Toyota Motor

Toyota emerged indirectly out of the work Sakichi Toyoda, a famed Japanese inventor. In 1926 Toyoda established a company to market an automatic loom he had invented. Three years later he sold rights to Platt Brothers, a British company that then led the textile machinery industry. Toyoda gave the proceeds from the sale to his son Kiichiro, also an inventor, but who had grown interested in an area other than spinning and weaving.

The younger Toyoda, then in his mid-30s, had become enamored of motor cars, and his father encouraged him to explore the business possibilities. In 1933 he established an automotive division within the loom company, and set out to improve his car through reverse engineering American models.

Prospects for the car business were substantially improved by the protectionist policy the Japanese government adopted in 1936. This advantage prompted Toyoda to spin off the auto operation the following year into an independent company called Toyota Motor. There are a variety of stories about why the spelling of the family name was changed, ranging from ease of pronunciation, to numerological superstitions about the number of calligraphic strokes required.

If the hope was that "Toyota" would be luckier, that was not immediately the case. The government suspended passenger car production in 1939, and Toyota was compelled from then until the end of WWII, to devote its attention to trucks.

After the war Toyota benefited from the fact that, although it had ties to Mitsui, it was not a direct subsidiary of one of the zaibatsu conglomerates that U.S. occupation authorities were dismantling. Unlike Nissan, Toyota was able to retain its top executives. Although Nissan had more experience in making automobiles, Toyota was ready with its own product, the Toyopet, when Japan introduced its first postwar cars in 1947. The company underwent dramatic changes a few years later--including a major labor dispute over job eliminations, and the splitting off of the marketing operation into a separate company (Toyota Motor Sales)--but in the early 1950s Toyota began to move ahead of Nissan.

That lead grew during the remainder of the decade as Toyota Motor Sales built a formidable dealer network, and Toyota itself made major advances in product quality and efficiency. The later were based on the adoption of the kanban (just-in-time) system for managing the flow of parts and the kaizen philosophy of continuous improvement.

Toyota Motor Sales soon began looking abroad for market growth, and in 1957 established a small American subsidiary in California. However, like the Datsuns (now Nissan) of the time, the company's Toyopets were ill-suited to U.S. roads because their small engines and relatively weak chassis could not stand up to prolonged high-speed driving. It was not until the mid-1960s, when Toyota returned with new cars--first the Corona and then the Corolla--that it started to gain a significant position in the U.S. market.

After reabsorbing the sales company in 1982, Toyota Motor followed the path of other Japanese automakers in initiating U.S.-based production. While Honda and Nissan established their own plants, Toyota began by forming a joint venture with General Motors. The plan, announced in 1983, was for the two companies to cooperate at a GM factory in Fremont, California, to produce a subcompact car using Toyota's manufacturing and personnel practices.

Toyota pursued that goal in part by going upscale. Like Nissan, it created a new line of luxury cars, called Lexus, that began to encroach on the market that had traditionally been dominated by German car makers such as Mercedes-Benz and BMW. Toyota's top-of-the-line Lexus LS 400 got off to a good start in the U.S. market, despite some technical problems that led to a recall.

Although Toyota, like other automakers, experienced the effects of the economic slowdown in the early 1990s, by the middle of that decade it was optimistic enough to expand U.S. production with a new truck assembly plant in Indiana and a big boost in capacity at its Kentucky facilities. These plants, like its other U.S. operations, received sizable subsidies from state and local governments. Toyota also opened new plants in Canada, India, and France while expanding joint venture operations in China.

In 2003 Toyota attained its a goal of a 10 percent worldwide market share, and in doing so overtook Ford for second place among the world’s automakers. Toyota then began closing in on General Motors. As part of this effort, Toyota continued to expand its North American operations with the 2003 announcement of a pick-up truck assembly plant in Texas and the 2007 announcement of a plant in Mississippi.

Toyota also laid the groundwork for a revolution in automobiles with the introduction of the Prius, which combined a highly efficient gas engine with a self-regenerating electric motor. The first generation hybrid had significant flaws, but the redesigned model introduced in 2003 was a sensation.

In 2008 Toyota finally outpaced a weakened GM, and became the largest auto producer in the global market. Still, it was not immune from the recession that emerged that year, and contributed to Toyota's first annual operating loss since 1938. Responding to the slump, the company indefinitely delayed construction of a new Mississippi plant, and, for the first time, offered buyouts to U.S. workers. Its growth hopes are now pinned to a great extent on the third-generation Prius introduced in May 2009.

In June 2009 General Motors announced it was leaving the NUMMI joint venture. The following month Toyota announced that it planned to close the operation.

In late 2009 and early 2010 the company was rocked with a crisis centered on reports that many of its vehicles were susceptible to uncontrollable acceleration.