Toyotathon Toyotathud Part Two

(Pictured: the E-M-F, the Toyota of the past and perhaps a mirror into Toyota's future.)

In scrounging my iffy memory, I have come up with a historical analogy for what is happening today with the fine Toyota Car Company. I had to go way back and the parallel is something less than perfect.

But first an update: OMG did Toyota blow it! Part one: another internal memo was leaked that the firm is now seeking external causes to this ‘conspiracy to cost them money.’ Toyota failed to refute the several scientific tests offered that duplicated the run away car event, other than to say that their testing did not show this. Part Two: two more vehicles ran away yesterday, both making the news.

Toyota has never been a ‘great’ car line. It’s a middling badge which has taken away share from the likes of Ford, Chevy, Pontiac and Chrysler. The term ‘more liked than loved’ is often mentioned. They grew to prominence making a nice middle brow car at a cheaper price and, when Japan grew up and exchange rates evened out, cruised on brand reputation.

Now all of that is gone. And there is no history of a brand or model coming back after this scale of a disaster. I don’t think the Japanese know that.

In 1909 the auto market was dominated by a handful of firms. The car itself was on the verge of wide-scale consumer acceptance. Several firms competed in the middle category that Ford would eventually win so handily. One of these early firms was an outfit called E-M-F.

The E-M-F was what Toyota is today: something a little bit nicer than one might expect for the price. It was a very durable vehicle, having been popularized as such by winning the Glidden Tour.*

The E-M-F firm capitalized on its Glidden win, as well as others on numerous race tracks and road rallies, by lining up a nationwide retailer to handle their offerings. They went from selling a very few cars to selling a whole bunch almost overnight. This is actually the closest parallel to Toyota, since the exact same thing happened as a result in both cases.

To make a long story short, E-M-F started cheaping out. The car that won the Glidden Tour and so many races was hardly the car that was being sold in stores. Now that car would have been profitable to sell, but not as profitable as what E-M-F wound up selling. In fact, E-M-F’s sole focus was on how they could make their cars much more profitable. Their answer was to cheap out on parts.

Flash forward one hundred years. All American car makers are in deep, deep do do, leaving the American market open to the first firm that could jump up production while keeping its price point at the same level. Normally, you have ‘do something’ to recoup expansion expenses. The best thing of course to do is sell more cars. This is what Toyota set sail to do: Build more cars, sell more cars.

Unlike 1909 there is about a 40% over-capacity in the automotive manufacturing segment world-wide. This is what all car manufacturers are actually facing. Toyota thought they could basically ignore this. So they go and up their production by a hideous percentage. Dumb, but not catastrophic.

The catastrophic part is where they adopt E-M-F’s focus on reengineering their cars strictly for profitability. Who knows how many bad moves they’ve made, but they all amount to cheaping out. In the case of the run away car problem, it's caused by having their cars essentially brake by wire: as opposed to mechanical systems slowing your car, parts have been shed by making the process a linkage between pads actually pressing outward, the gears decreasing and the engine cycling down. All of this is done with a computer. A really cheap computer, it seems.

In E-M-F’s case, they cheaped out on everything. The car became known as ‘Every Morning Fix-it’, ‘Every Mechanic’s Friend’, ‘Every Mechanical Fault’, and ‘Every Miss Fire’. Like Toyota, they bungled every opportunity to save their brand’s face. Unlike Toyota, they didn’t do it in the newspaper. The company simply froze. They knew damn well what the problem was—and they knew damn well that they didn’t have a solution. What were they going to do—rebuild each car, this time with good parts? E-M-F couldn’t do that, even if they wanted to. I think that’s where Toyota is today.

Toyota would have to take in all of their cars, crush them and issue new cars, this time engineered from the ground up with provable systems. No auto company is capable of that. No auto company could survive that.

In E-M-F’s case, they strung out their retailers, much as Toyota is doing today. E-M-F, however, had only one retailer, as opposed to thousands of small businesses to sponge off. This retailer decided that they had had enough of E-M-F. The retailer issued the recall, costing it one million dollars in 1909 money. ** One finished with the recall, the retailer, Studebaker, decided to go into the auto business on its own.

Once the world’s third largest auto company, E-M-F vanished within a few years. I’m not making any predictions as far as Toyota is concerned, but I think they are done in the American market. Having your cars kill people ala Pinto, Corvair, the cycle cars is usually bye bye. That the problem is cutting across all of its models and lines augurs poorly.

It could also be argued that Toyota and all Japanese manufactures have been cruising for a bruising the whole time. Much has been written about on-time sourcing, but very little about declarative pricing. At the start of production cycles many Japanese firms will declare a price they are willing to pay for such and such, almost always less than they did the cycle before. It is then up to their suppliers to reach this price while still making a profit. Perhaps the key to the entire disaster can be found here?

*The Glidden Tour was not really a race. It was a contest to see if it was actually possible to drive from one American coast to the other. It wasn’t. The E-M-F drivers constantly complained that the car they were in was too light footed to navigate many rural roads. They won the event even though the E-M-F spent a lot of its time being pushed, carried and otherwise manhandled. It should be noted that the E-M-F was the only car to finish the tour.

** It wasn’t really a recall. Studebaker hired local mechanics to go to people’s homes to fix the cars. The bills from such was the basis for Studebaker’s claims against E-M-F in bankruptcy court. Thanks to the weight of Studebaker’s claims, they were awarded possession of all of E-M-F’s assets. Post 1910, all E-M-F’s are made by Studebaker. Studebaker eventually abandoned the E-M-F badge and the lower end of the market with it. From that point on, Studebaker would sell itself as a technology leader. Studebakers were pretty sweet cars, but they were never again all that affordable.