General Motors and Toyota Competing with Quality to Stay on Top

This paper will measure the impact of quality management between the leading American
automobile manufacturer, General Motors to the leading foreign manufacturer Toyota. The paper will
analyze the differences in the history of each company their quality management tactics. The
consumer’s trends and tastes have changed over the years in the beginning America wanted its
muscle car and in today’s day and age the American consumer wants luxury, quality, reliability, and a
fuel-efficient automobile at a low price. Furthermore it is imperative General Motors needs to
strengthen their quality control and go back to the basics doing what they did best, build the “American
Car.” While they could learn from Toyota in the quality management division they will have to
differentiate themselves from Toyota. They have been trying too hard to build a better Toyota or
Honda when in actuality they need to build a better Chevrolet, GMC, Cadillac, or Saturn.

Preface

Quality is something everyone strives for in a consumable good. Quality is especially

important when it comes to bigger purchases such as automobiles. The American Automobile industry
has suffered a loss in market share to the foreign automotive companies. One of the reasons for the
loss in market share is quality management. The quality of an American automobile is just not the
same as a foreign name brand like Toyota. This paper will compare and contrast the differences
in QualityManagement of General Motors the leading American competitor to the leading foreign
competitor Toyota. “In 1950, America produced 79.4% of the world’s automobiles. By 1981, its share
had slipped below 30%” (Yates 1983). In 2007 the American Automakers held 52.6% of the market
share in the United States, which was up from 2006 at 51.5%. As the market shares continue to
fluctuate GM is the front-runner of the American automobile industry with 23.8% of the U.S. Market
share while Toyota holds 16.2% of the U.S market share. (Autodata corp.)

Part 1: History of General Motors

September 16, 1908 General Motors was formed. At the time GM consisted of Buick, Pontiac,
Cadillac and GMC. In 2008 GM consists of Chevrolet, GMC Pontiac, Buick, Cadillac, Hummer,
Oldsmobile Saab, and Saturn. By the 1920’s the demand for automobiles grew to unexpected heights.
“General Motors set the pace of production, design, and marketing innovation for others to follow”
(GM.com). By 1929 General Motors was established in India, Brazil, China, Canada, and Europe.
Quickly becoming one of the world’s leaders in automobiles.

In 1942 World War II was upon us and GM converted 100% of its operations to the war effort.
GM delivered more than $12 billion worth of materials including airplanes, trucks and tanks. During the
60’s and 70’s the fuel prices started to rise and foreign competition led to the downsizing of the
vehicles across all of General Motors lines. People were beginning to want lighter, aerodynamic, and
fuel-efficient vehicles. By 1982 GM added Saab and Hummer to the lines and in order to strengthen
the reach and variety of vehicles sold worldwide. 1995 was the biggest year for General Motors as
sales outside of North America exceeded 3 million units while sales in the United States hit 5 million
units. “By the end of the 90’s, the foundation for global growth in the new millennium had been set”
(GM.com).

Part 2: History of Toyota Motor Co.

The Toyota Motor Company was established in 1937 with the A1 prototype passenger car.
Under the reign of Sakichi Toyoda the soon to be largest automobile manufacture was beginning to
take shape. In 1953 the company slogan was “Good Thinking, Good Products.” This slogan would
play an important role in the growing years of Toyota to come. By 1957 Toyota Motor Sales U.S.A.
was established. This gave way to the first export of Japanese passenger cars to the U.S. “In June
1960, Eiji Toyoda, then Executive Vice President of Toyota Motor Co., Ltd. (TMC), laid down guiding
principles for quality control in a document named “Requests regarding inspection.” In it he introduced
the notion of “building quality into processes,” pointing out that “the idea behind an inspection is to
eliminate the need for inspections.” As long as standards in processes could be kept at the highest
possible levels, Toyoda thought inspections would, in an ideal world, become
unnecessary.”(toyta.co.jp). In 1962 the Corolla was introduced which is still being built today. Also in
1962 Toyota reached the 1 million units produced in Japan mark. By 1969 Toyota had already
exported over 1 million units.

