Even Toyota Isn't Perfect

A raft of recalls lately has the automaker scrambling to safeguard its reputation for quality
by Ian Rowley

Toyota (TM) was built on details. After decades of study and refinement, the company has developed thousands of pages of guidelines that lay out exactly what needs to be done at every step of the automaking process. That attention to the nitty-gritty has helped create an industrial machine that's unparalleled in building problem-free cars and trucks.

But growing numbers of flaws have started to tarnish Toyota Motor Corp.'s reputation for quality. Since 2004 the automaker has had to recall 9.3 million vehicles in the U.S. and Japan—its two biggest markets—up from 2.5 million in the previous three years. The problems got so bad that, in July, Toyota CEO Katsuaki Watanabe felt obliged to bow deeply in apology.

Given Toyota's obsession with details, it's no surprise that it would ask someone who knows how to focus on the small stuff to fix the problem. In June, Toyota ordered former Europe chief Shinichi Sasaki back to Japan to help get a grip on the issue. The 36-year Toyota veteran has spent three decades working to ensure glitch-free production. Although Toyota has long had a quality chief, Sasaki is the first person to do the job full-time. "My responsibility is to tell all Toyota employees the quality aspect of their jobs," says Sasaki.

Toyota chieftains say the company is making progress. In December, Executive Vice-President Masatami Takimoto said that when it comes to recalls, "the worst is now over." And Watanabe, while again apologizing for recent faults in vehicles, said Toyota is "right on track in ensuring good quality."

Sasaki's task is made more difficult by Toyota's rapid growth. In recent years, the company has opened at least two overseas plants annually, and this year it's poised to overtake General Motors Corp. (GM) as the world's No. 1 carmaker. Today, Toyota makes nearly as many vehicles outside Japan as it does at home, meaning its cadre of Japanese engineers is no longer big enough to train all the new workers at foreign plants. To make up for the deficit, Toyota last year opened new "Global Production Centers" in Kentucky, England, and Thailand. These facilities, modeled after one established in Japan three years ago, teach trainees the Toyota way in tasks such as welding and painting.

Garage Reports

Another new initiative: better record-keeping. In years past, Toyota maintained repair data only on vehicles under warranty, which meant it missed glitches that popped up later on. Now, Toyota shops in Japan provide a full report on repairs to cars of any age. The quality chief is also asking suppliers to share information and use common parts. Denso (DNZOY), Aishin Seiki, and others have just started using one design for voltage stabilizers for electronics in Toyota's cars.

More important is designing quality into cars in the first place. To give designers extra time to get things right, Toyota has tapped the brakes on the introduction of new models. For instance, the new generation of Corollas, already on sale in Japan, has been held back for a year in the U.S. to ensure that American workers have the time to learn how to build the model without glitches.

There's clearly room for improvement. In July, the company recalled 157,000 Tundra pickups because the trucks lacked front-seat anchors for child safety seats—a feature required in any vehicle that has a switch to turn off air bags. (When deployed, air bags can kill children riding in the front seat.) Toyota, it seems, simply forgot about the anchors when designing the trucks. It's the kind of oversight Sasaki vows to spot long before any recall notices need to be sent out. "Every decision at every stage," he says, "must be done properly."

For instance, the new generation of Corollas, already on sale in Japan, has been held back for a year in the U.S. to ensure that American workers have the time to learn how to build the model without glitches.

Another new initiative: better record-keeping. In years past, Toyota maintained repair data only on vehicles under warranty, which meant it missed glitches that popped up later on. Now, Toyota shops in Japan provide a full report on repairs to cars of any age. The quality chief is also asking suppliers to share information and use common parts. Denso (DNZOY), Aishin Seiki, and others have just started using one design for voltage stabilizers for electronics in Toyota's cars.

Leaked: Toyota May Add Up to Five More North American Plants
Toyota may build as many as five North American assembly plants in the next 10 years in order to keep up with surging U.S. demand that has forced the company to begin importing more vehicles from overseas, The Detroit Free Press reported people familiar with the plans as saying. Toyota is already likely to build one of those factories in the southeastern United States and another in Mexico, the sources said. Based on Toyota's recent investments, five factories would create about 10,000 jobs and cost $5 billion.