Japan Trip Presentation:

TOYOTA
Jose F. Rodrigues Neto
Paolo Gencarelli
Greg McKelvey
Giulio Pappalardo
Kazutoshi Tominaga
 Agenda

• Company Background
• Car Industry Trends
• Toyota Challenges & Strategies
• Our Questions for Toyota
Company Background
 Headline Facts: Toyota

• Annual sales: $114 Billion

• Production: ~5.8 million Units/Yr.
• Employees: ~210,000 people
• 56 manufacturing plants in 6 continents
• 3rd largest automotive manufacturer in the
global market
 Company History
• Established in 1937 out of Sakichi Toyoda’s
weaving machine company
• Launched first car (SA Model) in 1947
• “Toyota Production System” formed in 1950
based on Just-In-Time principle
• Overseas production starts in 1959 (Brazil)
• In 1972, cumulative production >10M units
• In 2002, entry in the Formula 1 circuit
 Business Segments - Low Diversification

• Automotive [90.0% Sales]

– Design, manufacture and sales of passenger cars,
recreational vehicles, SUVs and related parts
• Financial Services [4.5% Sales]
– Provisions of loans to car buyers and car dealers
• Others [5.5% Sales]
– Industrial vehicles (forklifts, etc.)
– Pre-fabricated housing
 Strong International Presence and Dominant
Position in the Domestic Market

Int’l Market (2000) Japan Market (2000)

9,000
GM
8,000
Ford
7,000
6,000
Daimler
VW Chrysler
5,000
T
4,000
O
Fiat Nissan Honda
3,000 Y PSA Renault
2,000 O
T
1,000 A
0

In 1,000 Units
 Balanced Global Sales
vs. Predominantly Export Based Production

Toyota Production and Sales (MM Units)

Other 0,1

12% Asia 0,3 Other 0,6

Europe 0,2
Asia 0,3 30%
21% North America 1,1 Europe 0,7

North America 1,8 35%

Japan 3,5
67%
Japan 1,8 35%

Production Sales

8
Strongest Stock Market Performance
Relative to the Industry
3-year stock price comparison
 Strong Financial Performance

INDUSTRY

• Market Cap • $ 102 Bn • $ 43 Bn (DaimC)

• 5-Yr CAGR Revenues • 3.0% • 3.8%

• 5-Yr Pre tax Profit Margin • 7.3% • 4.5%

• 5-Yr CAGR Earnings • 17.3% • –12.63%

• ROE • 9.5% • 11.8%

 Revolutionary Production System

• Revolutionized manufacturing industry

• At its core is “lean” principle
– Relentless drive to improve efficiency and
eliminate waste
• Beginnings of TPS were born out of
necessity due to lack of resources in
post-war Japan
 Toyota Production System:
Key Main Concepts

•• JIT •• Just
JustIn
InTime
Timemanufacturing
manufacturing
JIT •• Small
Smallbatches
batcheswhich
whichreduced
reducedinventory
inventorycosts,
costs,
tightened
tightenedrelationship
relationshipwith
withsuppliers
suppliersand
andimproved
improved
quality
qualitycontrol
control

•• “5 •• Asking
Asking“Why?”
“Why?”55times
timesto
tolocate
locatesource
sourceof
ofproblems
“5 Whys”
Whys” problems
Quality •• Stopping
Stoppingthe
theproduction
productionline
linewhenever
wheneverthere
thereare
arequality
quality
Quality problems
problemstotoensure
ensurethey
theyare
arenot
notrepeated
repeated

•• Low •• Long
Longterm
termsupplier
supplierrelationships
Low cost
cost relationships
supplier
supplier
Car Industry Trends
 Car Industry Trends

• Consolidation
• Push to Emerging Markets for Growth
• Global Emphasis on Small-Size Vehicles
• Environmentally Friendly Products
• Internet as a Key Enabler of Change of
Automotive Retailing
 Drivers of Consolidation
Type Rationale Tactics
Vehicle Brand Owner Platform Sharing

Drivers
Market
Enhanced Market Penetration
Purchasing Rationalization

Capacity Rationalization
New Scale Economies in
Product
Drivers

Production, Purchasing and

Supply Base Rationalization
Product Platforms

Forge Strong VBO

New Capabilities Drivers

Progress Toward Integration Relationships

Status Integration of Production &
Supplier

Capability Sets

New Scale Economies Create & Manage Global

Supply Network

“Of the 20 auto makers in 1965, 14 have since merged or been taken over.
By 2006, the top 14 VMs will account for 90% of light vehicle output.”
 Emerging Markets to Provide Long-Term
Growth in Light Vehicle Production
Growth by Region 1998-2006

45%
40%
35%
30%
% of Growth

25%
20%
15%
10%
5%
0%
Asia- East North West South Africa /
Pacific Europe America Europe America Middle
East
 Global Emphasis on Small-Size Vehicle
Light Vehicle Segment
% Growth
Full-Size Pick-up
Mid-Size Van
Mid-Size Utility
Small-size Van
Small-size Utility
D
C/D
C
B
A

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

 Reduction in Emission Standards

3.5 Reduction in Polution Standards

(Grams of NOx per mile)
3
Cars
2.5

Smaller SUVs, Minivans, and Light Trucks

2
(Less that 6000 lbs)

1.5

0.5

0
1975 1977 1981 1994 1999  2004 -2009
Toyota Challenges
 Toyota Challenges - Summary

• Industry overcapacity
• Economic downturn
• Globalization
• Environmental concerns
• The IT revolution
• Diverse and shifting consumer demand
 Toyota’s Strategy

• Increase competitive strength through

advanced technology
• Promoting a global perspective
• Value-driven cost reduction
(CCC21 program)
• Expanding the value chain—becoming
the Total Mobility Services Provider
• Expansion of model offerings—Quality,
value, and style?
Our Questions to Toyota
 Toyota Questions
• What do you see as the key elements to succeeding in the European
market?
• After Japan, U.S., and Europe, where do you see as the next critical
market to Toyota’s globalization effort?
– Emerging markets
• What have been the most difficult challenges in the global implementation
of “The Toyota Way?”
• While sales continue to globalize, non-Japan production footprint appears
to be leveling at 35%. What is Toyota’s strategic direction on “make where
sell”? Challenges?
• Does Toyota foresee Internet as viable infrastructure in purchasing,
supplier relationships? How will Toyota integrate into TPS?
• When do you think hybrid vehicles will reach critical mass?
• What is Toyota’s view on industry consolidation and potential benefits of
acquisitions / mergers?
• How does Toyota’s recent initiatives reflect future strategic focus (e.g. new
channel brand in U.S., participation in Formula-1)
Reduction in Emission Standards