Episode 148 - Post-War Labor disputes in Japan

I'm David Veech and this is Elevate Your Performance

I've been focusing these past couple of months on the historical activities that got manufacturing and business to where we are today.

I've been focused on Toyota lately because of the impact they have had on bringing improved methods to our attention.  After all, they are the Poster Child for Lean Organizations.

When I first started teaching TPS and lean, I read everything I could get my hands on about Toyota and lean manufacturing.  I learned a ton, but I wasn't always diligent about keeping track of what source said what thing.

The delays I'm experiencing this month are all related to research.  I've been re-reading those older works primarily in an effort to validate the truth of what I've been teaching.  Sadly, I've also validated that some points I make in courses I teach are wrong, historically.  

These would be details like lifetime employment contracts in Japan.  I was taught (again, I was remiss in keeping track of the source) that Japanese companies were ordered to provide lifetime employment contracts to their employees as a result of labor disputes and protests in 1950.  

This week, after re-reading Eiji Toyoda's Fifty Years in Motion, Taiichi Ohno's Toyota Production System, and a scholarly research article on Japan's Lifetime Employment, here's what seems to have really happened.

In December 1948, the occupation government, known as SCAP for Supreme Command, Allied Powers in Japan, imposed austerity measures to bring inflation under control in Japan.  The biggest piece was known as the Dodge Line, named after Joseph Dodge, chairman of the Detroit bank and special ambassador and financial advisor to SCAP.  

These measures fixed prices on certain products like trucks and passenger cars, but not on others, like raw materials.  Many Japanese customers suffered as they lost jobs, or their profits vaporized.  

Their inability to collect installment payments for vehicles they sold drove Toyota Motor Company and many others to the brink of bankruptcy, requiring them to secure significant loans that came with strict conditions on the operations of the company.

As the economy grew more volatile, the union movement in Japan flourished.  Initially, this was encouraged by SCAP until they learned that the largest union was backed by the Communist Party.

To meet the regulatory requirements and to survive, Toyota was ordered to reduce its labor force, already relatively small compared to their pre-war staffing, by 1,600 staff.   Toyota offered early retirement buyouts, but also were forced to reduce wages across the board by 10%.  As a result, Toyota President Kiichiro Toyota resigned from the company, accepting responsibility for the turmoil.

The same was happening to other companies as well and the labor unions exploded with strikes, protests, and often violence. 

The most violent labor disputes in Japanese history took place between 1949 and 1954, involving major companies, such as Toshiba, Hitachi, Toyota, and Nissan.  The working days lost in 1952 alone reached unprecedented 15 million days involving 1.6 million workers.

Lifetime employment was never mandated by the state, but as a long-time philosophy of Japanese employers, this was a goal that most large companies held very dear.  Japanese workers, accustomed to this, were particularly devastated when the staff cuts were required by the economics of the Japanese Market, pushing them into the streets in protest.

According to Ohno, a key goal Kiichiro shared with Toyota leadership was that Toyota needed to catch up with the productive capability (if not the volume) of US passenger car manufacturers within 3 years of the end of the war.  

In 1950, Eiji went to the US to study the automobile industry.  When he returned, he said he was asked "how long until we catch up with Ford?" 

 He answered that Ford was not doing anything that Toyota didn't already know about, 

but it is very difficult to say how long when you consider that Toyota's passenger car output at the time was a mere 40 vehicles per month, while Ford was making over 8,000.

Next up we'll touch on the birth of the quality movement and how Toyota was able to respond to the 1973 oil crisis, which is the event that actually made people start studying how Toyota was doing things.

Have a great day and I'll see you soon.  Don't forget to subscribe!

Episode 142 - Timelines for Toyota - Part 2

I'm David Veech and this is Elevate your performance.

With Sakichi Toyoda's death in 1930, his Son Kiichiro and nephew Risaburo were left to run his businesses.  As a result of a great earthquake in 1923, which destroyed significant pieces of Japan's railways, demand for automobiles soared.

Ford built a plant in Yokohama in December 1924, beginning production in March of 1925.  In 1927, General Motors began assembly operations in their plant in Osaka.  The surge of vehicles produced by these two plants effectively destroyed Japan's domestic automobile makers at the time.

It wasn't until 1933 that Kiichiro established an Automotive Production Division within the Toyoda Automatic Loom Works.  It began prototyping parts and designs which were reverse-engineered from a 1934 Chrysler DeSoto and a Chevrolet Engine.  Kiichiro had to establish his own steelmaking department as well, because their expected demand from existing steel mills was too low.

They purchased some machines, and converted others from the Loom works to begin making parts.  Kiichiro also sent an engineer to the US from January to July of 1934 to learn more.  That engineer visited 130 plants, 7 research facilities, and 5 universities to study the automotive and machine tool industries.

The Japanese government asked Toyoda to develop a truck as well, so Kiichiro bought a 1934 Ford Truck to use as the model, similar to how he used the DeSoto as the model for their first car.  That first car, the Model A1, was finally finished in May 1935.  The first truck prototype, the G-1 was finished in November that year.  Both were prone to serious defects.

