Automotive Industries: Toyota Looks For Partners

As it aims for a 10% worldwide market share, Japan's biggest automaker also wants `green technology' collaborations with other companies.

Unlike the thousands of people sitting at the blackjack and roulette tables a few floors below him in Las Vegas's ostentatious Mirage hotel, Hiroshi Okuda is not into gambling, at least with his company. The Toyota president, who spoke with AI during the Toyota National Dealer Show, has a well-thought-out plan to grow Toyota, even in the midst of the economic crisis in its home market.

That crisis is one of the reasons Volkswagen outsold Toyota worldwide for the first six months of this year, putting the German maker into the world's third-largest automaker slot in volume. But Okuda aims to recapture that title. It's well known that Toyota will buy small-car maker Daihatsu and heavy-truck maker Hino, but it also wants more collaboration with other companies on "green" technologies such as fuel cells. The environment is every company's business, he asserts, calling on other automakers to create a global association aimed at improving the environment.

"The issue of the environment is a global issue, shared by all humanity. Naturally, I feel all the automotive companies should work together," he says. Toyota is considering five or six candidates to collaborate on fuel cells. A decision will likely be made next year.

That's only part of the plan. Okuda wants to boost sales from the 4.8 million vehicles it sells annually worldwide to six million vehicles shortly after the turn of the century. That would give the Japanese automaker almost 10% of the global market. Longer term, sometime in the "first half of the century," he predicts the automaker will sell 10 million cars and trucks. To reach that goal Toyota must expand in developing nations, form more technology joint ventures, evolve its much-lauded production system, deliver vehicles quicker, develop new modes of transportation and survive the economic disaster that grips Japan like a vise.

Although it's the fourth-largest automaker in sales, Toyota it is not yet a truly global company. "What we need to do is to look at the overall globe as one market and develop our operations to that effect," Okuda explains. Still, Toyota will take it slow. It will spend only $81 million in each of three countries, China, India and Russia, to boost production over the next four to six years. "In terms of priority, it is China, India and Russia," Okuda says.

Toyota already has four auto production companies in China, and is building a 50,000-unit-a-year plant in India that opens in 1999.

Economically-challenged Russia, however, is a different matter. Toyota was planning a semi-knocked-down operation there that would assemble 1,000 cars a year, but that's been postponed. "In light of the current situation we might have to take a wait-and-see attitude," Okuda says, pointing out it took Toyota 50 years to earn profits in Southeast Asia. "Russia has a foundation of industrialization already," he says. "... perhaps in 10 to 20 years we will have a clearer picture of the future." The plant won't be postponed that long, but it could take that many years to post a substantial profit.

That's not the only leg of Okuda's globalization plan. He hopes to promote more non-Japanese to top executive positions, because he believes a truly global company should have diverse leadership. But, he admits it will take at least 10 years to get a non-Japanese executive on the Toyota board of directors. Today, the highest-ranking non-Japanese executive is Yale Gieszl, executive vice president of Toyota's U.S. sales operation.

The third leg of Toyota's globalization stool is creating niche vehicles and getting cars and trucks to the buyer sooner. Toyota has a new division, the Virtual Venture Corp., which creates unique vehicles geared to young consumers. It's experimental, and the volume is small, Okuda says. But if it is successful, production will be reorganized to accommodate the new products.

The goal is to get all products to market more quickly. Toyota is considering a system that sends the order directly from the dealer to the assembly plant. "No matter how quickly we try, it still takes a week," Okuda laments.

Some experts believe modular production speeds up the process. Traditionally, Toyota has shied away from this trend, but Okuda says the door is open if "someone comes to us with an idea, we might do it." Still, he guesses it will take at least 10 years for Toyota to incorporate major modules, like a complete instrument panel, into its vehicle designs.

But, first and foremost Okuda believes environmental issues are of the utmost importance. "In the 21st century automobiles will remain a very important part of society," he says. "The most important challenge for the automobile industry is to resolve issues such as pollution and safety."

Toyota recently began operating an EV Commuter System at its headquarters in Japan. It's providing 50 two-seat eco-commuter vehicles -- ecom for short -- for employees to get to and from work. So far the cars aren't driverless, but that could be the next step. From there it's only a short way to an intelligent transportation system that maintains a constant space between vehicles so they can travel down the freeways in a driverless convoy.

To some that might seem like a gamble, but to Okuda the odds are in Toyota's favor.