STAYING AHEAD OF THE TIMES

Introduction

Thank you, Mr. van Wolferen, for your fine introduction. I feel highly honored to be given the opportunity to speak before such a distinguished audience. My talk today, which I have titled "Staying ahead of the times," will be mainly about my management thinking.

The New Toyota

As you know, of course, our new company, Toyota Motor Corporation, came into being on July 1. The original Toyota Motor Company was founded in 1937, with the aim of providing Japanese drivers with products they would be satisfied with. In 1950, the Company was forced after strong urgings from the financial sector to separate its operations, with Toyota Motor Co. in charge of production and Toyota Motor Sales Co. handling sales. Although separated, the two companies worked closely together afterward, complementing each other's activities to produce and provide dependable cars that people would use and enjoy the world over.

In recent years, however, the conservation of energy and natural resources gradually became an important economic goal, and the environment surrounding the automobile industry changed quickly―and, in fact, is still changing.

In that situation, automakers began racing to develop energy conscious cars, especially small cars, and today the competition among companies is taking place on a global scale.

Various amalgamations and business ties emerged as automakers moved to win out in the competition, and the environment surrounding Toyota grew rapidly more severe.

Given our difficult position, we at Toyota realized that if we hoped to continue providing our customers with cars they would be happy with, it had become extremely important to respond quickly and accurately to their needs, from a long-term perspective, and to utilize more efficiently our limited human, material and financial resources.

We decided that merger was the best step that Toyota could take to realize more efficient operations: to merge and subsequently make full use of the marketing capabilities of Toyota Motor Sales Co. and the high product quality and highly rationalized production system of Toyota Motor Company.

Managerial Thinking

Staying ahead of the times. In order to provide our customers with cars that will satisfy them, I always ask myself what Toyota can do to stay ahead of the times. One of the founding principles of Toyota, in fact, and long a personal creed of my own is, "Be studious and creative, striving to stay ahead of the times." The history of Toyota itself has been a continual quest for the innovative, a history of creativity, and I personally am always searching for something new.

Development and production. As I'm sure you realize, the preferences of automobile owners continually change: from plain to luxurious cars, from large to small cars, and so on. There's no end to these changes. And as we move to respond to those changing preferences, I try to keep in mind that Toyota is producing and marketing not simply a means of transport but, in effect, "pleasant, moving space."

By always considering carefully what we must do in order to provide society-in-general with "pleasant, moving space," it becomes possible for Toyota to develop automotive products that will stay ahead of the times and be used and enjoyed by people the world over.

Today, with the principal social call being for more efficient conservation of energy and natural resources, the major thrust is toward developing energy-efficient small cars. In the future it is possible that the demand will be for using alternate fuels as power sources, and Toyota is currently studying potential new power sources such as battery-powered cars, gas turbine engines and hydrogen engines.

For the interim, however, I think the most efficient step is to use our oil energy better. There is still much room for improving the gasoline engine, and I personally feel it will be quite difficult for battery-or hydrogen-powered cars to replace gasoline-powered cars.

At any rate, it is primarily important for Toyota to measure accurately the needs of society and of its customers, and to develop attractive products accordingly and introduce them at the most opportune time.

At Toyota, therefore, we continue to make the efforts needed in production technology to stay ahead of the times, such as by raising our product quality and production efficiency. In 1950, for example, Toyota formed QC Circles for the first time, and in 1951 introduced its Toyota Suggestion System, two Company-wide approaches to quality control. One result of those activities was receipt by Toyota in 1965 of the Deming Prize.

Moreover, as a result of repeated trial-and-error moves toward greater production efficiency, Toyota was able to establish a unique production system of its own.

Domestic sales. Perhaps many of you know that the size of sales in Japan's domestic automobile market is now over 5 million units a year, making it second only to the United States, and 2-3 times the size of the markets in West Germany, France and the United Kingdom. I see Japan's domestic market expanding to about 1.3 times its present size during the 1990s.

Although Japan's domestic market is already quite developed, I expect further steady growth, tied to an increase in the number of female drivers and households with more than one car.

In the context of that growth, I want to see Toyota prepare in advance a system for handling domestic sales of 2 million vehicles by about 1985, which will bolster Toyota's managerial foundation.

A bolstered position in the domestic market will stabilize Toyota's overall managerial foundation, and enable us to build on it a strong system for constantly developing and providing to our customers products they will be satisfied with.

Overseas production and sales. Overseas, we expect that during the 1990s the worldwide demand for automobiles will expand to about 1.3 times its present size. Expansion will be particularly noteworthy in the Middle East, Africa and Central and South America, and special attention must therefore be paid to these markets in the future.

In overseas sales, Toyota is bearing in mind that it must develop attractive products to meet the particular demands of customers in each country, and that those products must be produced and delivered via production and sales systems that fit the host country most ideally.

Specifically, in overseas operations I will closely attend to the following three points.

First, and fundamentally, I want to see measures introduced energetically and prudently from a long-term perspective that meet closely the situation in each country.

Second, I want to see our overseas facilities made more replete, especially our knockdown production operations.

Third, I want to see closer attention than previously paid to countries in Asia, Africa, Oceania and Central and South America.

Also, I want to see our talks with General Motors succeed, and want to provide American customers with small cars of high quality and good fuel efficiency.

One of my fervent wishes is to have Toyota contribute through its overseas production and sales operations to the development of the countries where we do business―particularly to contribute to the economic growth of the developing nations―and to have Toyota thought of well by people around the world. Based on that thinking, I have continually made efforts for Toyota to cooperate overseas at the same time that we compete.

I believe that if the world's automakers will mutually respect each other's position, even as they compete fiercely, that that will contribute to the growth of each company and to the economy of each nation.

One of the principal factors contributing to the growth of the Japanese automotive industry has been the fact that 11 automakers have vied for shares in the domestic market, continually moving to reduce costs and raise their quality. In comparison, the local content legislation now being debated in the United States could have the reverse effect of not only restricting competition and running contrary to the best interests of American customers but in the long term being disadvantageous to the U.S. economy.

Tri-Party Unity to Build Automobiles

In addition to staying ahead of the times, a second aspect of my managerial thinking is building automobiles through tri-party unity: the three parties being Toyota, the suppliers that cooperate in production, and the domestic dealers and overseas distributors and dealers. I want these three parties to work closely together to ensure that Toyota produces and sells automobiles that satisfy our customers. Through cooperation it becomes possible for all three parties to benefit and grow. It is thus extremely important for the three to continue making strong efforts in the future.

Harmony Inside Toyota

The third aspect of my managerial thinking is harmony inside Toyota.

This is an internal matter, of course, but one that I consider extremely important. I want to bring into close concert the best features of the former Toyota Motor Co. and Toyota Motor Sales Co., the Toyota dealers and distributors, and the suppliers that cooperate in production, and want to build a new Toyota marked by youth and vigor. To do this, I am asking each Toyota employee to always bear in mind what I call the three C's: Creativity, Challenge and Courage.