RESEARCH

Toyota Motor Corporation one of the world’s largest automaker by sales, headquartered in

Japan was been majorly affected by the devastating Japan earthquake and tsunami in March,
2011 and faced significant damage to its global operations. Toyota produces more than 50%
of its vehicles in Japan. In fiscal year 2009, ended March 31 2010, Toyota produced more
than 60% of its vehicles in Japan, as Japan accounted for a little over 25% of its global
vehicle sales. In the short-term, Toyota’s vehicle exports as well as the supply of Japanese
automotive parts to Toyota’s other international automobile manufacturing facilities was
affected accounting loss of around 4,00,000 vehicles worldwide. Sales of Toyota vehicles fell
behind GM and Ford after the earthquake and tsunami in 2011 in the United States as parts
shortages and Toyota production cuts hurt sales.  In fact, a lot of American automakers
suffered from the earthquake too. The reason?

Automakers don’t build cars – suppliers do.  Suppliers build just about every part of a
vehicle except the engine, and then the automaker takes all those parts and puts them
together.  Toyota’s assembly plants across the world depended on Japanese suppliers, so
production of American-made vehicles like the Tundra, Tacoma, and Camry slowed to a
crawl as Japan recovered. But Toyota was able to recover faster than others and again started
its production in eight weeks and by October, 2011 it was manufacturing vehicles at pre-
tsunami level. The reasons were its plans and decisions to bring suppliers in the middle and
creating an integrated supply chain.

Agreements and Partnerships

Toyota Motor Corp. and Ford Motor Co. reached a preliminary agreement to jointly develop
a hybrid system for sport-utility vehicles and light trucks. By September 2011, Toyota
resumed full output in North America, ending the period in which production was slowed by
a shortage of parts related to the earthquake and tsunami in March 2011. Around the same
time the company transfered production of the new Camry from Japan to the United States
because of the high value of the yen. Japan's biggest automaker and subsidiaries Toyota Auto
Body Co. and Kanto Auto Works Ltd. agreed to convert the two units to wholly owned
subsidiaries through share exchanges and combined its car-making units in northern Japan to
boost efficiency.

Post-disaster business strategy

As Japanese automakers recover from the devastation caused by the earthquake and tsunami,
two major players Nissan and Toyota adopted starkly contrasting post-disaster business
strategies. Nissan aimed to expand in emerging markets, while Toyota focused on enhancing
customer satisfaction with its products and services rather than setting any sales targets.
Toyota's motto then was to offer quality goods at low prices to make its customers feel
Toyota's products are good bargains. This sounds modest but Toyota had already built a
global business network so it was more important for the company to hold on to its existing
customers rather than initiating an aggressive marketing offensive. Observers said Toyota
was trailing behind Nissan and Suzuki Motor Corp. in emerging markets, but company
executives gave little heed to such views as they prioritized the training of factory hands and
sales personnel over the expansion of production or sales networks. The company was cautious
about doing business in emerging markets on the grounds that they cannot expect to grow
indefinitely. They believed there could be "steep ups and downs" in those countries. And the
decisions were fruitful as Toyota took sales lead from GM, and there sales boosted by
Twenty percent in 2012.

Free labour for Suppliers

In the days immediately following the earthquake, many autoworkers were told to stay home.
There were no parts and no cars to build, and only minor facility damage, so there was
nothing for them to do. However, Toyota offered their workers the opportunity to collect their
full salary while helping hard-hit suppliers get back to production. By paying their workers to
help their suppliers, Toyota helped get the ball rolling that much faster. Toyota believed
building relationships with suppliers this way will pay dividends for years to come.

Power saving
One of Japan’s biggest problems following the earthquake was diminished national power
production. In order to help reduce electricity demand, Toyota :

 Severely curtailed or eliminated use of air conditioning. Toyota’s workers assembled

cars at 84F through the summer.
 Moved their “weekend” to Thursday and Friday. Toyota closed their Japan plants on
Thursday and Friday to reduce demand on those days, then open on Saturday and
work until Wednesday.

Yet often times disasters provide people with extraordinary motivation and subsequent effort.
At every point in Toyota’s supply chain, workers gave their all to get the company back on
track.

Re-engineering the parts chain

Toyota’s executives and engineers worked diligently to reduce the number of parts
bottlenecks, using a wide array of tools. Some suppliers with fully-operational plants were
given temporary contracts to produce parts that a competitor couldn’t build. Some suppliers
were given engineering and disaster recovery assistance to help solve problems at the plant.
Some vehicle options were been temporarily eliminated to reduce demand for critical parts.