"Toyota's Globalization Takes Shape through the Camry"

Speech by Gary Convis
Executive Vice President
Toyota Motor Engineering and Manufacturing North America, Inc.
"Toyota's Globalization Takes Shape through the Camry"

Management Briefing Seminars
Traverse City, MI
August 10, 2006

Good morning!

It is truly an honor to be here and share the stage with my colleagues Rick Wagoner, John Krafcik, and Dr. Sohi.

This is the premier event of the year in our industry. David Cole and his team do an incredible job putting this together. Dave – each year, I say you can't outdo yourself… and each year you prove me wrong!

I love coming back to Michigan, and in fact, I have family right here in Traverse City. I grew up in Battle Creek, attended Michigan State, and played basketball and baseball for the Spartans. These days, I still do OK playing hoops against most Toyota executives… at least those that are around five feet tall.

But I'm not sure I would want to get on the court with you, Rick! John, it's terrific to see you again. John and I worked together at NUMMI in the mid-80s, and it's been great to see his continued growth in our industry. First, let me start by commenting on the theme of this year's Management Briefing Seminars – "The Auto World Future – Round or Flat?"

Let me hedge my bets and say… yes.

I'm sure many of you have read Tom Friedman's exceptional book. After I did, it's impossible to deny the world is getting flatter – and it will continue to impact all of us and our companies forever.

He's right to say that companies of almost any sort can now outsource many needed services virtually anywhere, and that we all have to break through outdated thinking… boundaries… and borders.

The fact is though… we have many advantages right here at home if we truly work together to leverage our full capabilities.

To be a successful automaker or supplier in today's competitive world, I believe every single person involved in your value chain must fully understand the company's mission and direction, and execute their roles perfectly to move toward shared goals.

As an example, when a potential customer walks into a dealership, they are about to buy the second most expensive product they will ever own.

This is not just a transaction. Everything must be handled with professionalism… to build trust… and ideally establish a relationship with that customer for life. But it goes well beyond dealers.

It also extends to suppliers, logistics partners, IT providers, team members in our plants, design engineers, sales and marketing associates, and anyone else responsible for getting our vehicles into the driveways of satisfied customers. So, even though I accept Mr. Friedman's point that our world is quickly changing, I also believe many of our age-old principles will continue to apply.

Principles like quality… value… trust in products… and running your business with innovation… teamwork… and continuous improvement. To explain this further, today I'd like to talk about our all-new Camry. I think this story will resonate with you and help explain our world today – and, I believe – in the future.

The story illustrates how we, as a global company, adopted best practices from Toyota affiliates around the world and shared them to develop an exceptional car and launch it with exceptional execution.

It required outstanding global teamwork to integrate our designers, suppliers, manufacturing, and sales associates to work even more efficiently together. And as we collaborate globally, we also nurture our local talent to develop their own innovative ideas – and we're doing both at the same time. So, here's the story of the Camry development and launch. I think everyone here is familiar with the all-new Camry. The reaction from our customers and the media has been phenomenal.

There were many great headlines, but my favorite was from the Winnipeg Free Press. They called the new Camry: "The new thrilla' that was vanilla." Well, it was no accident. We wanted the new Camry design to be a breakthrough for Toyota. Possibly still vanilla, but certainly now a creamy French vanilla… without the calories.

How was this accomplished? I can summarize it in three points: One – we brought global teamwork to a new level.

Two – we listened closely to our customers, and ensured their voices were reflected in the design and features they wanted, and Three – we developed a clear production and launch strategy, and executed them with the full involvement of our local resources and partners. From the beginning, we knew this would be a challenging project. It was a massive undertaking.

The last generation Camry was produced in five plants. For this generation, we nearly doubled the number of plants to eight. And the new Camry would be introduced around the globe at a pace that was 20 percent faster.

So we had to find a better way. In the past, a "global" vehicle such as the Camry or Corolla would have design functions centered in Japan. And while manufacturing was closely involved in the process, each plant would be responsible for their individual tooling and assembly procedures.

But not this time… thanks to something we call the Global Production Center, or GPC.

This center was conceived a few years ago and is housed at our Motomachi plant. It has two primary roles:

One is to serve as a hub for global vehicle development – a way to allow regions from all over the world to collaborate more efficiently… And the second is to create a more uniform training system that can more effectively train our team members.

The 2007 Camry was the first vehicle to use our Global Production Center for global development from concept to SOP.

The increased communication, efficiency and teamwork resulting from this system was incredible.

Our manufacturing facilities globally were able to speak to the Camry designers with one voice. We were able to commonize drawings, processes and tooling while sharing best practices from around the world.

Now… how did we do this? By physically being together so all the latest design and engineering information could be easily accessed and shared. You would have enjoyed being in the room with us! Conversations went back and forth in English and Japanese, of course, but there was also Chinese, Russian, and Thai. And there might have been a few others that I didn't recognize! We also accomplished our goals by dividing up the massive workload required for the detailed preparations of a major model change. Each of the eight Camry plants around the world was assigned a certain set of processes to develop… and share the details with the other plants.

