Toyota City Head Office1, Toyota-cho, Toyota City,Aichi Prefecture,471-8571, JapanTelephone: (0565)28-2121Facsimile: (0565)23-5800Tokyo Head Office
4-18, Koraku 1-chome,Bunkyo-ku, Tokyo,
112-8701, JapanTelephone: (03)3817-7111Facsimile: (03)3817-9034 New Yor k
Toyota Motor North America, Inc.9 West 57th St., Suite 4900, New York, NY 10019, U.S.A.
Telephone: (212)223-0303Facsimile: (212)759-7670Lond on
Toyota Financial Services
(UK) PLC9 Clifford Street, London,W1S 2LD, U.K .Telephone: (020)7851-2312Facsimile: (020)7851-2339To request an annual report, pleasefax your name and mailing addressto one of the addresses above.Worldwide We bhtt p://www.glo bal.toyota.com
XTHE JAPAN TIMES • MONDAY, MARCH 18, 2002(Advertisement)
A Closer Look
— TOYOTA MOTOR CORPORATION - Part I
By STEPHEN BENFEY
To consumers, Toyota means everyday reliability. To manufacturers, the name is synonymous with lean production. To all concerned about the envi-ronment, it is a proponent of green technology. But to investors, Toyota is a multifaceted enterprise that defies simple definitions.
oyota’s performance is exemplary in theauto industry. Achieving record net rev-enues and net income for the fiscal yearending March31, 2001, on aconsolidatedbasis (USGAAP), Toyota
has triumpheddespite a weakeconomy athome and theeconomic down-turn in theU.S., its biggestsingle overseasmarket.As of March31, 2001, Toyota
has the highest market valuation of any automakerin the world. It had enough ready cash to buyback, during fiscal year 2001, 263.6 billion yen($2.1 billion) of its own shares.At its manufacturing facilities in 24 nationsand regions, Toyota made the third largest num-ber of automobiles in the world during the 2001fiscal year: 5.93 million cars, buses and trucks,under the Toyota, Lexus and Daihatsu Hinobrands. In the first half of fiscal 2002, it hasalready attained a record high for overseas pro-duction. Withthe opening ofits French plant,Toyota contin-ues vigorouslyto expand itsglobal presence.Toyota’s Lexus- and Toyota-badged vehiclesrank among the world’s highest-quality cars inthird-party surveys of customer satisfaction. Mostimpressively, this kind of performance is sus-tained. Toyota has been in the black every yearfor more than five decades, an exceptional case offinancial stability. For insight into this success we need to under-stand what makes the company tick.
A Smarter Wayto Get Around
oyota proved its ability to mobilize resources for change bydeveloping the gasoline-electric Prius, recognized by the indus-try as a
tour de force
of next-generation automotive engineering,and the first ever mass-produced hybrid vehicle.At the heart of the Prius is the Toyota Hybrid System (THS). The basic principle of THS is to optimize efficiency by intelligently con-trolling and managing several different sources of energy: a power source such as an internal combustion engine, rechargeable batteries,and a regenerative braking system. Hailed by
in 1997as “solid evidence that the ponderous development process that pro-duces new automobiles is finally on the brink of a genuine technologi-cal breakthrough,” the Prius has already sold more than all the electricvehicles manufactured in the last two decades.Toyota keeps improving the Prius as it expands marketing of thecar, sold in North America, Europe and Japan, to include Hong Kong(special administrative region of China), Singapore and Australia. Theindustry journal,
Automotive Engineering International
, recognized thelatest Prius as “the world’s best engineered passenger car” among new2001 models, praising its economical and environmentally friendly per-formance, 5-person seating capacity, ample luggage space and accessi- ble price.To support such large projects, the automaker concentrates on elim-inating waste while increasing efficiency and productivity.Then itapplies the released assets—money, machinery and personnel—toresearch and development. Toyota has more than 20,000 people inR&D, worldwide. Though they may be working on different projects,they are encouraged to swap ideas constantly. Just as Toyota believeshybrid technology maximizes efficiency, it believes cross-fertilizationof ideas maximizes innovation.
