Top Management
Interview

Aiming to Be a Strong Company
to Prevail in an Age of Fierce Competitionin the Global Economy
In the Toyota Industries Report 2011, we welcome Mr. Isao Endo, a business school professor andmanagement consultant well-versed in corporate management strategies and monozukuri(manufacturing). Mr. Endo joined President Tetsuro Toyoda to discuss what Toyota Industries

Great East Japan Earthquake

Cooperating in the Reconstruction ofDisaster Areas and Initiatives for
Early Normalization of Production

must do to realize further growth and advance forward amid the dramatically changing social andToyoda: It’s a pleasure to meet with you today.

economic environment.

I understand you have visited numerous companies bothin and outside Japan. You also have a wealth ofknowledge and insights about the strengths andchallenges pertaining to manufacturing sites.

Mr. Endo observes the Toyoda Automatic Loom, Type G.
The Toyoda Automatic Loom, Type G was invented and completed by
Sakichi Toyoda in 1924. This was the world’s first completely non-stop
shuttle-change automatic loom that enabled smooth shuttle replacement
and weft-yarn supply without a loss of speed during high-speed operation.
The loom also functions to produce no defective products by automatically
stopping operation if the warp yarn breaks. Its all-around performance andeconomic efficiency received top recognition worldwide.

Endo: It is a pleasure for me as well. Your company boasts
the world’s top market share* in the three fields of car
air-conditioning compressors, which have been adopted
by almost all automakers around the world; lift trucks; andtextile machinery (air-jet looms), which represents yourLooking Back at Fiscal 2011

founding business. Toyota Industries truly has a uniqueTurning Around Business Results byStrengthening the Business
Structure via Streamlining

presence within the Toyota Group.
Toyoda: Thank you very much. I anticipate that this
discussion will provide an excellent opportunity to reaffirm

In front of the Toyoda Automatic
Loom, Type G

Toyota Industries’ strengths and challenges.

Endo: The earthquake struck on March 11, shortly before

Endo: To start, let’s turn to the Great East Japanthe end of the fiscal year. How do you sum up yourEarthquake. It has had an enormous impact globally.

performance for fiscal 2011? You were able to dramatically

What are your thoughts? Was there any direct impact

turn around business results compared with the previous

on your business?

fiscal year. What initiatives did you focus on?

Toyoda: The recent earthquake left a deep scar on the

Toyoda: We lowered our break-even point and streamlined

overall Japanese economy, which was on the verge of

our structure via emergency profit improvement activities

economic recovery. It could have an immeasurable impact

implemented since 2008. We also succeeded inon the global economy as well. All of Japan must bandtransforming employees’ awareness by repeatedly

together to overcome this crisis based on the assumption

reminding them that the world has changed and we mustthat the aftereffects will linger for an extended periodchange our mindset accordingly. During this time, allof time.

employees made concerted, unprecedented efforts to

Fortunately, our plants and equipment received nocarry out reduction of fixed costs such as zero-based

Isao Endo

major damage, but some of our plants had to suspend

cost reviews. As a result, we were able to improve our

President, Toyota Industries

Professor, Waseda University Business School, Graduate School of Commerce

operations due to parts shortages. By switching over toprofit structure.

Corporation

Chairman & Partner, Roland Berger Ltd. in Japan

alternative parts and supporting recovery of our suppliers,

Tetsuro Toyoda

Throughout fiscal 2011, we maintained this approachproduction has recovered significantly. We will continue towhile actively expanding sales to take advantage of amake our utmost efforts to restore normal plant operations

market recovery and avoid opportunity loss, and these

Profile of Mr. Isao Endo

as quickly as possible. As for measures to help theefforts produced a certain level of results. At the same

Graduate of the Waseda University School of Commerce. Worked for Mitsubishi Electric Corp. and U.S. strategic consulting

stricken areas, we have donated relief funds and ourtime, it is precisely tough times like these, when thefirms before assuming his current posts. Also holds an MBA from Boston College School of Management. At the Waseda

industrial vehicles. We are also offering assistance to theearthquake is having a huge impact on our performance,

University Business School, he teaches corporate strategy and operation strategy and carries out practical research related

devastated areas by using our own trucks to transportthat every member of the Toyota Industries Group must

to on-site capabilities. Mr. Endo is also engaged in management consulting as chairman of the Japanese subsidiary of thedaily goods. Looking ahead, we will continue to take awork together, muster our courage and move forward.

largest European strategy consulting firm, Roland Berger Strategy Consultants. He is highly esteemed not only in terms ofstrategy formulation but also for consulting that produces results in conjunction with strategy implementation support.

look at various forms of cooperation toward reconstruction.

