Wednesday, April 25, 2012

I could have prevented the Toyota recalls

I saw this article today and a particular quote jumped out:

"Toyota had a stellar reputation for quality until massive recalls that began in 2008.

"Executive Vice-President Atsushi Niimi said the recall fiasco showed that Toyota had neglected improvements in production while pursuing growth. [my emphasis].

"When production plunged, we could see big-scale production was a burden," he said. "We needed an assembly line that could respond to the ups and downs of production needs."

Why did they have to experience it to know it when I wrote, before it happened, not to go down the "volume road"?

"Toyota evidently wants to topple GM as the planet's largest auto manufacturer. If they don't watch their step, they may find themselves there, with nowhere to go but down.

"I'm not convinced a successful model for an auto manufacturer is volume. I think it ought to be profit. GM makes a lot of cars, and they are not happy. Porsche, not so many, and they're happy. Very happy.

"It's harder to make $100 by making $1 on 100 cars than it is to make 50 cars with $2 of profit on each unit. Why? Because the administrative overhead associated with all that volume creates too many opportunities for quality and customer satisfaction breakdowns that threaten to collapse the entire house made of cards.

"Building 100 cars means 100x all the raw materials and parts to get to the plant on time; 100 customers to find and then keep happy; 100 warranties to support; 100 recalls if some component is wrong; more inventory sitting on lots collecting dust and depreciating asset value if sales slump...all this hustle and hassle for a buck?

"With less hustle to build 100 cars, a manufacturer has more time to think about design, technology, more time to test prototypes, more time to get it right. Rushing to market with a product "to get the sales" can backfire on brand equity."

I posted on-line,and tried to engage auto journalists, but everyone was too busy singing Toyota's praises to pay attention to sound fundamentals.

The fall of Toyota ticks me off because I could have helped them avoid it, and gotten rich for my troubles. If they'd paid me $50 million to be an advisor and listened to me, they'd have earned a return on their investment, avoiding recall losses estimated north of $2 billion and some as high as $10 billion.


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