Japan Trip Presentation: TOYOTA

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Japan Trip PresentationTOYOTA

• Jose F. Rodrigues Neto
• Paolo Gencarelli
• Greg McKelvey
• Giulio Pappalardo
• Kazutoshi Tominaga

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Agenda

• Company Background
• Car Industry Trends
• Toyota Challenges Strategies
• Our Questions for Toyota

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Company Background
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Headline Facts Toyota

• Annual sales 114 Billion
• Production 5.8 million Units/Yr.
• Employees 210,000 people
• 56 manufacturing plants in 6 continents
• 3rd largest automotive manufacturer in the global
  market

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Company History

• Established in 1937 out of Sakichi Toyodas
  weaving machine company
• Launched first car (SA Model) in 1947
• Toyota Production System formed in 1950 based
  on Just-In-Time principle
• Overseas production starts in 1959 (Brazil)
• In 1972, cumulative production 10M units
• In 2002, entry in the Formula 1 circuit

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Business Segments - Low Diversification

• Automotive 90.0 Sales
• Design, manufacture and sales of passenger cars,
  recreational vehicles, SUVs and related parts
• Financial Services 4.5 Sales
• Provisions of loans to car buyers and car dealers
• Others 5.5 Sales
• Industrial vehicles (forklifts, etc.)
• Pre-fabricated housing

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Japan Market (2000)
Strong International Presence and Dominant
Position in the Domestic Market
Intl Market (2000)
In 1,000 Units
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Balanced Global Salesvs. Predominantly Export
Based Production

Toyota Production and Sales (MM Units)
12
30
21
35
67
35

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3-year stock price comparison
Strongest Stock Market Performance Relative to
the Industry
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Strong Financial Performance
INDUSTRY

• Market Cap
• 5-Yr CAGR Revenues
• 5-Yr Pre tax Profit Margin
• 5-Yr CAGR Earnings
• ROE

• 102 Bn
• 3.0
• 7.3
• 17.3
• 9.5

• 43 Bn (DaimC)
• 3.8
• 4.5
• 12.63
• 11.8

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Revolutionary Production System

• Revolutionized manufacturing industry
• At its core is lean principle
• Relentless drive to improve efficiency and
  eliminate waste
• Beginnings of TPS were born out of necessity due
  to lack of resources in post-war Japan

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Toyota Production SystemKey Main Concepts

• Just In Time manufacturing
• Small batches which reduced inventory costs,
  tightened relationship with suppliers and
  improved quality control

• JIT

• Asking Why? 5 times to locate source of
  problems
• Stopping the production line whenever there are
  quality problems to ensure they are not repeated

• 5 Whys Quality

• Low cost supplier

• Long term supplier relationships

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Car Industry Trends
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Car Industry Trends

• Consolidation
• Push to Emerging Markets for Growth
• Global Emphasis on Small-Size Vehicles
• Environmentally Friendly Products
• Internet as a Key Enabler of Change of Automotive
  Retailing

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Drivers of Consolidation
Type
Rationale
Tactics
Of the 20 auto makers in 1965, 14 have since
merged or been taken over. By 2006, the top 14
VMs will account for 90 of light vehicle output.
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Emerging Markets to Provide Long-Term Growth in
Light Vehicle Production
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Global Emphasis on Small-Size Vehicle
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Reduction in Emission Standards
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Toyota Challenges
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Toyota Challenges - Summary

• Industry overcapacity
• Economic downturn
• Globalization
• Environmental concerns
• The IT revolution
• Diverse and shifting consumer demand

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Toyotas Strategy

• Increase competitive strength through advanced
  technology
• Promoting a global perspective
• Value-driven cost reduction (CCC21 program)
• Expanding the value chainbecoming the Total
  Mobility Services Provider
• Expansion of model offeringsQuality, value, and
  style?

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Our Questions to Toyota
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Toyota Questions

• What do you see as the key elements to succeeding
  in the European market?
• After Japan, U.S., and Europe, where do you see
  as the next critical market to Toyotas
  globalization effort?
• Emerging markets
• What have been the most difficult challenges in
  the global implementation of The Toyota Way?
• While sales continue to globalize, non-Japan
  production footprint appears to be leveling at
  35. What is Toyotas strategic direction on
  make where sell? Challenges?
• Does Toyota foresee Internet as viable
  infrastructure in purchasing, supplier
  relationships? How will Toyota integrate into
  TPS?
• When do you think hybrid vehicles will reach
  critical mass?
• What is Toyotas view on industry consolidation
  and potential benefits of acquisitions / mergers?
• How does Toyotas recent initiatives reflect
  future strategic focus (e.g. new channel brand in
  U.S., participation in Formula-1)

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Reduction in Emission Standards
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Japanese auto industry history

• From follower to leader
• From domestic producer to exporter
• Interventionist government

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Our questions for Toyota

• Current competitive landscape
• Local and global competition (Korea,
  Daimler-Chrysler, Ford, GM etc.)
• Future of automobiles
• Development of fuel-cells, integration of
  Internet applications and other trends

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1998 Production Comparison Chart
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Balanced domestic foreign production
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Toyotas Strategy

• Increase competitive strength through advanced
  technology
• Environmental technology
• fuel consumption, emission, recoverability
• Hybrid vehicles and next generation fuel cells
• Cost-reduction efforts
• discontinuation, integration of older models
• Increased emphasis on financial services and
  information communication system