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Japan Trip Presentation: TOYOTA

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  1. Japan Trip Presentation:TOYOTA Jose F. Rodrigues Neto Paolo Gencarelli Greg McKelvey Giulio Pappalardo Kazutoshi Tominaga

  2. Agenda • Company Background • Car Industry Trends • Toyota Challenges & Strategies • Our Questions for Toyota

  3. Company Background

  4. 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

  5. Company History • Established in 1937 out of Sakichi Toyoda’s 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

  6. 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

  7. Strong International Presence and Dominant Position in the Domestic Market Japan Market (2000) Int’l Market (2000) In 1,000 Units

  8. Balanced Global Salesvs. Predominantly Export Based Production Toyota Production and Sales (MM Units) 12% 30% 21% 35% 67% 35%

  9. Strongest Stock Market Performance Relative to the Industry 3-year stock price comparison

  10. 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%

  11. 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

  12. Toyota Production System:Key Main Concepts • JIT • Just In Time manufacturing • Small batches which reduced inventory costs, tightened relationship with suppliers and improved quality control • “5 Whys” Quality • Asking “Why?” 5 times to locate source of problems • Stopping the production line whenever there are quality problems to ensure they are not repeated • Low cost supplier • Long term supplier relationships

  13. Car Industry Trends

  14. 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

  15. 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.”

  16. Emerging Markets to Provide Long-Term Growth in Light Vehicle Production

  17. Global Emphasis on Small-Size Vehicle

  18. Reduction in Emission Standards

  19. Toyota Challenges

  20. Toyota Challenges - Summary • Industry overcapacity • Economic downturn • Globalization • Environmental concerns • The IT revolution • Diverse and shifting consumer demand

  21. Toyota’s Strategy • Increase competitive strength through advanced technology • Promoting a global perspective • Value-driven cost reduction (CCC21 program) • Expanding the value chain—becoming the Total Mobility Services Provider • Expansion of model offerings—Quality, value, and style?

  22. Our Questions to Toyota

  23. 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 Toyota’s 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 Toyota’s 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 Toyota’s view on industry consolidation and potential benefits of acquisitions / mergers? • How does Toyota’s recent initiatives reflect future strategic focus (e.g. new channel brand in U.S., participation in Formula-1)

  24. Reduction in Emission Standards