The End of Detroit (8 page)

Soon to be extinct, the Taurus is already a museum piece. The first one sits on display at the Henry Ford Museum and Greenfield Village in Dearborn, just a couple of blocks away from the styling studio where the first Taurus came to light 20 years ago. A sign tells the story of how Detroit once beat the Japanese and how the Taurus saved Ford from disaster. But the display doesn’t go on to say how Ford then lost the game because it did not have the determination or focus to keep playing. It chose easy profits over difficult success. To a Japanese company, the outcome would have been no question. For proof, simply look at the latest Accords and Camrys, which remain stellar vehicles even as Honda and Toyota have expanded their focus into truck sales. Said Kagay, “Ford went from building a hit to misguided hubris. What does all of this say? To be humble is virtuous. And Ford forgot that.”

CHAPTER THREE

TWO PATHS TO THE
SAME CONCLUSION

TO THE AMERICAN CONSUMER,
Toyota and Honda have become such interchangeable symbols of automotive reliability and quality that it’s sometimes hard to tell them apart. They’re often mentioned in the same breath—Toyota-and-Honda, all run together—as if they were one big company instead of two. They certainly have a lot in common. Toyota, the fourth-biggest seller in the United States, and Honda, the fifth biggest, are both based in Japan, where they rank No. 1 and No. 2 in size. They are both fiercely independent companies with clear operating philosophies that have endured for decades, a sharp contrast to the tendency of Detroit companies to follow the whims of whichever executive is at the top. While executives can certainly accelerate or shift the direction at Toyota and Honda, as is true in the case of their current management, the basic underlying values remain in place at each company no matter who is in charge. Despite the merger-and-acquisition craze that swept the automobile industry and indeed the business world during the past decade, both Toyota and Honda have stood steadfastly alone, although they have both participated in joint ventures with other companies when it met their needs.

The similarities extend to the showroom, as well. Both Honda’s and Toyota’s lineups in the United States feature cars and trucks that are known less for flashy styling than for their understated appearance and solid craftsmanship, although both have been experimenting lately with trendsetting vehicles aimed at Generation X consumers. Over the past two decades, both have built a network of factories in the American Midwest and South, which now produce the majority of vehicles that they sell in the United States. Toyota and Honda each got into the car business long after most of their global competitors. Ford and General Motors were already assembling cars at plants in Japan before Toyota built its first vehicle in 1936. Honda began as a motorcycle company after World War II. It didn’t produce its first cars in Japan until 1966, and did not export cars to the United States until the 1970s. When both Toyota and Honda originally brought their vehicles to America, neither one was taken seriously as real competition for Detroit’s automobiles. In retrospect, Detroit’s indifferent attitude toward them gave the Japanese companies valuable time to get on their feet and hone their approach with American consumers.

But the perception that Toyota and Honda are carbon copies of each other is wrong. They have very different approaches toward developing vehicles, different corporate personalities and different strategies for global growth. Toyota is most like a traditional auto company, aiming to meet the needs of all kinds of customers with a broad lineup of cars and trucks. Honda has pursued a path all its own, picking its spots in the marketplace, introducing vehicles only when it is sure that they will stand out from the competition. Today, Honda’s founding family plays no role in the company, while the Toyoda family remains an active participant in the company that bears its name, and someday soon could see one of the family again named to the chairman’s job. What these companies share is a drive and determination to stay true to their mission, as they see it, which in the end focuses squarely on the customer.

One way to get a feel for just how different these companies are from each other is to visit their corporate headquarters in Tokyo. Honda’s main office is located in a tall white building on a busy corner in Aoyama, one of the city’s trendiest business districts, kitty-corner from the residence of Japan’s crown prince. It sits squarely above a subway station, amid department stores, hotels, coffee shops and restaurants that are crowded at lunchtime and after work. The Honda building is just as popular a place to visit for people who work nearby. You can order a cappuccino or a light snack at the bar in the Honda headquarters lobby, shop in a boutique stocked with trendy merchandise, such as windbreakers with logos of Honda’s Formula One cars, and look over dozens of Honda vehicles. Shoppers browse in air-conditioned comfort inside the vast lobby; those outside can examine a dozen or so vehicles that are parked on the sidewalk, in a display that changes every day. Here, Japanese office workers from nearby businesses can sit behind the wheel (on the right in Japan), examine the trunk and kick the tires on vehicles like the small Fit, the best-selling subcompact in Japan, or the Mobilio, a tall minivan that is built on the Fit’s chassis. Visitors can pick up brochures about the vehicles or look up information about them on computer screens next to the coffee counter. But there’s no hard sell, and no one ever buys a car here. Instead, buyers are directed to their local dealers.

