Toyota Crisis Shakes Hometown

Feb. 10, 2010
"When Toyota catches a cold and sneezes, everyone gets pneumonia here," said Kazuhiko Yamada, president of Honmachi Holdings, a company that maintains machinery in Toyota factories. "The financial crisis had hit us in the stomach,

There is a saying in Toyota's hometown that when the auto giant sneezes, the whole city falls ill. But the symptoms of its recall crisis look set to be felt far beyond "Japan's Detroit."

No flashy signs or advertisements are necessary to remind visitors to the company town in central Japan that it is the birthplace of the world's largest carmaker. The name -- Toyota City -- speaks for itself.

But the group's influence extends well beyond the city limits, and concerns are mounting across Asia's biggest economy that Toyota's massive global safety recalls will tarnish the brand image of Japan Inc as a whole.

Japan's biggest company -- which employs more than 300,000 people around the world -- has long been a source of pride for the nation. Its cars dominate the roads, used by millions of Japanese including the royal family and the prime minister.

Toyota's success mirrored the country's post-war economic miracle, driven by the success of its carmakers and other exporters. Nowhere are the company's woes felt more keenly than in the eponymous city, renamed in 1959 in recognition of Toyota's growing importance.

The automaker's recalls of more than eight million vehicles around the world to fix faulty accelerator pedals and brakes are another major setback to the local economy, after Toyota sales slumped in last year's economic crisis.

"When Toyota catches a cold and sneezes, everyone gets pneumonia here," said Kazuhiko Yamada, president of Honmachi Holdings, a company that maintains machinery in Toyota factories.

"The financial crisis had hit us in the stomach, and just when we thought global demand was picking up, we got another blow from the recalls. This time it's in our face," said Yamada, himself a former Toyota employee.

Businesses large and small, from parts suppliers to restaurants, revolve around Toyota like satellites.

"Toyota is number one for us," said 69-year-old Hatsue Aoyama, who runs a cafe where many Toyota retirees gather. "Needless to say, with the crisis and these (recall) problems, everyone is glum. We have seen better days. It's really sad," she added.

It's not just Toyota City that is worried.

Rival Honda -- itself recalling hundreds of thousands of cars to fix defects -- has warned the problems could damage confidence in all Japanese cars.

And fears are growing that Toyota's woes will make consumers overseas think twice about buying Japanese goods in general.

"Toyota is the representative of Japan Inc. The issue may shake the credibility of the whole of Japan and its technology," said Tatsuya Mizuno, an auto analyst at Mizuno Credit Advisory.

Founded in the 1930s by loom-maker Kiichiro Toyoda, the company became the savior of a local economy battered by a collapse in silk prices due to the Great Depression.

The company posted record sales of 26.29 trillion yen (US$292 billion) in the year to March 2008, but was hammered by the subsequent global downturn, posting its first-ever annual loss last year.

Toyota has expanded into various fields such as telecommunications, advertising, real estate, insurance and shipping services. It also owns a dozen major parts makers, including Denso, itself a Fortune 500-listed company.

"It's because of Toyota that we were able to lead stable lives. It is a source of comfort and pride," said 62-year-old Rieko Iwai, whose father-in-law, husband and son are former or current employees of the Toyota group.

"When I have a grandchild, it would be nice if he worked for Toyota. Toyota has strong foundations so I don't think it will topple that easily."

Toyota's presence is such that locals are reluctant to openly criticize the company and its current chief Akio Toyoda, the grandson of the group's founder and son of one of its former presidents, who took charge last year. "He is what you would expect of a third-generation leader. He doesn't know the field," said one man who has worked with Toyoda in the past and asked not to be named. "He is like a soldier who has practiced firing shots but who has never been into battle."

Copyright Agence France-Presse, 2010

See Also
Atop the Mountain, Toyota Facing Questions
Toyota Should Have Acted Sooner Says Japanese Minister
All Toyota Brake Recall Articles

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!