Yo Mama

Lower unit costs meant better productivity.

In 1958, Toyota’s productivity was 1.5 cars

per worker per year. In 1965, productivity

was up to 23 and in 1969 up to 39. GM’s

ratio in 1959 was 8.9 and 11.4 in 1969.

Sales impact on lower unit costs was

magnified by four production factors. First, a

high quality engineering staff led by Tyuichi

Nakagawa, who had designed the engine for

fighter planes in World War II.

Second, quality control circles were a

constant source of creative ideas for both

process and product improvements.

Third, a zero defect program was developed

with the objective of identifying rot causes of

less than satisfactory productions. As a

consequence, end-of-line defects fell to under

1%.

Finally, “kanban” – just in time supply –

kept inventory levels at a minimum. This

was achieved by locating suppliers in the

same industrial parks as the factories.

So holding the ground was facilitated by

moving rapidly along the experience curve.

There was also a second facilitator: having

strengths in key success factors. The

subcompact segment has four such factors:

fuel consumption; maneuverability; price;

and design.

Corona’s fuel consumption was less than the

Beetle’s and also lower than its indirect

competitors (Pinto, Vega, Falcon, Valiant,

Corvair). It decreased a further 30% in the

next ten years.

Maneuverability was high due to Corona’s

small size and the fact that it was the first

imported car to have automatic

transmission.

Price was another variable where Toyota

had advantage. As we have already seen, the

introductory price was lower than its nearer

competitors and decreased 20% over the next

decade until the Corolla was introduced at a

20% lower tag price. This gradual reduction

was enabled by experience effects and other

savings. The unit cost per car of marine

damage in 1966 was 18 dollars per car; by

1967 this had diminished to 6 dollars; and a

few years later it was 3 dollars.

Maintenance costs...