Toyota: "Only the Paranoid Win..."

Most of those in the global automotive industry wish that they had these problems. But, one of Toyota's strengths over the years has been maintaining effective challenges before its employees so as to avoid hubris (as much as possible). Bravo.

Paranoid Tendency
As Rivals Catch Up,
Toyota CEO Spurs
Big Efficiency Drive

Culture of Institutional Worry
Drives Mr. Watanabe;
How Paint Is Like 'Fondue'

Finding Limits to Improvement

By NORIHIKO SHIROUZU
December 9, 2006; Page A1 Wall Street Journal

TOYOTA CITY, Japan -- The world sees Toyota Motor Corp. as an unstoppable profit juggernaut, overtaking rivals one by one as it rolls toward replacing General Motors Corp. as the world's largest auto maker.

Not Katsuaki Watanabe. Toyota's chief executive officer is a worried man. He thinks Toyota is losing its competitive edge as it expands around the world. He frets that quality, the foundation of its U.S. success, is slipping. He grouses that Toyota's factories and engineering practices aren't efficient enough. Within the company, he has even questioned a core tenet of Toyota's corporate culture -- kaizen, the relentless focus on incremental improvement.

U.S. and European car makers have spent years struggling to overhaul outdated operations and work practices to better compete with Toyota. By some measures, some of those companies are catching up. Now, driven by a severe dose of institutional paranoia, Mr. Watanabe is trying to move the target.

Mr. Watanabe, 64 years old, wants kakushin, or revolutionary change in how Toyota designs cars and factories. He is pushing Toyota to reduce the number of components it uses in a typical vehicle by half -- a radical idea that would usher in a new chapter in car design. He also wants to create new fast and flexible plants to assemble these simplified cars.

His ultimate aim: Cut at least a trillion yen ($8.68 billion) in vehicle costs in the next three to four years -- the equivalent of about $1,000 a vehicle -- and keep slashing costs at similar rates thereafter. That is on top of one trillion yen Toyota squeezed out of its parts purchasing from 2000 through 2004, an effort led by Mr. Watanabe in an earlier role. By comparison, GM recently lopped a similar amount from its annual costs, but largely by cutting jobs.

Toyota is gaining market share and racking up profits even as its U.S. rivals are in an historic tailspin. Toyota now has 12% of the world-wide car market, including sales from two affiliates, putting it in the No. 2 spot behind GM. It is poised to soon overtake the embattled Detroit auto maker. Mr. Watanabe's formula of relentless improvement, characterized by a series of programs with lengthy acronyms, helps explain why the Japanese company has been able to prosper as American giants wither.

Like most senior Toyota executives, Mr. Watanabe is careful to downplay the company's ambitions in public. His favorite words include jimichi (steady), tetteiteki (thorough), and, especially, guchoku (having an open mind). If it succeeds, Toyota would further pressure Detroit to revamp itself; failure, however, could slow the Japanese company's seemingly inexorable rise....

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