Eiji Toyoda

Japanese industrialist and businessman

• Born: September 12, 1913
• Birthplace: Nagoya, Japan
• Died: September 17, 2013

For more than a half century, Toyoda was a central executive at the Toyota Motor Company and a driving force in the development of a small family enterprise into one of the world’s most successful corporate empires.

Early Life

Eiji Toyoda (ay-jee toh-yoh-dah) was born on September 12, 1913, in Nagoya, Japan, to Heihachi and Nao Toyoda. Although the family name was eventually to gain international recognition for automobile manufacturing, it was already a well-known name in Japan thanks to Toyoda’s uncle, Sakichi Toyoda, known in Japan as the king of inventors.

Sakichi Toyoda was a skilled carpenter. Most of the 150 domestic and international patents he eventually obtained were related to the weaving industry. In early 1895, he established in Nagoya the first of a series of successful ventures in the weaving and textile machinery industry. In his autobiography, Eiji Toyoda warmly acknowledged his uncle’s shaping influence on his early years. When Toyoda was in the second grade, his uncle Sakichi took him to visit one of his weaving works in Shanghai and used the occasion of the trip abroad to acquaint his young nephew with the intricacies of foreign exchange rates.

Sakichi's eldest son, Kiichirō Toyoda, urged his father to consider setting up an automobile manufacturing plant in one of the family's loom works factories. It was a risky venture to expand the company into automobile manufacturing. Japanese companies had manufactured cars as early as 1914, but foreign motor car companies such as Ford and General Motors had so thoroughly dominated the Japanese market that none of the corporate giants in Japan was willing to commit investments. However, Kiichirō ordered the Toyoda Loom Works to begin the manufacture of automobile engines. An automotive department was established in the company in 1931.

It was in this department, while studying as a mechanical engineering student at the prestigious Tokyo Imperial University in the mid-1930s, that Toyoda began to spend his summer vacations tinkering with small engines. By the time Toyoda graduated in 1937, Toyoda Automatic Loom had produced three passenger cars with economical engines of Chevrolet design and the stylish lines of a DeSoto body. Toyoda’s father had plans for the young graduate at his own weaving mill, but Kiichirō, Toyoda’s strong-willed cousin, prevailed, and it was decided that Toyoda would begin work in Toyoda’s automotive facility. At about this same time, in August 1937, the Toyota Motor Company was established. (“Toyota” is an alternate reading of the two ideographs that make up the family name; it was chosen for its phonetic clarity and potential advertising appeal.)

Toyoda married Kazuko Takahashi in 1939. They had four children, Kanshire, Tetsuro, Shuhei (who later became a high-ranking Toyota executive), and Sonoko.

Life’s Work

The Toyota Motor Company was barely on its feet when the eight-year-long Second Sino-Japanese War (1937–1945) began. Toyoda, who was in charge of product inspection and improvement, later conceded the poor quality of the company’s early vehicles and candidly allowed that military procurements for the war effort had saved the company in its early years. Despite wartime procurement and production problems and an air raid that leveled a quarter of Toyota’s plant in the closing days of the war, the company tallied profits in every fiscal period during the war except for the first year. These wartime earnings were used to spin off several related companies. In 1940, for example, the Toyota Steel Corporation was founded in response to a need for locally produced, high-quality specialty steel.

The immediate postwar years (1945–1950) brought brutally harsh conditions to both industry and daily life for all Japanese. The initial policy of the US occupation authorities was to “deconcentrate” Japanese industry by breaking up large industrial conglomerates such as Toyota to ensure that they would remain weak and unable to contribute to any kind of revival of the expansionist drive that led to war. As production declined, management ordered layoffs and wage and benefit reductions without consulting the workers, and this touched off a wave of labor unrest and strikes that further damaged the country. In 1950, Toyota was close to bankruptcy.

By this time, however, the occupation authorities had come to reconsider their initial deconcentration policy. The onset of the Cold War had convinced US General Douglas MacArthur of the merit in encouraging the revival of a strong industrial base that would in turn contribute to a prosperous Japan that would be closely tied to US strategic purposes in the Far East. One of the earliest beneficiaries of this new policy was Toyota. In the summer of 1950, at a time when few Japanese were allowed to travel abroad, US occupation officials granted Toyoda permission to travel to the United States for three months to study production methods; half of this time he spent at the Ford Motor Company. The daily output of the various Ford plants was about eight thousand units, while Toyota’s was a piddling forty.

