Page 73 - Toyota Under Fire

TOYOT A UNDER FIRE

SAVING IN GOOD TIMES FOR A RAINY DAY
One of the seminal events in Toyota’s history was the crisis
of 1950. The company, still led at the time by TMC founder
Kiichiro Toyoda, had been investing heavily, expecting rapid
growth that did not materialize. Ultimately the company faced
a cash crunch and was unable to meet its payroll, leading to the
only prolonged worker strike in the company’s history. The com-
pany’s lenders stepped in and forced the company to reduce
payroll by more than 1,500 employees. After asking for volun-
teers to meet this demand, Kiichiro Toyoda and his executive
staff all resigned, taking personal responsibility for leading the
company into crisis.
Losing control of the company to the banks has forever
cemented the value of “self-reliance” in the Toyota Way cul-
ture. That principle has translated into the company’s having
a very conservative investment strategy to this day, with $25
to $40 billion in cash or equivalents on hand during the boom
years. Toyota has been criticized more than once and given
low ratings by some investment advisors for this conservative
strategy, particularly when competitors were either going on
shopping sprees, paying large bonuses, or returning cash to
shareholders.
However, this conservative strategy paid off handsomely
over the long term as the company faced its worst economic
environment since postwar Japan. The only reason Toyota could
sustain employment through the recession and then the re-
call crisis, while continuing its industry-leading investments in
R&D, was because of this conservative approach to spending
and saving.

42