Toyota - we are grasping for salvation. And FT-86 Concept unveiled

We are grasping for salvation.
Toyota has become too big and distant from its customers.
When you get to this level, it makes it difficult to return to profit on sales growth alone.

These are some quotes made by President of Toyota Motor Co. Akio Toyoda at a recent press conference in Tokyo last week.

In addition, he also made references to the fiery crash of a Lexus ES, whose throttle was stuck wide open, killing all 4 people inside. The topic was discussed previously in this blog.

We would like to pay our deepest condolences for the loss of four precious lives...Customers who chose Toyota and Lexus cars because those brands are safe and secure are now beset with anxiety. I regret and apologize for this development.

Below is an excerpt from a report by AutoNews.
TOKYO -- Toyota President Akio Toyoda said that the money-losing automaker is “grasping for salvation” as it struggles to return to profit.

The world's largest carmaker was once targeting annual sales of 10 million vehicles but now expects sales of 7.3 million this year, down from 8.97 million in 2008, Toyoda said at a news conference here on Friday.

Toyoda said his company is on the brink of “capitulation to irrelevance or death” as he prepares for a second-straight year of substantial financial and unit-sale decreases.

Citing the five stages of corporate decline outlined by Jim Collins, author of How the Mighty Fall, the Toyota chief warned that his company has slumped to stage four.

“We are grasping for salvation,” Toyoda said, adding that the company has already spiraled through the first three stages: Hubris born of success, undisciplined pursuit of more and denial of risk and peril. Read more here.

Acknowledging a weakness is one of the key tenets of Toyota Way, one that is often often preached to the production line operators and low ranking executives, but unfortunately rarely practised at the higher levels where it matter the most. Prior to his ascension, Akio Toyoda have been known to have been very critical of how Toyota have "lost its way" in its quest to become the largest car company in the world. Previous TMC President Katsuaki Watanabe have always denied TMC's quest to be No.1, saying that Toyota is not interested in a purely numbers game, something which is in direct contradiction to Toyota's effort to rapidly ramp up production sites and capacities around the world. A miscalculated move which made Toyota overly exposed to the current recession and leaving the company with far too many excess capacity, relative to its other Japanese brand compatriots. The young (young here is used relative for Japanese standards; Akio Toyoda is pushing 53 years old this year) Toyota scion's courage to acknowledge a weakness should be applauded.

In the article linked above, Akio Toyoda made some references to Jim Collins' book How The Mighty Fall. Below is a summary of the 5 stages of decline explained in the book.

STAGE 1: HUBRIS BORN OF SUCCESS
Great enterprises can become insulated by success; accumulated momentum can carry an enterprise forward for a while, even if its leaders make poor decisions or lose discipline. Stage 1 kicks in when people become arrogant, regarding success virtually as an entitlement, and they lose sight of the true underlying factors that created success in the first place. When the rhetoric of success ("We're successful because we do these specific things") replaces penetrating understanding and insight ("We're successful because we understand why we do these specific things and under what conditions they would no longer work"), decline will very likely follow. Luck and chance play a role in many successful outcomes, and those who fail to acknowledge the role luck may have played in their success—and thereby overestimate their own merit and capabilities—have succumbed to hubris.

STAGE 2: UNDISCIPLINED PURSUIT OF MORE
Hubris from Stage 1 ("We're so great, we can do anything!") leads right to Stage 2, the Undisciplined Pursuit of More—more scale, more growth, more acclaim, more of whatever those in power see as "success." Companies in Stage 2 stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas where they cannot be great or growing faster than they can achieve with excellence—or both. When an organization grows beyond its ability to fill its key seats with the right people, it has set itself up for a fall. Although complacency and resistance to change remain dangers to any successful enterprise, overreaching better captures how the mighty fall.

