected to sell in relatively high quantities. Honda is targeting annual global sales of 200,000 units per year, with approximately 100,000 in North America. Honda is aiming for affordability with the new Insight, which is expected to sell for approximately $19,000—several thousand dollars below the Honda Civic Hybrid and Toyota Prius. At the same time, the new hybrid should match or exceed the fuel economy of those vehicles. The new Honda Insight will be unveiled at the 2008 Paris International Auto Show in early October.

Currently, we own a Toyota Camry Hybrid and a Honda Civic Hybrid.  I’d love to drive an American hybrid that truly delivers outstanding fuel economy.  The question is whether GM will deliver such a vehicle at a price I can afford.