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Straight Talk

By James Hettinger
Senior Advisor, Battle Creek Unlimited
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Just within the past five years, we in West Michigan were giddy over the possibility that Toyota might construct a new engine production complex somewhere in our area. Now that possibility has become a little less likely than the Michigan Education Association embracing comprehensive public school reform.

Not that either scenario was very likely. But we do know Toyota looked, but we can question how seriously they looked.

One of my favorite phrases is the cynical expression that no good deed goes unpunished. Toyota has probably become an ardent believer in that phrase. I would be the last person to try to contend that the behavior of a global corporation is always altruistic, as I have seen enough to know that altruism plays into it a very small fraction of the time. But I am very experienced with Toyota’s North American expansion. I was involved with the site location decisions of dozens of their suppliers.

Toyota’s expansion into the North American market was driven by the belief that one should produce in a market where one sells. The company also wanted to hedge its bets on exchange rates and be in a position to contend with domestic content legislation. That would be generally good business strategy and an ancillary good political strategy. If you want to sell into a certain market, you had better be sure that market can afford your products. Secondly, Toyota’s expansion was as widespread, geographically, as possible. That was probably better political than business strategy.

Toyota was very nervous that their North American expansion would be viewed as coming at the expense of, say, General Motors. If GM were to collapse, Toyota would likely be blamed, even though it appears some people at GM had been working hard on the collapse for years.

Toyota built a presence that now employs no less than 170,000 Americans. Their suppliers and sub-suppliers probably account for thousands of other jobs. Memo to Congress: Be careful. The same antics led to thousands of people losing jobs in civil aviation. Economic erosion is wreaking enough havoc with the lives of working Americans. Try not to make things any worse.

Toyota even began to use some GM suppliers in order to help prop up the sagging corporate colossus. This caused anxiety in Battle Creek for those employees of Toyota suppliers. We did not want to see them lose their jobs after they had labored hard to become the very best at what they do.

In their rapid expansion into North America, Toyota outran its capability to effectively manage the vast new geographical deployment. For Toyota, outrunning the capability is deadly to the company’s ability to provide superior management performance. Losing the capability to manage creates exactly the problems the giant automaker faces today. Quality is a management problem; it is not a worker problem.

While the approach of using GM suppliers may have been good political strategy, it was lousy business strategy, because it separated Toyota from a traditional culture and traditional supplier relationships that nurtured high quality automotive products and production. Have any accelerators made by traditional Toyota suppliers failed?

So, all of this earned Toyota CEO Akio Toyoda a pistol-whip session with our jingoist, imperious, and capricious grandstanders in Washington, D.C. In the past 20 years, there have been 569 recalls of Toyota products. That is rather anemic standing next to the 3,498 GM recalls over the same period. But it was Mr. Toyoda who was ridiculed and laughed at. One congresswoman from Texas even had the bold faced vacuity to insist Mr. Toyoda was not “contrite” enough — thereby earning herself a much needed scholarship to diversity and multi-ethnic sensitivity training.

With there now being a major GM recall of 1.3 million vehicles, a former CEO earning $3,000 an hour, presumably, not to work, and automotive executives complaining that they are not compensated well enough, it does not seem like much has changed despite the infusion of billions of taxpayer dollars and the restructuring of wild-eyed government whiz kids.

“Change we need?” I think not. It looks like the government accelerator got out of control and is now bringing us more of the same at high velocity. All in all, the barnyard is the same, but for the animals running it.

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