Mr. Endo also serves on the Supervisory Board of Roland Berger worldwide. He is an adjunct professor at Cheung Kong
Graduate School of Business in China as well as a member of the management advisory committee at Nisshin Steel Co., Ltd.
* Survey by Toyota Industries Corporation for car air-conditioning
compressors and lift trucks; 2010 statistics from the International Textile
Manufacturers Federation (ITMF) for air-jet looms

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Top Management
Interview

Manufacturing and Quality

Toyoda: Quality is the lifeblood of a manufacturer. Taking alocation has decreased.

Quality Is the Lifeblood of
Toyota Industries“Customer First” approach, each division works to further

Endo: You mean that 130 books

raise quality by incorporating quality through their own

are not enough. You should readwork processes and promoting close collaboration.

even more (laughter).

Endo: I was just given a look at the Toyoda AutomaticSome people may think quality and profits are

Becoming independent

Loom, Type G on display in the showroom. What should

contradictory, but that’s not true. Raising quality leads topeople who can learn, think andwe learn from the ideas that Sakichi Toyoda incorporated

improved costs and ultimately generates profits. To

act on their own as you envision

into this loom?

maintain quality through genchi genbutsu, I personally visit

is then premised on further

Toyoda: Sakichi invented the loom based on his

work floors to check the production status and progress

improving oneself throughphilosophy of “contributing to society and the world

made toward realizing improvements.

reading books and other means.

through monozukuri.” From the perspective of what truly

Endo: In that sense, the Toyoda Automatic Loom, Type G

What specific measures are

satisfies customers, he created the loom through repeatedcan still be considered the origin and basis of quality

you taking to develop personnel

trial and error, devising simple mechanisms for stoppingand invention.

who will carry the future of

the loom operation when a warp yarn broke to prevent

Quality issues have become a key topic lately, but I feel

Toyota Industries?

producing defective goods. However, his first loom wasthat trust in the quality of Japanese products remains

Toyoda: I feel the advance of IT

compared with competing foreign products without

strong. Japanese manufacturers make proactive efforts to

has had adverse effects on

adequate performance testing, and the results weregenerate knowledge and ideas while achieving further

developing young engineers who will support thehave joined the company recently are thrilled to see anddisappointing. This bitter experience led him to anadvances in operations through ingenuity. It is rare to findcompany in the future. The fact that enormous volumes

experience the process of assembling an engine from start

unwavering conviction that a product should never besuch examples anywhere else in the world. I hope to seeof information can be easily obtained via the Internet

to finish. As a result, they start to learn about the

shipped unless it has been fully and repeatedly tested with

Toyota Industries maintain its basic stance of incorporatingstresses the importance of genchi genbutsu. Informationfascinating aspects of manufacturing.

completely satisfactory results in order to avoid

quality and steadily raise its competitiveness even further

obtained through your own eyes, actions and feelings is

Endo: It’s likely that experiencing such aspects would

inconveniencing customers.

with a high level of awareness of everyone on the work floor.

real-life information. This also applies to manufacturing

lead them to put their heart and soul into the design.

This episode teaches us the importance of going backbecause we tend to immediately rely on electronic sensors

to the basics and engaging in manufacturing with an

Human Resources Development

and computers.

emphasis on quality based on genchi genbutsu (go andDeveloping Employees Able to
Learn, Think and Act on Their Own

Endo: It seems every company faces the same concerns.

see for yourself).

Developing Human Resources Who
Can Play Active Roles Globally

Toyoda: To address this situation, we are using the Toyoda
Automatic Loom, Type G to teach the origins ofEndo: Toyota Industries’ business development is quite

very beginning. Its importance has become a compelling

Endo: Incorporating quality is achieved not only throughmanufacturing at the Technical Learning Center. Since at

globalized. Accordingly, I understand the proportion ofissue for many companies these days. In some ways, thetools and quality assurance systems but also through auniversity young engineers are taught to use 3D CAD fromyour sales generated overseas is high. Could you tell me

standardization of parts and the globalization of businesshigh awareness of quality and integrity. What are yourthe beginning, they are put to work without having reallyabout the development of global human resources?

seem to have made it easier for quality problems to have athoughts on human resources development?

understood the basics of design and technical drawings.

Toyoda: Now that many of our end users reside outside

more widespread impact. Could you explain Toyota

Toyoda: I believe the basis of human resources

At the Technical Learning Center, we have them draw

Japan, the development of global human resources is not

Industries’ basic stance and initiatives regarding quality?

development is nurturing independent people who canusing drafting boards. It is necessary to instill the basics

a special task but something we must do as a matter oflearn, think and act on their own. I would like to see

before they start using 3D CAD.

course. However, our globalization happened only in theemployees, whether young or experienced, make efforts

Endo: A defect at the design stage can easily lead to apast 10 years, and it has been a dramatic turn of events.

to further improve themselves. Reading many books, formajor quality problem later.

