Page 68 - Toyota Under Fire

THE OIL CRISIS AND THE GREA T RECESSION

Toyota needed to maintain its investments, particularly technol-
ogy related to environmentally friendly vehicles. Toyota reduced
costs by delaying some new models, focusing on efficiency, and
releasing outside subcontractors, but laying off regular engineers
was out of bounds. In fact, employees of the Toyota Technical
Center in Michigan (its own corporation, which employs more
than a thousand key engineering staff members) were ineligible
for the voluntary separation program. Toyota wanted to keep all
the engineers it had so painstakingly trained.
The task ahead for responding to the recession was to cut
costs without layoffs and to ensure that the company was on a
sound footing to emerge from the recession stronger than ever.
As outgoing President Watanabe put it in a joint speech with new
President Akio Toyoda: “We have let [our strengths] become di-
luted. We have allowed fixed costs and foreign-exchange risks to
increase, and our earnings are now overly sensitive to fluctuations
in unit sales and exchange rates. Furthermore, the speed and ef-
ficiency of our business operations has been reduced.”
How did Toyota address these weaknesses? Not by radically
changing direction, but by getting more aggressive about what it
had always done: continuous improvement, investing in people,
and trusting those people to find and implement solutions that
would cut costs and improve quality and productivity.

Turning the Recession into Opportunity

With volumes plummeting in late spring of 2008, Tetsuo Agata was
named as the new president of Toyota Engineering and Manufactur-
ing North America (TEMA), the organization that runs Toyota’s
manufacturing, purchasing, and engineering. Agata was chosen from
a similar position in Toyota’s European operations because he had

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