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Toyota Recall Highlights Reliance on Suppliers

As the company expanded its production overseas and turned to foreign suppliers its legendary quality may have suffered, experts say.

By Kimiko de Freytas-Tamura, Agence France-Presse

Jan. 29, 2010

They may have the Toyota badge, but a big chunk of each vehicle made by the Japanese giant -- from screws to pedals and sometimes even the engine -- are produced by a vast network of suppliers.

A safety recall by Toyota of 2.3 million vehicles due to a problem with accelerator pedals made by U.S. firm CTS Corp. has highlighted the Japanese giant's growing dependency on components that are not made in its factories.

Toyota is famous for its close contacts with suppliers in Japan, where it effectively owns many parts makers, enabling engineers from both sides to be in constant communication over product development.

But as it expanded its production aggressively overseas over the past decade, Toyota has turned to foreign suppliers with which it has looser ties. As a result, some experts say, its legendary quality may have suffered.

"Toyota is obsessed with cost-cutting, halving costs here and there. That has put a big burden on suppliers," said Zenjiro Imaoka, visiting professor of risk management at the Tokyo University of Agriculture and Technology.

"The pressure on suppliers in turn could damage quality control," said Imaoka, who has authored several books on supply management, including Toyota's famous "Just-in-time" inventory strategy.

The Toyota group owns dozens of companies in Japan's industrial and automotive sectors, including a steel company, precision equipment makers, and auto parts producer Denso Corp., itself a Fortune 500-listed company.

But that intimacy with suppliers has become frayed over the years as the carmaker's appetite for revenue grew and it failed to develop equally strong ties with suppliers overseas, analysts said.

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