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Milwaukee's Daily Magazine for Sunday, Nov. 23, 2014

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Readers Blog: Art's Milwaukee

Toyota's Ordeal Not Unique

          Akio Toyoda, the President and Chief Executive Officer of the great vehicle manufacturer Toyota, was a man in pain when he appeared before the Oversight and Government Reform Committee of the U.S. House of Representatives. “Grilling” is a very apt term to describe the person in the hot seat of public interrogation by Congressional committees. This certainly applies to Toyoda and Yoshimi Inaba, Toyota’s head of U.S. operations, who appeared with him.

            The car maker has admitted and is trying to make amends for flawed workmanship, in particular accelerators that tend to stick. A resulting Lexus crash in San Diego last year killed four members of one family; Toyoda to his credit apologized publicly for his company’s responsibility for the tragedy, and reiterated the sentiment with emphasis in private meetings.

            Complaints from some that Toyoda’s appearance was too ritualistic, and his statements too general, overlook the enormous gulf which still separates American and Japanese cultures. For us, making an apology is usually tough, and doing so in public something we’d usually rather duck.

            For Japanese, admission of error is agony, and doing so in public borders on the unendurable. Suicide is still occasionally selected by some in this terrible position, fortunately not often in our time.

            Committee members to their credit were generally respectful in addressing the Toyota officials. By contrast, the heads of the U.S. (no longer) Big Three auto makers were subjected to a very hostile environment when they appeared before Congress in November 2008.

            Over the past half century, foreign competition from Japan in particular has been an important – and ultimately very positive – spur to domestic auto manufacturers, after many years of global mass market dominance. Japan’s corporations benefited from domestic protectionism and export subsidies, but their more fundamental long-term advantage has been systematically instilling management lessons a rich and complacent America had forgotten.

            Quality control expert W. Edwards Deming became a cultural icon in Japan, while fading into obscurity in the U.S. Management expert Peter Drucker likewise steadily grew in influence. To be sure, Drucker also remains a major influence in American business circles, but his work is generally ignored in our business schools.

            Drucker’s public impact and prominence began with his 1946 book ‘Concept of the Corporation,’ based on a study of General Motors from the inside. Though the author generally praised the enormous firm, Chairman Alfred P. Sloan Jr. was offended, apparently by criticism of aspects of labor-management relations.

            The book was banned within the company.

            Things got worse. In the 1960s, when Ralph Nader and his young team publicly pressed for auto safety reform, the Big Three dug in. Some auto executives crossed the line and hired investigators to discredit him, thugs to intimidate him and prostitutes to compromise him. Nader fought back, and ultimately succeeded.

            Foreign competition, especially from Japan, forced American manufacturers to change drastically – or die commercially. By the 1980s, a U.S. vehicle renaissance was underway. Toyota’s current travails indicate only that Japan is not immune to similar design and quality problems.

            These lessons reach well beyond the car industry. One General Motors executive who appreciated Drucker’s study was Charles Wilson, who became Secretary of Defense in the Eisenhower administration. The Korean War armistice in 1953 was followed by comprehensive strengthening of devastated South Korea, which Pres. Eisenhower feared might soon fall into the Communist orbit.

            Drucker was assigned to the group overseeing education.

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Arthur I. Cyr is Clausen Distinguished Professor at Carthage College and author of ‘After the Cold War’ (Macmillan and NYU Press). He can be reached at acyr@carthage.edu

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