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Behind Toyota's reputation for quality is this: a deep-seated fear of failure.

"We are kind of paranoid," says Dennis Cuneo, senior vice president of Toyota Motor North America Inc. "You're going along, and things are going quite well, and you're always thinking: 'What could go wrong?'"

Industry watchers have wondered when the relentless growth of Toyota's manufacturing in North America would start to undermine the quality and reliability of its vehicles. The company's leaders have the same concern, Cuneo says.

Toyota and Lexus divisions still comfortably exceed industry averages in such measures as J.D. Power and Associates' Initial Quality Study and Vehicle Dependability Index Study, and surveys by Consumer Reports magazine.

But the quality gap is closing as Toyota's competitors catch up. And recalls of Toyota cars and trucks spiked during the past two years.

Cuneo says Toyota has taken steps over several years to shore up its quality standards. He is the top U.S. executive at the holding company for Toyota's North American operations.

"We got on top of it," Cuneo told Automotive News. "We knew we had to stay on top of it, or we could lose this leadership in quality that we have."

Successful experiment

Toyota has new programs to track supplier performance, especially on vehicle launches, Cuneo says. At its new production support center in Georgetown, Ky., employees of every North American plant are trained in Toyota techniques. Those employees, in turn, update co-workers in their home plants.

Cuneo was part of the management team at Toyota's first U.S. plant, a joint venture with General Motors in Fremont, Calif.

The California experiment showed that Toyota could apply its quality methods successfully to a plant with U.S. workers - in that case, unionized workers.
More recalls
Still, U.S. recalls of Toyota cars and trucks rose more than tenfold from 2003 to 2005, to more than 2.2 million vehicles. Some critics, especially competitors, called that development a sign that Toyota's steady expansion finally had dented its signature attribute: its reputation for exceptional quality.

But recalls are an imperfect measure of overall quality. Nearly half the Toyota recalls last year stemmed from a single repair of a steering relay rod, which can crack under extreme steering maneuvers.

The recall covered trucks dating back to the 1989 model year. Some of the trucks are so old that the law does not require a manufacturer to fix them at its expense. But Toyota did.

An Automotive News review of other quality data found no pattern of decline in Toyota vehicles. Those measures include J.D. Power and Associates surveys; ratings from Consumers Union, which publishes Consumer Reports; and limited but valuable warranty data.

Trouble at Scion

One taint for Toyota: Vehicles from Scion, the company's new youth-oriented brand, scored worse than the industry average last year in Power's Initial Quality Study. The study focuses on problems consumers report with their new vehicles during the first three months of ownership. Scion vehicles are assembled in Japan.

Some analysts say the highly configurable nature of Scions creates more opportunities for owner complaints. Cuneo argues that Scion's target audience of tech-savvy young consumers has high expectations.

Cuneo says Toyota reviews the same quality measures that Automotive News examined, along with internal measures. "We're very comfortable with our trends, but we want to do more," he says.

There are countertrends, albeit limited. In 2002, Toyota Division beat the industry average by 20 percent in the Initial Quality Study. Last year, that advantage shrank to 10 percent.

Similarly, Toyota Division was 22 percent better than the industry average in Power's 2002 Vehicle Dependability Index Study, which measures vehicle quality after four to five years of ownership. In the 2005 study, Toyota was 18 percent better.
Lower warranty costs
But during the same period, Cuneo says, warranty claims for Toyota vehicles built in North America dropped by about 30 percent.

Joe Barkai, director of product development strategies at Manufacturing Insights, a research and consulting firm in Framingham, Mass., studies warranty costs.

He calculates that Toyota spends about 1.3 percent of revenue on warranty claims. That's less than half the rate of General Motors and Ford Motor Co., he says.

Barkai cites Toyota's ability to use data to identify and fix problems quickly. That feature is rooted in the Toyota Production System.

"Once they make a decision, the entire organization realigns itself around the decision," Barkai says.

Jeffrey Liker, an engineering professor at the University of Michigan, has studied Toyota for 20 years. He says the discipline Toyota imposes on its growing number of suppliers helps the company maintain its quality record.

Liker says there was evidence four or five years ago that Toyota quality was starting to slip. The company made a priority of finding and eliminating those problems, he says.

One of the problems was the more-frequent transfers of workers among jobs in Toyota's U.S. plants compared with its Japanese facilities.

"They realized that they needed very, very disciplined standard work and training, and auditing by the supervisor, with all that churning and movement of people," Liker says. "They made the adjustments that they needed to."
Furrowed brows
Toyota may face similar problems in the future, Liker says. But if that happens, he predicts, the company would react in the same way.

"They are very systematic," he says. "I don't think that's going to change" - unless Toyota engages in mergers and acquisitions, he adds.

Liker has written about Toyota's methods in several books, including The Toyota Way. His courses cover these methods, which the company shares openly.

Yet so far, Liker says, other automakers generally have not duplicated Toyota's record for quality. One exception he cites is the GM plant in Lansing, Mich., that builds the Cadillac CTS and STS. That factory has adopted Toyota-like methods successfully, he says.

Quality isn't always about defects, recalls and things gone wrong. Toyota also is concerned with "secondary quality" - the feel of door handles, the touch of audio controls, the richness of the grain on the instrument panel.

For example, when the Mazda3's interior trappings trump those of the Corolla, there are furrowed brows at Toyota. That a competitor might have a smoother-shifting transmission or a quieter engine at idle is a pressing concern.

Asians on top
For its annual auto issue, published this month, Consumer Reports compiled complaint data for eight model years from owners of all kinds of vehicles. The object was to show which companies' vehicles perform best over time.

The data show that 8-year-old Toyotas are about as reliable as 3-year-old Ford Motor and Chrysler group cars and trucks and 2-year-old Volkswagen AG vehicles, Consumers Union says.

David Champion, senior director of Consumers Union's auto test department, agrees that quality gaps among automakers are narrowing. Last year, Consumers Union says, Asian automakers' products had the fewest problems: 12 per 100 vehicles. That rate has not changed since 2002.

U.S. companies' products were slightly improved last year, at 18 problems per 100 vehicles. European products held steady, at 21 problems per 100 vehicles

But if the industry's overall quality improvement is reaching a plateau, Toyota's Cuneo says his company won't be satisfied with that.

He says: "Our real objective is to widen the gap again."

Mark Rechtin contributed to this report

damn this is a very interesting read. i guess it shows why toyota stands out.
no other company can do what toyota have said/done.
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