STAGE 3: DENIAL OF RISK AND PERIL
As companies move into Stage 3, internal warning signs begin to mount, yet external results remain strong enough to "explain away" disturbing data or to suggest that the difficulties are "temporary" or "cyclic" or "not that bad," and "nothing is fundamentally wrong." In Stage 3, leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data. Those in power start to blame external factors for setbacks rather than accept responsibility. The vigorous, fact-based dialogue that characterizes high-performance teams dwindles or disappears altogether. When those in power begin to imperil the enterprise by taking outsize risks and acting in a way that denies the consequences of those risks, they are headed straight for Stage 4.

STAGE 4: GRASPING FOR SALVATION
The cumulative peril and/or risks gone bad of Stage 3 assert themselves, throwing the enterprise into a sharp decline visible to all. The critical question is: How does its leadership respond? By lurching for a quick salvation or by getting back to the disciplines that brought about greatness in the first place? Those who grasp for salvation have fallen into Stage 4. Common "saviors" include a charismatic visionary leader, a bold but untested strategy, a radical transformation, a dramatic cultural revolution, a hoped-for blockbuster product, a "game-changing" acquisition, or any number of other silver-bullet solutions. Initial results from taking dramatic action may appear positive, but they do not last.

STAGE 5: CAPITULATION TO IRRELEVANCE OR DEATH
The longer a company remains in Stage 4, repeatedly grasping for silver bullets, the more likely it will spiral downward. In Stage 5, accumulated setbacks and expensive false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future. In some cases the company's leader just sells out; in other cases the institution atrophies into utter insignificance; and in the most extreme cases the enterprise simply dies outright.

You may read further on Jim Collins' book here.

But as I have said previously in other entries, the best thing for Toyota is for other competitors, particularly Western car makers in USA and Europe and even Korea to under estimate Toyota. Like every large organization with operations spanning across the globe, Toyota have its own shortcomings. It's just that due its sheer size, Toyota attracts more attention and scrutiny and as the saying goes "the bigger they are the harder they fall." The fact Toyota now have pragmatic chief of staff with enough conviction to call a spade nothing but a spade and get on with solving the problem should allay many concerns. I think Toyota is far from becoming irrelevant. There was once a joke that Toyota's war chest is big enough for it to afford to buy over all major automakers if it really wants to.

Oh and by the way, Toyota did address an issue regarding its boring image - the company have recently previewed the FT-86 Concept ahead of the Tokyo Motor Show on Oct-24 2009. The FT-86 Concept is a thinly veiled successor to the legendary Toyota Trueno / Corolla Sprinter AE86 in the 80s. The AE86's timeless appeal would later extend its appeal beyond Japanese tuners and drifters to become a mainstream cult car in the late 90s after being used as a key character in the hit anime series Initial D. Though I think credit should also be given to previous TMC President Katsuaki Watanabe, who headed the company when the project was commissioned.


The car was previously commonly referred to as a 2-door Toyo-baru sports car, due to the project's joint development with Fuji Heavy Industries automotive division and boxer engine specialist Subaru.

The FT-86 Concept was designed in Toyota Motor Europe's ED2 design studio in France. It will feature a 2.0-litre four cylinder boxer engine from Subaru, with turbocharging rumoured to be considered. Like its AE86 predecessor, it will adhere to a traditional sports car front-engine and rear wheel drive configuration with a long-nose and a short tail body. Price will be below USD20,000 dollars or JPY 3 million yen. The vehicle will be manufactured by Subaru.


According to chief engineer Tetsuya Tada, the car will be built from a completely new bespoke chassis, to appeal to enthusiasts who dislike shared platforms. A new blue-red metallic paint was also developed specifically for this car to express its sporting intentions better. According to Tada-san, the colour developed is shoujyouhi red colour, which is a traditional red color of a Japanese monkey's backside. Normally I dislike a lot of PR rubbish in press releases, but the last part do concern me a little. Hopefully Toyota's PR guys will give the rationale a nicer spin to it rather than erm...monkey arse.

Related link:
The Infallible Toyota and Lumbering GM? Think again
Akio Toyoda - Toyota president who doubles as a race car driver