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The Honolulu Advertiser
Posted on: Sunday, April 9, 2006

Toyota's foresight on Prius left U.S. rivals in the dust

By Anthony Faiola
Washington Post

TOYOTA, Japan Satoshi Ogiso was in his office redesigning Camrys and Tercels when the young auto engineer was suddenly ordered to switch gears and join a secret mission "to come up with a whole new car for the 21st century."

Toyota Motor Corp.'s top management, Ogiso said, had read the wind. Believing that higher oil prices and the rise of eco-conscious consumers would spark surging demand for super-efficient autos, they ordered up what would become the prototype for the Toyota Prius.

The gas-electric hybrid reached U.S. shores in 2000, defying industry naysayers by becoming one of Toyota's hottest new models. Eager clients in the U.S. are still waiting two months or more for delivery.

As the company was busy unveiling the Prius, its U.S. competitors at General Motors Corp. and Ford Motor Co. were heading down a completely different road. Both companies were pouring cash into gas-guzzling sport utility vehicles and minivans, sales of which tanked as oil prices shot up.

Analysts say the foresight and planning that went into the development of the world's first mass-produced hybrid underscore how Toyota has managed to leave the struggling U.S. automakers in the dust and why it is likely to stay ahead for years to come.

Toyota is poised to overtake ailing General Motors this year as the world's largest automaker in terms of units sold. It is a title, industry experts say, that the 69-year-old company could win through a combination of efficiency, flexibility, quality control and, most importantly, an uncanny sixth sense for what consumers want.

"The early development of the Prius put Toyota at least two years ahead of the Big Three in one of the fastest-growing car segments," said Noriyuki Matsushima, managing director at Nikko Citigroup Ltd. in Tokyo. "Toyota has succeeded in reinventing the idea of automaking and corporate efficiency in a manner that has everybody else in the industry playing catch-up."

In the midst of massive layoffs and plant closures, General Motors and Ford are struggling for survival. Meanwhile, Toyota is projected to post record profit this year after nearly doubling production and opening seven factories over the past five years.

The U.S. automakers have linked much of their woes to massive "legacy costs" or generations of generous benefit packages to its unionized employees. Industry experts say General Motors' healthcare and pension expenses amount to roughly $2,000 more per vehicle than Toyota's.

But analysts say those costs tell only part of the story. Pegged in the post-World War II era as a maker of inexpensive cars, Toyota commands a record 13.3 percent of the U.S. market up from 12.2 percent in 2004 even though many of its models are more expensive than their American counterparts.

Toyota has avoided layoffs or major labor disputes for more than half a century while maintaining an industry edge in cross-training line workers to build multiple cars on the same assembly lines.

Two years ago, the company came up with a process in which parts for specific models were presorted into boxes that travel down the line as each car is assembled. Though low-tech and inexpensive to put into effect, it significantly sped up the product line. It was one of roughly 600,000 small improvements Toyota makes annually.

"Toyota is the Tiger Woods of flexibility and efficiency; they've got everybody a few strokes behind," said Ron Harbour, head of Harbour Consulting, publisher of an annual auto industry productivity report. "Often, it's nothing that makes you sit back and go 'wow.' They're little things, thousands of little things that add up to a huge advantage."