When Honda constructed this building 15 years ago, the company’s founder, Soichiro Honda, insisted that the headquarters be earthquake proof, and that the windows be set back from the street, behind balconies, so that broken glass would fall on balcony floors and not shower passersby below, making it one of the safest buildings in Tokyo. That same care extends to the welcome that visitors receive when they arrive for appointments. Unlike the silent formality that marks most Japanese business occasions, where the usual beverage is green tea and sessions start precisely on time, no meeting at Honda begins without an offer of espresso or orange juice or ice water, and a pleasant exchange about Formula One racing or plans for the weekend. And if the schedule slips by a few minutes and a spirited conversation runs overtime, no one seems rattled. As if to illustrate the company’s friendliness, Honda’s robot, Asimo, looks down on the visitors from the reception area, atop a steep flight of stairs in the showroom. About four feet tall and fully functional, without any guide wires or remote controls, Asimo is one of the most familiar and popular figures with Japanese consumers, and he is becoming increasingly familiar to Americans as well from Honda’s lighthearted television commercials. A few lucky guests are greeted personally by Asimo (who spoke only Japanese in 2002, but has since been programmed to speak English) and escorted by him to a bank of elevators for their appointments.

The cordial atmosphere in Honda’s headquarters is a sharp contrast to the starkness of Toyota’s Tokyo headquarters a 10-minute taxi ride away. Toyota’s imposing, black glass building sits in the shadow of the Tokyo Dome indoor stadium, home to the perennial champion Yomiuri Giants baseball team, whose winning ways have made them Japan’s most-respected but probably least-loved sports team. The closeness to the home of the Giants is apt, for Toyota, too, inspires similar feelings of respect without real affection. Toyota’s executives arrive in chauffeur-driven Crown sedans and disappear down a steep driveway to vanish behind garage doors. There is little to encourage anyone to linger. The leafy manicured park next to the building, though inviting, is generally deserted past the lunch hour. The near-empty lobby holds no such enticements as a coffee bar (the closest Starbucks is a few doors down). Instead, a security guard stands at attention as receptionists greet guests and phone upstairs to double-check their appointment before allowing them to enter. If a visitor is headed for the executive floor, he or she has to change elevators partway up. The corridors are starkly decorated and employees work silently away. The camaraderie at Honda is absent here, replaced by focus and formality. But in a way that’s not surprising, because Toyota has an intensely serious focus. And because of that, it may well be that Toyota, rather than one of its American or European rivals, will become the world’s first truly global automobile company, even though it is based in a country that until about 150 years ago was all but closed to the outside world.

Toyota’s emergence as a world automotive power is the result of a journey that began 70 years ago, outside Nagoya, Japan, three hours west of Tokyo. Toyota was founded there in 1933 as an offshoot of the Toyoda Automatic Loom works, a company that made machinery for weaving vast bolts of industrial fabric. Unlike the United States or Europe, where automobile manufacturing had been under way since the turn of the century, the automobile craze was late to reach Japan. While it boasted major cities, like Tokyo and Yokohama to the east, Osaka in the center of the country and Hiroshima far to the west, Japan was still a largely rural nation in the years before the Second World War. Its automotive needs were being met by American automobile companies, through exports from the United States and the factories that they built in Japan in the 1920s. Only the firm that would later become Nissan had begun building vehicles when Kiichiro Toyoda appealed to his father, Sakichi Toyoda, to let him investigate the automobile industry. The Toyoda family by then was already well-known and prosperous, thanks to its enormously successful loom business. “By the time I had started going to school, Toyoda looms were as famous as Mikimoto pearls and Suzuki violins,” wrote Eiji Toyoda, Sakichi’s nephew and Kiichiro’s cousin, who joined the auto company at its infancy and would later become one of its most influential chairmen.