As it turned out, the summer of 1950 was a watershed period for the Toyota Motor Company. By the time Toyoda returned to Japan in October 1950 and was made the company’s managing director, a “procurement boom” was under way as orders to supply US forces in Korea with everything from gunny sacks to trucks flooded the offices of Japanese factories. During the first year of the war, for example, the US military ordered more than three thousand trucks from Toyota, equivalent to about one-fourth of the entire Toyota production that year. By the end of the Korean War in 1953, the Japanese auto industry had surpassed the production record of the peak year of 1941, and Toyota had pulled ahead of Nissan in sales of both cars and trucks. Once again, a war had given the company a much-needed boost. Two years later Toyota introduced the Crown, which sold well in Japan.

Another major turning point in the history of Toyota came in 1957 with the decision to establish Toyota Motor Sales, USA. Volkswagen was demonstrating that foreign-made small cars could command a growing share of the US market, and, while other Japanese manufacturers debated, Toyota acted. The first two Crown passenger cars arrived in California in September 1957. They turned out to be a disaster. They were cars built for short hauls on crowded city streets, not for American high-speed roads, and for function rather than comfort. They lacked acceleration and strong brakes. Sales were so poor that the American franchise nearly collapsed, and it fell upon Toyoda, who was appointed as executive vice president of Toyota Motor Company in 1960, to travel to the United States in that year to handle the staff dismissals and reduce the scale of operations. The setback did not destroy the company’s determination to break into the US market, but rather it conveyed a do-or-die urgency for radical improvement in the quality of Toyota’s product. The urgency was heightened as American automakers introduced compact cars of their own into their 1960 lines.

In response, Toyoda promoted kaizen, the concept of continuous improvement to make a company more competitive. He also hired Taiichi Ohno, an inventor, to develop a new approach, the Toyota Production System, to improve both quality and, through production efficiency, quantity. The system concentrates on waste control, just-in-time parts supply to avoid inventory backlog (called kanban), automation “with a human touch” to control errors, production leveling to eliminate erratic numbers of finished cars, and “signboard,” a stock identification-and-control procedure.

It would not be until 1964 that Toyota was ready to compete again in the United States with the Corona. Two years later, in 1966, the company introduced another new model, the Corolla, which met international standards of excellence for the mass market; exports began to climb rapidly. Sales expanded steadily in the United States, and in 1975 Toyota surpassed Volkswagen as the leading imported-car company. In the meantime, Japan’s so-called economic miracle was rapidly increasing the purchasing power of the Japanese consumer and, by the time Toyoda became president of Toyota in 1967, the era of private passenger car ownership, when ordinary citizens could afford to buy a car, had begun.

One set of figures illustrates the dramatic growth of the auto industry in Japan in the 1960s. In 1960, the total output was 165,000 vehicles; by 1969 that figure had grown to 2,611,000 vehicles, and Toyota’s share of the market had expanded from 25 percent to 37 percent. By 1982, when Toyoda retired from the presidency and became chair of the board, Japan’s automobile production had surpassed that of the United States, and Toyota remained well ahead of its domestic rivals in output. In 1984, Keidanren, the powerful federation of Japanese business organizations, elected Toyoda as its vice chair. That year the company achieved a record, selling some 3.4 million vehicles in its domestic and overseas markets and earning $2.1 billion.

Since 1960, Toyoda had tried to arrange a joint venture for manufacturing automobiles in the United States. Executives at Ford turned him down four times. Roger Smith, chair of General Motors, was more amenable, and the two companies concluded an agreement in 1983 to create New United Motor Manufacturing Inc. (NUMMI). The first North American Toyota plant opened in Ontario, Canada, in 1987, followed by plants in Kentucky in 1988, Indiana in 1998, and Texas in 2003. The company also opened plants in Great Britain and France. NUMMI achieved a nearly flawless labor record in avoiding the strikes that troubled other ventures.

Also in 1983, Toyoda ordered the company to make a major departure from its specialty, compact economy cars, which had greatly boosted company sales after the 1973 oil crisis. He directed engineers to build the Lexus to compete with the Mercedes and BMW in the luxury car market. It was introduced in 1989 and soon accounted for an appreciable share of the market.

Toyoda stepped down from the chairmanship in 1994 at the age of eighty-one, but he remained active in the company and became known as “supreme adviser.” The corporate legacy that he helped develop brought the company to the forefront of the car industry in 2007, when it surpassed General Motors to hold first place in sales worldwide. That same year, Toyota became the second ranked automaker in terms of US sales. In 1994, Toyoda became the second Japanese person, following Soichiro Honda, to be inducted to the US Automotive Hall of Fame. He also was selected as one of the leading management gurus by the International Institute of Management in 2006, and was named in 1999 to Time magazine’s list of one hundred most illustrious people of the twentieth century. In his nineties, Toyoda was hospitalized for hip problems. At the age of one hundred, Toyoda died of heart failure on September 17, 2013, at the Toyota Memorial Hospital in Toyota City, Japan.

