A Wall Street Journal article last week (subscription may be required) noted that Toyota has accelerated its cost-cutting efforts.  The world’s leading auto producer by volume has requested the help of its key suppliers to meet a goal of reducing the cost of component parts by 30% in the next three years.

Toyota has been garnering considerable negative perceptions in the U.S. market of late.  First, a multitude of major product recall incidents has tarnished the company’s previous stellar reputation as a producer of reliable vehicles.  Second, the effects of near two years of global recession coupled with some business missteps has had a severe impact on Toyota’s sales growth and lack of profitability.  The company expects to suffer its second straight year of loses, and has lost some market share in the critical U.S. market.

This latest initiative, despite the need for the company to repair its balance sheet, is rather untimely and fraught with more risk. Toyota owners already have building concerns about the company’s building lapses in vehicle quality and reliability 

I like others have been a loyal Toyota owner, having purchased multiple vehicles over the last ten years.  I must admit that I too have noticed a noticeable deterioration in reliability.  Our 2004 Avalon has experienced three major part failures this year, which is very worrisome, and I suspect that our experience may not be an isolated one.  We, along with other Toyota owners, wonder aloud whether the so-called “sticking accelerator” problem reported among a group of sedans is limited to just a certain few vehicles or is more widespread.

It seems that ever since the bulk of vehicle production was shifted outside of Japan, quality seems to have slipped over time.  My evidence point is that our 1999 Toyota SUV, which was built and exported from Japan, continues to perform in the traditional Toyota manner. 

Pushing suppliers even harder to achieve significant further component part cost reductions without a context to the root-causes of eroding quality and reliability is risking even more damage to the Toyota brand.  A look back in history when major U.S. OEM’s such as Chrysler and GM embarked on similar initiatives with their suppliers would indicate a disastrous impact on the reliability of vehicles. 

Toyota should know better than to embark on an accelerated road toward destroying its brand and owner loyalty.  Let’s hope that they do due diligence to both business and reliability needs.

What’s your view?  Does Toyota have other options besides extracting more cost reductions in parts?

 Bob Ferrari

Hello everyone and Seasons Greetings.

After a short pause for the Christmas holiday, Supply Chain Matters resumes with all forms of supply chain commentary.

There were some interesting supply chain developments in the business news last week.  A Wall Street Journal (subscription may be required) article noted that in an effort to gain further control of its 787 supply chain, Boeing acquired the remaining 50% of the Global Aeronautica fuselage plant in Charlestown South Carolina.  The article notes that Boeing plans to step-up the 787 production schedules to a delivery rate of 7 Dreamliners per month by 2011, and 10 per month by 2013. The full acquisition of the Charlestown facility allows Boeing to tighten supply-chain oversight and speed-up production by opening-up a second final assembly facility by 2012.

The article further intimated that this latest move by Boeing may be an indication that the company may be willing to renegotiate with its key suppliers who have been financially burdened by the two years of Dreamliner delays. Boeing has spent over $1 billion in South Carolina alone, to buy out struggling suppliers.

This site has posted numerous comments related to the supply chain challenges at Boeing.  Our latest noted that Boeing must now focus on flawless execution.  So far, so good.

Bob Ferrari