t the core of Toyota’s commitment to environmentally friendlytechnology is a conviction that a sustainable business model islinked to achieving sustainable transport. Toyota aims to
enhance the interaction between vehicles and their environment in thelargest sense, including society as a whole, and individual lives. ToyotaMotor Corporation Chairman Hiroshi Okuda has stated, “We believethe Toyota Hybrid System is not only very effective in alleviating the pressure on the environment, but that it also represents a real break-through in technology.There is strong potential for future applicationsand we are currently adopting the system for minivehicles, luxury and medium-class cars, SUVs and trucks.”With a growing variety of hybrid models and production facilities,Toyota sees hybrid technology as a key to automotive progress.In June 2001, Toyota introduced the EstimaHybrid minivan—the world’s first hybrid mini-van and the world’s first mass-produced gaso-line/electric four-wheel-drive hybrid vehicle — to the Japanese market. Once again, Toyota wentall out to offer much more than just environmen-tally sound engineering. Its newly developed THS-C hybrid system combines a 2.4-liter high-efficiency gasoline engine, front motor and
Super CVT transmission.The Estima Hybrid also features advanced electronic “brake bywire” technolog y, an engineering paradigm for autos of the future.Its electronically controlled braking system provides outstandinghandling and driving stability using independent as well as linear hydraulic controls for each wheel. The rear transaxle combines themotor and differential gear in a single unit, for a more lightwe i g h t ,compact structure and eliminates the need for a driveshaft, there- by keeping overall weight increase to a minimum.The electrical system generates up to 1,500 watts of auxiliary 100-volt AC — making it a mobile power plant ready for anything from alaptop to a microwave oven. In fact, one version of the vehicle is out-fitted for networked office mobility.On August 20, 2001, Toyota introduced the first of a planned seriesof vehicles featuring the so-called “Mild Hybrid” (THS-M) solution.Incorporated in Toyota’s luxury-class Japanese sedan, the Crown Royal,this new hybrid variation also offers compatibility with the internation-al auto industry’s proposed next-generation electric power source stan-dard called 42V PowerNet. THS-M already satisfies Japanese govern-ment fuel consumption standards for 2010.
oyota fuel cell hybrid vehicles (FCHVs) are in trials on publicroads in California and Japan. The FCHV is a new breed of car that takes Toyota’s proven hybrid technology and applies it to thefuel cell. The Toyota FCHV-5 and FCHV-4 use a fuel cell stack to con-vert hydrogen and oxygen into water and electricity. If supplied with pure hydrogen, as in the FCHV-4, the only emission is pure water.Obviously, a car powered by fuel cells would be ideal for the environ-ment. To make this dream a reality,Toyota has developed an extraordi-narily powerful 90kW fuel cell stack and combined it with a secondary battery and regenerative braking system.The new FCHV-5, Toyota’s latest fuel-cell hybrid vehicle employsan on-board reformer to make hydrogen from Clean Hydrocarbon Fuel(CHF), an evolved form of gasoline that Toyota is developing in part-nership with the petroleum industry. CHF could be used by both con-ventional internal combustion engine and fuel cell vehicles, therebyminimizing the need for changes in fuel supply infrastructure. Toyota’sFCHV-4 and FCHV-5 deliver all the driving pleasure and performanceof gasoline engine cars, while achieving three times the fuel efficiency.With maximum torque of 260N/m, they exhibit impressive hill-climb-ing and acceleration characteristics. Toyota is committed to introducingan improved FCHV-4 vehicle to the Japanese market on a limited basisin 2003.Speed is essential in the development of alternative powertr ain s
because the first company to market a successful breakthrough will bein a strong position to establish the
standard. Toyota believeswe are living in an age when many alternative technologies will com-
pete and several will coexist. This is why Toyota is pursuing a multi- pronged development initiative to improve fuel effic iency and exh aus t
hile hybrid vehicles using gasoline, diesel, natural ga s,and fuel cell power sources are at the forefront of its env i-ronmental eff o rts, Toyota also continues to improve thee nvironmental compatibility of its cars that run on gasoline alone.For these, Toyota designed the lean-bu rning D-4 direct injectionengine. For diesel engines, the automaker developed the Toyo t aDiesel Pa rticulate and NOx Reduction (DPNR) system to beinstalled in commercial vehicles for the Japanese market from2003, and for cars in the European marke tfrom 2005. A licensing agreement allow sD a i m l e r C h rysler and Vo l k swagen to useToyo ta ’s current NOx Storage Reduction 3-way Catalyst System, a vital system for cleaning emissions from lean-bu rn gas o l in eengines.Although Toyota has achieved a significantlead in practical hybrid technology on its own,the company is ready to supply or license the technology to other automakers and wishes to collaborate in making further advances.Toyot a ’s R&D alliances include an agreement with Vo l k swa g e non telematics and recycling, and with GM on environmental tech-n o logy. Toyota President Fujio Cho has called for automakers tocontinue to “cooperate in the laboratory — and compete in theshow r o o m .”
s an example of howToyota never leave sgood enough alone, itlaunched a tough new initiativefor its parts sourcing policy in2000 to achieve cost reductionin 173 parts.This would be a laudableaim, and a difficult challenge,for any automake r. But for Toyota it is not simply a matter of cutting prices for the sameitems.Working with its design-ers, production engineers, purchasers and supplier part-ners, Toyota wants to develo p
the most cost competitive p a rts in the wo r l d, wh i l e ,wh e r ever possible, creatingenti r e ly new components to
t a ke over the functions of older designs.Toyota encourages and r ewards those who deve lo pmeasures that generate bigs avings. Ta rgeted part sinclude everything from hand-grips to dashboards and pow-ertrain components.In a business wh e r earound 70 percent of ve h i c l ecost is materials and compo-nents, improving qualitywhile reducing cost is a keys t r at egy in delivering prod-ucts that are as aff o r d a ble ast hey are attractive. It is also as t r a t egy that contributes tothe company ’s bottom line.
A sustainable businessmodel is linked to achieving sustainable transportToyota — exceptionalcase of financial stability.