But success in the automobile industry did not come quickly or easily. Kiichiro Toyoda, an engineer, had been fascinated by cars during his travels, including the trips he took to New York in 1921 and 1929 with his sister, Akia, and her new husband, Risaboro (who, in a fashion then common in Japan, forsook his more-modest family name to become a Toyoda). The testiness between Kiichiro and Risaboro, which would continue throughout their lives, began early. A well-known photo of the three Toyodas, taken on their first trip abroad, shows Akia and Risaboro sitting cozily together on one armchair, with Kiichiro across the room in another, turned away from them in a stiff pose. Kiichiro, always excited by new ideas, was convinced that the family’s vast expertise in manufacturing could be leveraged in the car business. Shortly before his death in 1930, Sakichi gave his son permission to explore the new venture. It was not a popular decision among other members of the family and managers at the loom company, so as a result Kiichiro decided to keep his work clandestine.

Working at night in the corner of a factory on the loom works’ grounds, Kiichiro and a group of loom company engineers began developing an automobile engine, feeling that the car had to be developed from the inside out. Kiichiro had set up a small casting forge in order to melt steel and pour it into molds to form the cylinders and blocks for the car’s engine. Time and again, the engine blocks would crack, foiling the engineers on the most critical component of their vehicle. It took months to find a solution, but by 1933 Kiichiro and his team had built 10 prototype engines. He wanted to move the company forward into automobiles themselves, but for this he needed permission from Risaboro, who had become chairman of Toyoda upon his father-in-law’s death, and from other company board members.

At a heated meeting in December 1933, Kiichiro pleaded his case, finally winning the board’s approval to set up an automotive group. Kiichiro’s engineers first tore apart a Chevrolet that they had shipped to Japan from the United States. They noted how many parts the vehicle had and how each piece fit together, lessons they would apply to their own design. Eventually, the team set up their own version of an automotive assembly line, finding sources for each of the parts and practicing how they would produce a car. Finally, in 1936, Toyoda was ready—and his timing was fortuitous. As the company was getting ready to show its first car, Japan’s parliament, the Diet, passed legislation to encourage domestic automobile production and in effect curb production by Ford and GM by requiring that the companies be owned by Japanese citizens. “Looking back on it now, it was a very low blow by the government against foreign automakers,” said Eiji Toyoda. Nonetheless, the measure gave Toyoda a much-needed boost.

At a motor show in Tokyo, the company unveiled a concept car it called the AA. It was essentially a copy of a Chrysler sedan, with a long hood and the kind of sculpted body that was so prevalent on vehicles from before World War II. There was nothing original about it that signaled the design direction that the company might ultimately take. But it was a start for the fledgling Toyota Motor Company, which had chosen a name that was slightly different from that of the loom manufacturer. (There are several different explanations for this: One is that the syllable “ta” was considered easier to pronounce in Japanese than “da.” Another is that the name Toyota takes only eight brush strokes in Japanese writing, as against 11 for the name Toyoda. A third is that the family, concerned about the risks of the automotive project, didn’t want it to share the same name as the loom works for fear that if it failed, the parent company’s reputation might be harmed.)

Even as production of the first Toyota vehicles was under way, the culture that would permeate the company was taking shape. A year before the first Toyota car was introduced, Kiichiro and Risaboro sat down to draw up the principles under which they wanted all of the Toyoda group companies to operate. These would apply not only to the loom business but to the emerging automobile company as well. Known formally as the Toyota Precepts, they would eventually evolve into a cultural outlook that would become known as the Toyota Way. The first of the precepts was teamwork, followed by the determination to be at the forefront of technological and market developments. Employees were to be practical and avoid frivolity, be kind and generous and strive to create a comfortable atmosphere. Finally, Toyoda employees would be reverent and show gratitude to those around them.

Decades later, the Toyota Way has been refined into two main principles: continuous improvement and respect for people. It is deceptively simple, and incredibly difficult for many people to grasp, but it is cited around the company as the secret to what makes Toyota so successful. Its emphasis on always making things better leads to an unavoidable transparency, while its emphasis on teamwork and inclusion means no single executive can create a kingdom in which he is the sole ruler. “I don’t think there’s truly any way to hide in Toyota,” said Dave Illingworth, senior vice president of planning and administration for Toyota Motor Sales USA, the company’s American sales arm. “If you have a problem, you’d better tell somebody, because eventually you will be found out.” The primary tool that Toyota would need to truly inculcate the auto company into its way of thinking would be created later, but the philosophical building blocks were put in place from the very beginning.