In 1970 Toyota was awarded the first Japan Quality Control Medal. As the number of units
produced in Japan exceeded 10 million in Japan by 1972. By 1975 the cumulative exports reached 5
million units. Then in 1977 the Toyota Technical Center U.S.A. was established. Shortly after the 5
million mark in 1975 by 1979 Toyota already reached the 10 million export mark. By 1986 Toyota had
already reached its 50 millionth vehicle and 20 million exports. As Toyota grew rapidly in the Japanese
markets as well as the U.S. markets Toyota decided in 1988 to start production on the Toyota Motor
Manufacturing plant in Kentucky. Soon after in 1989 the Lexus dealerships started to arrive in the
United States. Lexus is Toyota’s high-end luxury brand of automobiles. Just like Cadillac is to  General
Motors.

In the mid 90’s the annual overseas out put was exceeding 1 million units. Toyota began to
open up manufacturing pants like the one in Kentucky in Indiana, West Virginia, and in the United
Kingdom. By the end of the 20th century Toyota was listed on the New York and London Stock
Exchanges and exceeding annual overseas sales of 3 million units.

“By 2002 the North American production achieved 10 million units cumulative production”
(Toyota.co.jp). By 2005 Toyota was producing vehicles in Russia, China, Brazil, United States of
America, United Kingdom, and Mexico. Also in 2005 Toyota launched the Lexus brand in Japan. Along
with General Motors Toyota is creating Hybrid vehicles and already have some Hybrids on the road.
With sales expected to grow as the fuel prices rise.

Part 4: General Motors Quality History

In the early years of General Motors after World War I the automobile business slowed and
the founder of GM William Durant was forced to resign as president in a severe financial and
management crisis. Alfred P. Sloan, Jr. would take the position and head the corporation. Shortly after
GM would become the largest producer of cars and trucks in the world. “The new product concept
which evolved under Sloan was to produce “a car for every purse and purpose” and continuously
improve all GM vehicles” (Smith 1983,15). Sloan’s management style was to maintain balance
between individual and group management, preserving the advantages of each. Sloan called it
“decentralized operations and responsibilities with coordinated control.” Basically give the employee a
clear responsibility and let the employee do it.

While GM was improving its products with many automotive firsts the war was just beginning
to start. When World War II started GM halted all automobile manufacturing and turned all of its plants
to help the war effort. From 1940 to 1945 GM’s “contribution spanned from the tiniest ball bearing to
massive tanks, naval ships, fighter planes, bombers, guns, cannons, and projectiles” (Smith 1983,
p16).

Car making resumed after the war. In the fifties the sales of General Motors soared. Then in
the sixties the government started regulating the American automobile industry. Then in the seventies
the fuel prices began to rise due to the events in the Middle East. “Foreign manufacturers, which had a
ready supply of small, fuel-efficient vehicles, gained a strong hold in the U.S. market segment” (Smith
1983, p19)
 At some point around 1960, “America began to rush to exploit the quickening demand for
consumer goods swept aside pride-of-workmanship in the name of quick profit”(Yates 1983 p232).
This would become a snowball effect and leads us to where we are now with the poor quality General
Motors vehicles when comparing them to Toyota. “In the rush to meet the demands of the bursting
marketplace, quality and quality control were left far behind” (Yates 1983 p233). It was as if every
automobile that was manufactured in Detroit had some degenerative disease; as if the molecules of
metal began disintegrating the moment the helpless customer rolled his new car onto the street. The
situation reached its height in 1978, the last boom year for Detroit. The American automobile
manufacturers were pumping out automobiles at a furious rate, with little regard for quality. While
pressures from the governement to meet emmision standards, the engineers were focused on the
future and not on the automobiles pouring off of the assembly lines. This resulted in some of the worst
automobiles in the history of the industry.

General Motors had the line of cars called the X-cars to compete with the foreign front wheel
drive market. These cars were recalled no less than four times in 1980 alone. While General Motors
was considered the best of the domestics it was still not as good as its foreign counterparts.

