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TOYOTA JIDOOSHA KABUSHIKI GAISHA
トヨタ自動車株式会社
Toyota Motor Company Ltd.
Toyota Motor Company is more than just a Japanese automobile manufacturer. Toyota is the company against which all other Japanese automobile companies—Nissan, Honda, Subaru, etc.—benchmark themselves. By some estimates, Toyota-related activity accounts for a full two percent of the gross national product of Japan. Moreover, Toyota is a formidable automaker at the global level. Many industry experts expect the company to eventually surpass General Motors as the world’s largest automotive manufacturer.
Like many great things, Toyota Motor Company began with the aspirations and ideas of a single person who had the ambition, fortitude, and talent to make his dreams a reality. Sakichi Toyoda was born in a rural community near Nagoya, Japan, in 1867. He came of age during the rapid industrialization of the Meiji Era (1868 – 1912).
Sakichi Toyoda Starts as a Lathe Manufacturer
Textiles were one of Japan’s major industries; and weaving was the first area in which Toyoda applied himself. He learned carpentry from his father, and began building and selling wooden looms in 1894. This business gave him a comfortable livelihood.
Sakichi noticed, however, that weaving cloth with a manually operated wooden loom was extremely arduous work. He set for himself the goal of creating a power-driven loom. He began by buying an old steam engine. He experimented until he finally figured out how to harness steam power to drive a loom. A few years later, he improved his invention with a device that solved the problem of individual threads breaking during the weaving process. If even a single thread broke, Toyoda’s looms would shut down automatically, and the operator could put in a fresh spool of thread before restarting the machine.
Toyoda’s loom business took several different forms over the years. Finally, in 1921, he founded Toyoda Automatic Loom Works. This company still plays a central role in the Toyota Group; and the textile industry still uses machinery manufactured under the Toyota name.
Toyota Begins Manufacturing Automobiles
By the 1930s, Sakichi’s son, Kiichiro—who had been born in 1894—was assuming the mantle of leadership in his father’s business. Kiichiro studied mechanical engineering at Tokyo Imperial University. As a student, he distinguished himself for his willingness to “learn by doing.” Although he was the son of a now prosperous industrialist, Kiirchiro regularly rolled up his sleeves to pour die castings and operate lathes. Later, as the CEO of Toyota Motor Company, Kiichiro sometimes remarked that a true engineer could be recognized by his dirty hands.
Kiichiro was charged with the task of developing Toyoda’s automotive business. Toyoda began manufacturing automobiles during the 1930s. The car manufacturing operation began as the “Automobile Department” of the loom works, but a separate company was soon established. The distinctive Toyota logo (the “T” enclosed in the oval) began appearing on cars in 1936. Toyota Motor Company, Ltd. was founded in 1937.
Toyota Motor Company in the Aftermath of World War II
Japan was gearing up for war in the 1930s. Toyota Motor Company temporarily benefited from military contracts for trucks, but Japan’s surrender in 1945 brought uncertainty and extreme financial hardship. In the eyes of the Allied Occupation, Japan’s large financial groups (zaibatsu / 財閥) were abettors of the militarists who had led the country to invade Asia, and go to war with Britain and the United States. Kiichiro Toyoda did not know if the Occupation authorities would liquidate his company as step in creating the “new Japan.”
Fortunately, the Allies saw Toyota as an asset in the country’s economic revitalization. The Toyota Group was neither dissolved nor significantly altered by the Occupation reforms. However, this reprieve did not spare Toyota from the extreme shortages and inflation of the postwar years. At one point, the company’s debt was more than eight times greater than its total capital value.
Kiichiro began with standard corporate belt-tightening techniques—voluntary management pay cuts and an across-the-board pay cut of 10% for all workers. When these measures proved inadequate, Kiichiro asked for the voluntary resignation of 1,600 workers. The workers reacted by engaging in strikes, protests, and work stoppages.
Kiichiro defused the crisis with an unusual gesture: he publicly took responsibility for the state of the company, and resigned as CEO. The challenges facing Toyota at that time were of course beyond his control. However, his act of self-sacrifice perhaps made the workers reflect on the difficult circumstances facing the company. Work resumed in Toyota’s plants without interruptions, and the company weathered the lean postwar years.
High Profitability and Diversification
Today Toyota is known not only for being the largest Japanese automaker, but for its exceptional profitability. In 2005, the company posted record profits of 18.5 billion yen ($17 million) in an environment in which General Motors reported losses $8.6 billion.
Toyota Motor Company is a member of the Toyota Group—a keiretsu with interests not only in automotive manufacturing, but also in finance, ecommerce, aviation, and real estate.