How to Reduce Costs & Raise Quality
Though the Prius is a gasoline/electric hybrid, the same success-ful hybrid principles can be applied to diesel, fuel cell, and otherpower sources.Estima Hybrid, world’s first hybrid minivan and first hybrid 4WD,also features an electronically controlled braking system.Toyota luxury sedan featuring THS-M “mild hybrid” system, asimpler and more affordable alternative to full-fledged THS.Fueled by pure hydrogen, the Toyota FCHV-4 fuel-cell hybrid vehi-cle is in trials on public roads in Japan and California.
arly in the company’s history—Toyotawas founded in 1937 as a spinoff fromToyoda Automatic Loom Wor k s — its
leaders searched for ways to make better products more efficiently.They discovered that one of the most basic keys to maintainingand improving quality was to stop the linewhenever there was a problem, not lettingdefects or difficulties pass.In seeking solutions they refused toaccept quick fixes, and searched instead for the root cause. To achieve efficiency, theysought to eliminate waste of every kind: wast-ed materials, wasted movement, wasted time.Inspired by the way U.S. supermarkets put ontheir shelves only the quantities they expected customers to buy,Toyota came up with “Justin Time” manufacturing.Instead of “pushing” parts through theline, Toyota reversed the process, having eachdownstream stage order or “pull” parts asneeded. When implemented comprehensively,the technique irons out irregularities acrossthe board, not only from line worker back tosu p plier, but also from dealer to factory.
Toyota believes it is the customer, ultimately,who calls the shots and who determines the product and quantity to be manufactured.That way inventory accumulates at neither plant nor showroom.Driving all of this is Toyota’s practice of
k ai zen
, “continuous improveme nt.”
K ai zen
puts responsibility for improvement in thehands of each worker, demanding that he or she question eve ry process and test allassumptions. Errors are viewed as learningopportunities. Toyota’s people are famous for being suspicious of the easy answer and thecommon wisdom. Perfection is not a usefulconcept to them. Instead they believe inimprovement. Problems are considered chal-lenges. If it looks like clear sailing ahead,employees are encouraged to look harder untilthey find something that needs fixing.Together, these practices grew into whatwe now call the Toyota Production System(TPS). The sys-tem is recog ni ze d to be a major fa c-tor in the reduc-tion of inve n t o-ries and defectsin the plants of Toyota and itssuppliers. It un-d e rpins all of Toyo t a’s opera-tions worldwide.K nown gen-e r ical ly as “lean
pr o d ucti on,” T PS
has become aworld standard adopted by manu-facturers bothinside and outsidethe auto-m ak i n g business. Inde- pendent surveys consistently confi rm thequality of Toyota’s manufacturing plants and the cars made there.
ince 1990, Toyota’s North American plants have earned 15 plant qualityawards from J.D. Power and Associates(JDPA), the marketing information firm. Twoof Toyota’s North American Assembly plantstook top honors in the North American plantquality awards of JDPA’s 2001 Initial QualityStud y. Four North Amer ican- built Toyo t a
vehicles — Avalon, Corolla, Sienna, and Tundra — rated best in their segment.For two years running, Toyota’s plant inKyushu, Japan, earned the Platinum PlantQuality Award, the highest ranking amongvehicle assembly plants worldwide. T h eKyushu plant makes the Lexus ES300, whichwon Best Entry Luxury Car, and the RX300.The Toyota Tahara plant in Japan, manufac-turer of the Lexus LS430 (Best PremiumLuxury) and Lexus GS Sedan, earned theSilver in the Asia Pacific Plant Awards.Quality and efficiency are the two mostapparent benefits of TPS. Less obvious is theflexibility it imparts. Not only is it a manu-facturing method that can adjust easily tofluctuations in demand, handle several modelvariations at once and maintain high qualityand efficiency. It is also a way of viewing theworld, a strategy that expects change and seeks to transform itself.Toyota believes that its “change” mindsetgives it an advantage within today’s economicframework.
What is Toyota’s Engine of Success?
Toyota peopledon’t believe in perfection,only improvement.
Contact pointsfor investors
Score One for Toyotain F1 Challenge
On March 3, 2002, Panasonic Toyota Racing driver Mika Salocame in sixth place in the Australian Grand Prix, scoring a world cham- pionship point in the team's maiden Formula 1 race. For a race thatToyota claimed it merely wanted to finish, this was a roaring success.Building on its success-ful track record in CARTand other motorsportarenas, Toyota in 1999resolved to take on theextreme challenge of F1racing. Toyota's decisionwas based on seve r a l potential benefits. Fore-most was the desire toincrease the Toyo t a brand's appeal to young people. But F1 is also seen as the ultimate automotive "test lab" whereengineers can experiment with state-of-the-art materials and technolo-gies. This is whyToyota decided to keep full control of chassis and engine development, unlike most other car manufacturers entering F1.Formula 1 is the world's most watched annual sporting event. Toyotaoffers F1 fans complete information at http://www.toyota-f1.com
The second half of this advertorial will appear on March 25