Endo: What happened?

example, can expand the scope of one’s own human

Toyoda: Using 3D CAD enables highly finished technical

Toyoda: In 2000, we made Sweden-based lift truck

qualities and abilities, and help acquire decision-making

drawings at first glance. However, if the basics are

manufacturer BT Industries AB into a Toyota Industries

capabilities.

lacking, a grave design error can occur, leading to

subsidiary. At that time, we had approximately 10,000

Endo: Do you enjoy reading books?

quality problems.

Japanese employees. With the addition of BT Industries’

Toyoda: I read about 120 to 130 books a year. After I

Endo: That’s why it is absolutely necessary to return toapproximately 10,000 employees, we suddenly became afinish, I send them to overseas bases where these books

the basics.

company in which half our employees did not speak

are not readily available locally. They are happy to receive

Toyoda: We are teaching our young engineers theJapanese. Today, Toyota Industries comprises about

them besides being strongly motivated to learn.

fundamentals of drawing. We also have them learn about

40,000 employees worldwide, of which around half are

Unfortunately, however, with more employees posted

steel making and dismantling and assembling engines up

Japanese. Nevertheless, we have few personnel who canoverseas, the number of books I can send to any single

to the point of actually starting the engine. Those who

respond to the globalization of our company. Therefore,

Endo: Quality has been a crucial theme for you from the

President Toyoda explaining the mechanism of the Toyoda Automatic
Loom, Type G

8Toyota Industries Report 20119

Top Management
Interview

developing key components in the car electronics field thatmounting global competition?

respond to the trend toward vehicle electrification; andToyoda: The rivalries among countries and regions, as wellraising the energy-saving performance of textile machinery

as fierce competition among companies that transcends

in terms of electricity and air consumption.

national borders and industries, are unfolding on a scaleEndo: You certainly operate a wide range of businesses. I

and at a pace that are unprecedented. It’s akin to the

now have a much better understanding of how all thesesituation in Japan in the 16th century when many warlords

businesses are carrying out development with a focus onfought fiercely for domination. We are indeed in the midst

addressing environmental and energy issues head-on. I

of a paradigm shift in which the global economic structure

think further extending these initiatives to fields beyond

is undergoing a major change.

your main businesses could lead to the creation of new
business models.
I was told that one warehouse company examined thenurturing assertiveness is the first step.
Having said that, our textile machinery sales team has

fiscal 2012 as a year for making a new start in order toprevail in an age of fierce competition in the global

trend toward electric trucks and installed recharging

economy.

equipment and batteries at some of its warehouses.

Endo: I couldn’t agree more. The world will serve as the

Toyoda: We are on the verge of commercializing the samestage for competition among companies.

line of business. We have built a system within our

Presenting the features of the latest air-jet looms

As this trend unfolds, Toyota Industries has positioned

What about your strategies for each region?

automated storage and retrieval systems whereby

Toyoda: We have been building and operating a global

customer needs have quickly shifted to electrification,batteries are recharged while being stored, and when

optimal structure for each business duly considering

lighter weight and energy savings. To provide whata vehicle arrives its batteries can be replaced within

where we should carry out production, which regions wea dynamic global outlook. Long accustomed to thecustomers really need, we are making Company-wide

one minute.

will supply, how we will carry out sales and how we should

concept of globalization, members set off freely around theefforts to develop new technologies based on the 3Es,

Endo: It appears that interesting new fields are expanding.

share roles with Japan.

world, cultivate new markets and put new businesses on

which stands for energy, environmental protection andAt the same time, however, companies in emerging

Endo: How do you intend to approach emerging

track. Many have a command of multiple languages, andecological thinking. We are honing our elemental

countries are also strengthening their technologicalcountries, which are expected to achieve growth in thein this regard, it is more effective to send such staff totechnologies that contribute to electrification, lighter

prowess. What are your thoughts on this?

years ahead?

overseas subsidiaries than to train them in Japan.

weight and energy savings and expanding our

Toyoda: Products closely resembling our air-jet looms are

Toyoda: Besides China and India, markets in ASEAN and

Endo: Sending talented staff to foreign countries andbusinesses in these fields by applying these technologies

available in some markets. However, the fabric produced

Latin America are also expected to grow. Rather thanenabling them to learn through experience provide ato new products.

