Toyota, Statistics and Size

By AutoObserver Staff March 31, 2011

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Chris Theodore heads Theodore & Associates LLC, consulting on Product Development, M&A, Lean Product Creation, Safety, Emerging Technologies, Innovation and all things automotive. Before opening the company in 2009, Chris Theodore served as Vice President of North America Car Product Development for Ford Motor Company, Senior Vice President of Platform Engineering for Daimler-Chrysler and as a research engineer in the General Motors Detroit Diesel Division. Theodore will be speaking at the Edmunds Safety Conference in Washington D.C. May 23-24, 2011.

Let’s get a few facts about Toyota’s much-publicized unintended acceleration debacle out of the way so we can focus on the bigger issue of corporate size: Most reported unintended acceleration is due to driver error. The United States has by far the most reported cases, even for common vehicles that are sold globally. It is no coincidence that a country with a laughable driver-education program and the largest population of trial lawyers has the most reported incidents and lawsuits.

No one has disputed that floor mats and sticky throttles have caused many of the reported Toyota cases. Now that Toyota has become a major player in the U.S. market, statistics would tell us it should have more reported cases. If Toyota’s floor mat and throttle fixes resolve only a portion of the reported cases, Toyota would be well below the industry average of reported cases per vehicle in the car park.

Politicians, trial lawyers and some tabloid journalists have accused runaway electronic throttle control, knowing full well that to prove a negative is impossible. Gremlins in software and electromagnetic interference effects could cause unintended acceleration, but industry test protocols and failsafe measures are so thorough as to make these failure modes highly unlikely, or at least statistically insignificant with respect to the number of reported incidents. Nevertheless, this is a reminder that systems should be designed such that they cannot operate in an unwanted domain, hence the need to make features such as simple brake-override software standard.

Immediate, full application of the brakes can always overcome the power of an engine, despite the claims of motorists who have experienced unintended acceleration. No one disputes that Toyota’s handling of the crisis was abysmal. Their response was slow, uncoordinated and ineffectua.

It is this last point that leads to the discussion of corporate size. In past editorials, I have discussed the advantages of global oligopolies in both the manufacturer and supplier industries. What I failed to mention is running a large global company is extremely difficult! There are many organizational models, from centralized to decentralized, each with strengths and weaknesses. The cost of global coordination can often exceed the economies of scale, resulting in a slow and unresponsive bureaucracy.

Ford Motor Company was one of the first truly global companies. The model T was the first global car, with production spreading to England, France, Denmark, Germany, Argentina, South Africa and Australia. The plants were copies of one another, and economies of scale were huge. Eventually, the products and plants diverged to meet regional requirements, and ultimately bureaucracy and politics crept in to create warring regional fiefdoms. Finally, under the strong leadership of Alan Mulally, the “One Ford” policy has broken the regional and functional barriers, creating an efficient global company.

Wishing to avoid this regional divergence and reinforced by their homogenous culture, Toyota (and Honda, for that matter) clung fiercely to a centralized model as they grew globally. Toyota’s U.S. engineering, sales and manufacturing operations were operated as individual units reporting back to the home office. Communication between them was infrequent and uncoordinated. No wonder Toyota’s response to the crisis was slow and disorganized. Toyota’s new CEO, Akio Toyoda, found himself embroiled in a crisis, with two camps of advisers: the old guard versus Toyoda’s followers, who were seeking to create a new Toyota. Toyoda first listened to the counsel of the old guard, but was soon stung by their cautious and reactive advice.

Now, I’ve met with Toyoda, and he is not the pampered “prince” some critics have called him. He is knowledgeable, proactive and decisive. He will not let a good crisis go to waste; he will use this as an opportunity to consolidate power and mold a new, more-responsive Toyota. The crisis may have come just in time, igniting the need to change from an aging and ponderous, consensus-driven bureaucracy into a responsive global company.

VW is the current darling of the industry, as it continues on the path of global growth in its quest to become the world’s largest automobile manufacturer by 2015. Even under the brilliant Martin Winterkorn, I can only say: “Be careful what you wish for.” Statistics and size can work against you, or in the words of the Japanese, “the nail that sticks out gets pounded down.”

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