Another important aspect when buying a car is you want it to look good for a long time. The
nice paint job is important and should last for many years to come. American paintwork looked inferior
to Japanese and European cars. The Americans were struggling with color matching between metal
and plastic surfaces. Adding to the problem was poor fit body panels and doors, wavy chrome trim,
and badly stitched interiors. This led to a massive barrier in the marketplace. Because of the
Eviromental Protection Agency and OSHA (Occupational Safety and Health Administration)
regulations it made it harder in America to paint the vehicles. They were not allowed to use some of
the chemicals, and methods the Japanese were. In Japan they did not have such stringent rules
against the environment and occupational safety of their employees. “Nobody realizes how difficult it is
to paint a car, or how expensive it is to design and build a modern paint shop that will produce first-
class results and still be environmentally clean” (Yates 1983, p235). Because of all of these issues it
has resulted in a public perception of domestic car quality as inferior to that of foreign markets.

Part 5: Toyota’s Total Quality Control

In June of 1960 the Vice President of the Toyota Motor Company Eiji Toyoda laid down
principles for quality control. He released a document named “Requests Regarding Inspection.” In the
document he introduced the concept of “building quality into processes,” pointing out that “the idea
behind an inspection is to eliminate the need for inspections” (Toyota.jp.co 2008). Eiji created this
because “increased output in response to the incredible surge in demand due to Japan’s rapid
motorization at the time saw a huge influx of insufficiently trained new staff at the factories. This was
having serious repercussions on quality” (Toyota.jp.co 2008).

By June of 1961 Toyota Motor Company had adopted the system of Total Quality Control to
modernize management operations. All of the Toyota Motor Company employees were required to
“regard the next processes (on the production line) as their customers and provide them with the
required amount and quality of goods and services on a timely basis” (Toyota.jp.co 2008). Toyota also
created individual quality control circles to determine the cause of defects to keep them from
happening again. In addition quality control teams were formed at all levels to promote company-wide
participation.

Another area of the quality aspect that is easy to overlook is the suppliers that supply the
automakers with the raw material and parts to make their automobiles. Toyota makes sure they do not
buy any materials from suppliers unless they are thoroughly inspected so when they are arrive to the
plants they know they are getting a good product. They also hold these suppliers accountable to
continue delivering top-notch quality materials. On the other hand General Motors has a warranty
reduction department to identify parts or materials that break down in the field causing high warranty
costs and help suppliers of those parts reduce breakdowns. However this does work often times it is
more costly and too late if you have to complete a warranty job on someone’s vehicle. Toyota makes
sure not to have these problems in the first place so when their customer buys their product they know
they are getting quality automobile.

Jeffery L. Liker, author of “The Toyota Way” worked for General Motors and other U.S.
automobile companies before joining Toyota. When he joined Toyota he mentioned, “In no time at all I
noticed a fundamental difference between Toyota and my previous employers.” “I witnessed the
transformation of a workforce from one of the worst in the General Motors system to one of the best in
any manufacturing facility in the United States. The difference was the “Toyota Way”(Liker 2004 p. xi).
“The Toyota Way” is a model that many companies in the United States have adopted as their own.
“The Toyota Way” consists of 14 management principles that all work together to create one of the
most successful automobile companies in the world. “Toyota’s success derives from the balancing the
role of people in an organizational culture that expects and values their continuous improvements, with
a technical system focused on high-value-added “flow.”(Liker 2004 p. xv) Below is a picture of what
the Toyota Way looks like.

The Toyota Way (Liker 2004 p. 6 ) Toyota uses a production system called “The Toyota
Production System (TPS).” “The Toyota Production system is Toyota’s unique approach to
manufacturing” (Liker 2004 p7). It consists of the “lean production” along with the Six Sigma approach.
The 14 principles that make up the Toyota Way follow the TPS approach.

