Herald-Leader Editorial

Toyota rebound sets fine example

Change, investment paved the way

January 4, 2013 

In 2008, Toyota finally reached the top, gaining the title of world's largest automaker from GM, which had held it since the 1930s.

Few businesses would count the following few years among their best, or easiest. But after reaching that pinnacle Toyota faced an exceptional series of devastating challenges — some of its own making.

And Toyota — also largely of its own making — has recovered. And in the story of its rebound, there may be some lessons for state and national political leaders.

In the fall of 2009, Toyota recalled 3.8 million vehicles, the largest in its history, as allegations mounted about acceleration problems.

By the end of last year, the automaker had recalled 20 million vehicles to fix various malfunctions, paid tens of millions in related fines and agreed to a $1 billion settlement in a class-action lawsuit.

The earthquake and tsunami that devastated parts of Japan in March, 2011 exacted a huge toll on Toyota, which produced 60 percent of its vehicles in Japan at the time, closing auto plants, suppliers and some Japanese ports. By June of that year Toyota forecast a 31 percent drop in profits, due in part to the natural disasters.

Another factor was the Japanese yen, which had a run of several strong years, essentially cutting into the profitability of Toyota's overseas sales.

By the fall of 2011, Toyota's stock had sunk to a 10-year low. The company fell to third behind GM and Volkswagen.

Yet, in 2012 Toyota regained the top spot. U.S. sales last year rose almost 30 percent, more than doubling the overall jump in auto sales of just under 14 percent. Profitability is again on the rise.

Some of this is thanks to a falling yen and a strengthening U.S. economy. But Toyota's management also took several critical steps that have helped it regain customer confidence and improve performance.

Coveting consumer confidence, executives moved quickly to shake up manufacturing to again focus on quality and reliability. They apologized to dealers and to consumers about the lapses. And Toyota has realigned production, opening plants outside of Japan and closing some in the country. The company has also overhauled product lines with new looks to appeal to younger consumers.

All the talk about running government like a business usually means slashing spending and cutting taxes. But businesses that remain successful decade after decade play a longer game.

They invest in infrastructure, people and products. They admit mistakes, fix them and move on. They envision and plan for a future far beyond the next quarterly or annual report.

Kentucky has benefited enormously from Toyota's success. The company's Georgetown plant and its suppliers provide thousands of jobs and pay millions in taxes. Toyota has been a generous corporate citizen, contributing money, automobiles and talent to many civic endeavors.

That benefit could be even greater if Kentucky's political leaders could learn from Toyota — if they could look beyond the next election, redistricting battle or budget crisis. If they could get over the things that have gone wrong and fix the things they can by investing in people and infrastructure, we'd all be assured a much brighter future.

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