by these machines is significantly inferior. This is because

lumping these markets together as emerging countries, it

the software that operates our weaving machinery cannot

is crucial to accurately identify the different needs of eachcountry and provide products that satisfy customers invaluable opportunity for significant personal growth. One

Let me give you an example. Our electrically driven

leading retail company sends 30% of its managers

compressors for hybrid vehicles are highly regarded

be emulated by competitors. We will continue tooverseas for three to six months without any specificbecause they can use power from a battery, not an

strengthen the competitiveness of our hardware, but weassignment other than to find out what they want to do atengine, thereby enabling the air conditioner to run evenalso intend to focus our efforts on software development

the company in the future. In the early stage of thisduring an idling stop. In industrial vehicles, we are working

to further raise the added value of all our products.

program, many people were hesitant and worried thetoward improving basic performance such as the uptime

Endo: Japan possesses highly sophisticated technologies

workflow might be disrupted without them, but once thisof electric lift trucks and serializing hybrid lift trucks.

and technological depth. It is also becoming increasingly

program was put into practice, it was not the case and theEndo: I understand that electric lift trucks already make up

important to integrate production technologies andprogram has been a tremendous success.

a high proportion of your lift trucks, which are one of yoursoftware into a “black box” from the perspective ofmainstay products in industrial vehicles.

strengthening global competitiveness.

Technology Development and Product Development

Toyoda: Electric lift trucks account for approximately

Tackling Environmental and Energy
Issues Head-On

60% of our lift trucks. In fact, we are the world’s top

Global Strategies

manufacturer of electric-powered vehicles, with sales ofCarrying Out Business around the
Globe and Making Finely Tuned
Responses in Each Region

over 100,000 electric lift trucks annually.
Endo: As a manufacturer, a great deal of effort is of course

We are also developing plastic glazing that realizes

poured into technology and product development. Whatbetter fuel efficiency through lighter vehicle bodies;directions will you pursue in the future?

developing next-generation clean diesel engines by further

Endo: Emerging countries are achieving dramatic growth,

Toyoda: With heightened concerns about such issues asadvancing diesel engines, which emit 20% to 30% lower

while market needs have significantly changed andglobal warming and the depletion of oil resources,

CO2 emissions compared with gasoline engines;

diversified. How is Toyota Industries responding to ever
Explaining the mechanism of car air-conditioning compressors

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Toyota Industries Report 201111

Top Management
Interview

example, we are raising productivity based on the Toyota
Production System (TPS). We are dispatching staff from
the Materials Handling Equipment and Textile Machinery
divisions to locations where TPS is implemented in orderthat they can utilize this system after returning to theirrespective divisions.
Endo: So the overall direction is to combine the total
capabilities of Toyota Industries to maximize yourcomprehensive strengths more than ever.
Toyoda: That’s right. I often sail for enjoyment. On days
with no wind, I gaze at the distant ocean, observe far-off
waves and read the wind before it arrives.
Endo: Acting before the wind arrives by reading the wind
is similar to management then.
these countries in a timely manner.

Today, we have discussed a variety of topics. I haveEndo: How will you respond to markets in North America,

the impression that Toyota Industries is an extremely

Europe and other developed countries?

unique company filled with possibilities, plus a sense of

Toyoda: Despite lower growth, Japan and other developed

anticipation about what you will do next.

countries are big markets. Therefore, we must continue to

Toyoda: We will make our best efforts to meet theprotect these markets, whereby it is crucial that we

expectations of our stakeholders. Also, always

compete through our high value-added products andremembering our founding spirit and considering whatvalue chain. A prime example is our large-scale automatedsatisfies customers, we intend to contribute to the world

guided vehicle (AGV) that carries containers at theby providing products and services that are useful to

Tobishima container wharf in Aichi Prefecture. This vehiclesociety. I believe this is our corporate social responsibility.

can transport a container, which is approximately 45 feetin length and weighs around 30 tons, at a speed of 25
kilometers per hour. It can carry this mountain-like
container and park at a designated location with a marginof error of within 2 centimeters.
Future Aspirations

Deepening Collaboration among
Businesses and Combining Total
Strengths
Endo: Our discussion so far has given me a general ideaof the directions Toyota Industries is pursuing in its
businesses over the medium and long terms. It appears
that collaboration among businesses will become
increasingly important, even in your global strategies andtechnology development based on 3Es.
Toyoda: Precisely. To raise synergies, we are working to
remove barriers and deepen horizontal collaboration
among businesses. We are also striving to standardize
everything possible, such as development and cost
reduction measures. In the vehicle assembly business, for

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Toyota Industries Report 201113