Toyota President Sets Out Challenges for 2008

At a press conference organised by the Japan National Press Club, Toyota President Katsuaki Watanabe today acknowledged that the company is facing some tough challenges over the coming year. He particularly highlighted declining product quality and the deceleration in the global economy.

After decades of steady growth, Toyota is now poised to take over from General Motors (GM) as the leading automotive manufacturer in the industry. Last year, Toyota declared a global output of 9.498 million vehicles, up 5.3% from the previous year, while GM produced 9.284 million units. However, the inevitable delay between production and sales, especially relevant to Toyota, which exports much of its inventory over long distances, meant that Toyota was behind GM in terms of sales volumes. It sold 9,366,000 vehicles against GM's 9,369,524 vehicles. Although this meant that GM could claim to have been the world's top seller for 77 years, it seems almost certain that Toyota will definitively dethrone it in 2008.

However, as conceded by Watanabe, Toyota’s global expansion has led to an erosion of the company’s customary high standard of product quality. As reported by Associated Press (AP), there has been no single cause for the decline, sources of defects ranging from product design to final assembly. In general, though, as the company has grown in size its resources have come under increasing pressure, with more restrictive time constraints and a shortage of experts. For the time being, the company has maintained its recruitment rates, but this will become more difficult with the shrinking of the Japanese population.

Watanabe went on to warn against the rise of the so-called “big company disease”, an incipient sense of arrogance among the firm’s personnel. The resultant complacency has contributed to the fall in product quality, most conspicuously since 2006. The company has been forced to delay some product launches by as much as six months as problems are identified and resolved.

Watanabe also acknowledged that the worldwide economic difficulties present another challenge, but he is confident that there is no impending crisis. He stated that the U.S. market as a whole is founded on strong fundamentals and that sales will remain at the same level as last year, at around 16.15 million vehicles. Indeed, he feels that Toyota has a broad enough product range to be able to exploit growing opportunities as the market shifts towards more fuel-efficient vehicles. The company is therefore expecting its U.S. sales to grow by 1% during the year to about 2.64 million units. Taking a global view, Watanabe forecast that worldwide sales will rise by 10 million units over the next three years to 82 million vehicles. He expects 80% to 90% of the growth to come from emerging countries such as China. The Japan Automobile Manufacturers Association expects the market in Japan to stabilise during the year, although minivehicle sales will fall by around 0.9% year-on-year (y/y).

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