Principle 5 is one of the most important principles in terms of quality. Principle 5 states;
Building a Culture of Stopping to Fix Problems, to Get Quality Right the First Time. “Russ Scaffede
was the vice president of Powertrain for Toyota when it launched the first American powertrain plant in
Georgetown, Kentucky. He had worked decades for General Motors and had an excellent reputation
for a manufacturing guy” (Liker 2004 p. 128) At General Motors Scaffede learned the golden rule
of engineproduction, do not shut the assembly plant. At General Motors the managers are judged by
their output. The more that was outputted the better they were. If you did not output enough you would
loose your job. This is where Toyota separates itself from a company like General Motors. In
Scaffede’s case the first month with Toyota he did not shut the plant down once for a whole month
outputting a lot of engines. Scaffede thought he was doing great when president of the Toyota Motor
Company in Kentucky said, “If you are not shutting down the assembly plant, it means you have no
problems. All manufacturing plants have problems. Please take out some inventory so the problems
surface. You will shut down the assembly plant, but you will also continue to solve your problems and
make even better-quality engines more efficiently” (Liker 2004 p. 129). With this said it just shows how
much the Toyota Motor Company lived by their “Toyota Way.” They needed to make sure they took
the time to get things right first so there will be few mistakes and few imperfection in quality. By not
running the plant constantly 100% of the time and taking the time to get things right first they are able
to output more inventory over the long run.

“Toyota learned long ago that solving quality problems at the source saves time and money
downstream. By continually surfacing problems and fixing them as they occur, you eliminate waste,
your productivity soars, and competitors who are running assembly lines flat-out and letting problems
accumulate get left in the dust” (Liker 2004 p.130). Toyota prides itself on quality and because of this
they have been one of the most successful auto manufactures in the world.

Toyota keeps things simple and use four simple key tools. The first tool is “Go and See.” In
other words this is where management will go and look at the problem first hand to see for them
selves what is going on. The second is, “Analyze the Situation,” which means to fully understand the
problem and complexity and make sure you have the right solution to fix it before moving forward. The
third is to, “Use one-piece flow,” which consists of the type of manufacturing. Using a continuous
manufacturing where everyone stops in the section when a problem surfaces. The final key tool is “
Ask why? five times. Using this tool when a problem surfaces if you ask why at least five times you will
get to the root of the problem. An example would be: Why is there oil on the ground? (one) The  car is
leaking. Why is the car leaking? (two) A bad seal somewhere. Why is the seal bad? (three) That’s the
way the supplier made it. And as you can see you could keep going through the “whys?” and get to the
root cause of the problem.

While Toyota continues to improve its quality they are constantly re-innovating and coming up with
new types of vehicles to stay competitive with the fuel-efficient market like the Hybrid vehicles. It is
obvious that quality has been an essential part in Toyota’s development since the 1960’s. As they
continue to dominate the market only time will tell how large they will grow and thrive on their own
successes.

Part 6: Conclusion

“In 1979, GM controlled 48% of the domestic car market. In 2007, it’s struggling to hang on to
25% of it” (Lorenzo 2007). They ignored the seriousness of competition from their Japanese
competitors for so long that by the time they woke up to the reality of what was happening, it was way
too late. Toyota’s products were better, more reliable, and often cheaper than the Detroit automakers.
Although the quality gap has grown smaller between the two the fact of the matter is that Toyota can
build their vehicles for far less cost than that of General Motors and GM will always be playing catch
up in the market.

General Motors needs to learn and adapt some of the Toyota Way principles in order to
develop the quality of their cars. There was a time in the 70’s to 80’s that certain government agencies
kept GM from using certain chemicals or processes to build their cars. They have since overcome
these obstacles and are reinventing the different ways to paint and build the cars abiding to these
regulations. As General Motors continues to develop their quality they will rebuild their reputation.

Although General Motors and other American automakers have gotten the stigma that their
quality is poor it is obvious that it is improving. In the J.D. Power associates quality ratings the gap
between Toyota and General Motors is getting smaller each year. General Motors is improving their
quality so maybe one day soon they will be able to stay competitive with Toyota in terms of quality.