With promising developments in the domestic manufacturing capability, the Japanese government changed the licensing rules, restricting licenses to manufacturers owned by a majority of Japanese citizens, effectively restricting Ford and GM from continuing operations there.  This, despite low output of the 2 domestic manufacturers, Toyoda and Nissan.  By September 1936, Toyota's volume had grown to just 100 vehicles per month.

In 1936, Toyoda hosted a contest to design a new Logo for the company, and changed the name from Toyoda with a D to Toyota with a T, as Industry leaders recommended.  People submitted 27,000 entries with the winner announced in the October 10, 1936 issue of the Toyota News.

They established the Toyota Motor Company in August 1937 and saw their dealer network grow to 22 outlets.  These dealers became significant investors in the new company.

We'll pick up here tomorrow and talk about Japan's entry into World War II.

Give me some feedback.  Let me know what you'd like to know more about.  Post a comment or send me an email.

Have a great day and I'll see you tomorrow.

https://www.toyota-global.com/company/history_of_toyota/75years/text/index.html

133 - The Birth of the Auto Industry

I'm David Veech and this is Elevate Your Performance.

The automobile industry literally changed the face of America.  This single enterprise led to more technological innovations in manufacturing, metallurgy, electronics, oil refining, distribution systems, road construction, labor relations, and management practices than any other in the history of the world.  Until the dawn of the computer age, the automobile industry was the absolute technological driver for the United States.

 

We can't talk about cars without talking about Henry Ford, but he certainly wasn't the first or the only person focused on mass producing cars.  Leonardo da Vinci designed a self-propelled wagon way back in the 15th century.  A steam-powered "road locomotive" was invented in England in 1801, but it really took the internal combustion engine to make an automobile economically feasible.  

The Otto engine was the first patented 4-stroke internal combustion engine, back in 1867.  Karl Benz and Gottlieb Daimler each developed practical cars in Germany in 1885 and 1886.  Shortly after that, in 1893, Ford finished his own internal combustion engine and then in 1896 built a steel frame around it, added 4 bicycle tires, and the Quadricycle was born.  When he tried to get it out of his shed to take it for a test drive, it was too wide to fit through, so he had to bust down a brick wall to get it out.

His first auto venture was as mechanical superintendent of the Detroit Automobile Company, formed in August of 1899.  By this time, there were 60 automakers in the US, a number that would grow to 253 by 1908.  This early competition killed the Detroit Automobile Company, but in 1901, with the same financial backers, he started the Henry Ford Company which also failed.  Finally, in 1903, and the Ford Motor Company launched with a simple car called the Model A that eventually morphed into the Model T.

In 1908, Ford produced 10,607 Model Ts.  In contrast, Daimler, working in the most integrated factory in Europe, with 1,700 workers, produced fewer than 1,000.  

In 1908, Ford’s Model T cost $850, which was more money than his workers made in a year of labor.  Ford’s vision was to build a simple but durable car at the lowest possible cost, then pay his workers high enough wages to allow them to afford the very cars they built.  At the root of this vision was a core value that a corporation exists to serve society (Henry Ford, Today and Tomorrow).  

 

To accomplish his vision, Ford needed to do something dramatic and revolutionary.  While all the other automakers employed teams of fitters working in dozens of workshops, custom shaping standard components to make them fit together, Ford, inspired by a visit to Chicago Meat Packers, decided to divide the labor involved among his entire workforce.  

 

In 1910, he built a new factory in Highland Park, Michigan and began work on a moving assembly line.  In 1913, the assembly line began operations.  It relied on each worker specializing in one small area of work and bringing the work to the worker by moving the car from station to station on a moving conveyor belt.  This single innovation resulted in a 900% improvement in productivity over the craftsmen fitters.  

 

In 1914, in response to high turnover rates and low morale, Ford began paying his workers $5 per day when the rest of the industry was paying $11 per week.  By 1916, Ford was making over 730,000 cars a year and selling them for about $350 each.   

 

The Government recognized the need for new roads and passed the Federal Aid Road Act in 1916, and the Federal Highway Act in 1921.

 

Several factors combined to enable this revolution in the auto industry, which essentially saved two other industries.  

 

First, the price of steel was low thanks to the construction of the nation-wide railroad.  But the railroads were no longer expanding at the same rate as through the last part of the 1800’s.  A reduction in the demand for steel may have forced some steel mills to close, but now they had another primary customer, the auto industry.  

 

The oil industry was about to fall victim to electricity until the automobile created the demand for a modified version of kerosene called gasoline.  

 

The availability of cheap raw materials, a shortage of skilled labor, and the high demand for cars drove Ford to mechanize the manufacturing process.  This in turn drove the consolidation of the automobile industry so that those 253 independent auto makers of 1908 turned into 44 makers in 1929.  

 

Of those 44, the big three (Ford, General Motors, and Chrysler) accounted for over 80% of 

new car sales in America.

https://www.history.com/this-day-in-history/henry-ford-leaves-edison-to-start-automobile-company