Significance

Toyoda’s career in the industrial empire founded by his uncle and cousin spanned six decades that were as turbulent for Toyota as they were for Japan. The wartime years brought opportunity for a struggling new company, but Japan’s defeat brought the company and country to the brink of total economic collapse. The Korean War represented another opportunity for Toyota, but it was the drive for efficiency and quality control and improved labor-management relations that brought Toyota to its world standing. By 1980, Japan’s automobile industry had reached an annual production level of eleven million vehicles; Toyota had a third of that market, well ahead of Nissan, its nearest competitor. As the 1980s progressed, Toyota retained its premier position in the Japanese auto industry year after year. Moreover, historians credit Toyoda with leading Japan into the world automobile market.

Furthermore, many of the management and production styles associated with Toyota were perfected while Toyoda was at the helm. The “just-in-time” system in which parts arrive from suppliers in time for final assembly, thus reducing inventory costs, is an example of this production style. Toyoda was a key figure in the development of the Toyota Production System and total quality control strategies. Toyoda also deserves a large measure of the credit for his company having had no strikes since 1955.

Toyoda’s life illustrates that of the exemplary Japanese business executive. He was a redoubtable executive who led by building harmony and consensus among employees and by instilling strong company and brand loyalty.

Bibliography

Allinson, Gary D. Japanese Urbanism: Industry and Politics in Kariya, 1872–1972. Berkeley: U of California P, 1975. Print. A highly respected scholarly study of the relationship between the Toyota enterprises and the communities, in and around Nagoya, Japan, where they are located. It includes a good analytical discussion of the growth of the Toyota empire and the role of various family members, including Toyoda.

Cho, Yukio. “Keeping Step with the Military: The Beginning of the Automobile Age.” Japan Interpreter 7 (1971): 168–78. Print. A fascinating account of the early years of the automobile industry in Japan.

Cusumano, Michael A. The Japanese Automobile Industry: Technology and Management at Nissan and Toyota. Cambridge: Harvard UP, 1985. Print. A scholarly examination of the history of the two companies and the personalities who helped to transform them into world-class auto manufacturers. Contains an immense amount of statistical data.

"Eiji Toyoda." Movers and Shakers: The One Hundred Most Influential Figures in Modern Business. New York: Basic, 2003. 325–27. Print. Contains a three-page entry on Toyoda with biographical information and a brief explanation of his management innovations.

Hirsch, Jerry. "Eiji Toyoda, Car Family Scion Who Developed Corolla and Lexus, Dies." Los Angeles Times. Los Angeles Times, 17 Sept. 2013. Web. 10 Dec. 2013.

Kamata, Satoshi. Japan in the Passing Lane: An Insider’s Account of Life in a Japanese Auto Factory. Trans. Tatsuru Akimoto. New York: Pantheon, 1982. Print. A controversial account of the Toyota Company by a freelance journalist who hired on at the company as a laborer. Kamata challenges the generally favorable view of Toyota’s contented workers by depicting them as being driven under ferocious working conditions.

Kamiya, Shōtarō. My Life with Toyota. Trans. Thomas I. Elliott. Tokyo: Toyota Motor Sales Co., 1976. Print. Although there is little mention of Toyoda in this book, it is a valuable study of the company by one of the founding members of the company and president in the 1950s.

Keller, Maryann. "The Legacy of Eiji Toyoda." Bloomberg Businessweek. Bloomberg, 18 Sept. 2013. Web. 10 Dec. 2013.

Landes, David S. Dynasties: Fortunes and Misfortunes of the World’s Greatest Family Businesses. New York: Viking, 2006. Print. The Toyodas are the last of the eleven dynasties that Landes covers, and he emphasizes the kin relationships and rivalries within the family and discusses business strategy and economic history. A fascinating view of business culture.

Liker, Jeffrey K. The Toyota Way: Fourteen Management Principles from the World’s Greatest Manufacturer. New York: McGraw-Hill, 2003. Print. For general audiences, this book explains the practices initiated by Toyoda and others that made the Toyota Motor Company a huge global success.

Maynard, Micheline. "How Eiji Toyoda Created the Modern Version of Toyota." Forbes. Forbes.com, 17 Sept. 2013. Web. 10 Dec. 2013.

Tabuchi, Hiroko. "Eiji Toyoda, Promoter of the Toyota Way and Engineer of Its Growth, Dies at 100." New York Times. New York Times, 17 Sept, 2013. Web. 10 Dec. 2013.

Toyoda, Eiji. Toyota: Fifty Years in Motion. New York: Kodansha Intl., 1987. Print. Originally published in Japanese in 1985. A rambling autobiography with many interesting anecdotes and numerous photographs from the early years of the company. Valuable for discussion of Toyoda’s relationships with other leaders of the company.