After thorough discussion, we developed common methods and tooling. If design changes were required, face to face meetings took place within hours with the design engineer... and usually led to quick implementation.

Ultimately, the goals were to ensure that all of our regions had their voices heard in the vehicle development – and to build the Camry the same way at each plant, wherever possible.

We accomplished this by using a number of methods, but one of the key ones was something we call visual manuals. A visual manual is a short video of a specific Camry process that supplements our written materials, with the details and key points highlighted in the five languages I mentioned earlier. Now let me move on and discuss some of the innovations that took place here in North America.

Earlier, I mentioned teamwork that became even stronger and how sales, design, and manufacturing collaborated to make a great product even better. As you can see in this picture, the new Camry SE Sport grade really stands out. One of the reasons it looks so distinctive is because of the new rocker mouldings developed for this car. The aggressive rocker mouldings really differentiate the SE grade from the other levels.

But they almost didn't happen. The design team for the Camry came up with these rocker mouldings, which were larger than on any previous Camry. The sales team loved it – and said "go for it!"

The manufacturing team said – "we've got a problem."

And here's why. The rocker mouldings were installed from beneath the vehicle, while the body was on an assembly overhead conveyor. The new and larger rocker mouldings would not fit with the vehicle body on the carrier – and it would cost around $1.2 million to adapt the carriers.

But in this case, we didn't want to give up. We could see how much this small detail would create a strong image for the SE model – and wanted to come up with a solution... without spending the money.

And we did. The key was designing a different type of fastener for the rocker moulding. By making the part easier to put on, we were able to reconfigure the process, and attach the rocker moulding in final assembly.

After we solved that, we needed to devise a new way for the team members to safely and ergonomically install the moulding on the bottom of the Camry. Here's what we came up with.

Isn't that great? Our team members wanted cup holders installed too, but we decided that went a little too far!

Another key to the success of the Camry launch was a staggered start-up. As you may know, we have two lines which build the Camry in Georgetown. By staggering the build-out of the previous model and the launch of the new Camry by one week between the lines, we were able to build the last-generation Camry and the new one at the same time.

This staggered start was certainly a challenge for our parts ordering and delivery systems… and our suppliers… so let me thank our many suppliers in the audience for your great support in making it possible! In addition to the staggered start-up, we simplified our build complexity during start of production.

For three days, team members would only build the LE grade – our highest volume model. After that, we added the XLE, and then two days later… the SE grade of the Camry. This method allowed team members to master their processes on the high volume vehicles before introducing the complexity of additional variations.

Reducing complexity is something we all want to do, isn't it? However, as our customers want more and more features in our vehicles, the build variance becomes more complex.

Imagine this. Until recently, team members building Camrys and Avalons had to choose between 24 variations of sun visors. Twenty-four! And this is just one example of hundreds of variations we deal with.

We knew there had to be a better way. So, we developed a process we call "kitting." With kitting, we sort parts into a tray and place the tray in the vehicle as it heads down the line.

Now there are no visor choices to make. The correct part travels down the line with the vehicle in a kit.

This allows the team member to focus on ensuring perfect quality for installation – and improves efficiency.

This is just one example. But if you're working on our production line and trying to produce some 60 high quality cars every hour – believe me, simplifying things is a very big deal.

Another method we developed in our drive for simplification is something we call "minomi." Loosely translated, minomi means "part only."

Even though it has a Japanese name, this innovative new way of delivering parts to the production line was developed by our Kentucky team members. Team members spent too much time removing parts from boxes, so we knew we had to find a better way.

Through the minomi project, delivery trays are now custom-made for individual parts. This system is very flexible, and can be designed to handle any size or shaped part. This picture shows some of the different minomi racks. Now… a large percentage of our parts are delivered to team members so they are easy to pick up, require only the space of the part, and eliminate fluctuation in the process.

This has resulted in a very positive impact on our operations performance. Minomi is a great example of how we have worked to harness the innovation of our team members.

In fact, during the Camry development, we created groups of what I like to call our "interim engineers" who work on major projects for months – both in North America and Japan.

These groups included team members from the production lines who worked hand in hand with our design engineers and pilot teams to ensure the parts were designed for ease of assembly, fit, and function right from the drawing stage. We also had several suppliers right out on the shop floor working seamlessly with our team members and designers. For this Camry development, we used over 150 Georgetown team members to interact with the design side, and supported the launch workload in many ways.

Here's a statistic that illustrates the growing strength of our local team. When we launched the last Camry five years ago, our Japanese colleagues sent over trainers for the equivalent of 671 work months. For this new Camry, we reduced that number to zero.

And the great thing is you can see the skill and knowledge of these team members steadily develop through their involvement, and the pride they felt as this Camry came off the line.

Let me tell you one last story about the Camry that seems so simple, but has made a world of difference for us. One of the biggest challenges we face is listening for the most minute squeaks and noises in a vehicle. I'm sure many of you face a similar challenge.

We have rigorous inspection processes, of course, but sometimes the ambient noise of the plant prevents us from hearing everything we want. So, our Georgetown plant installed not one, but two "quiet tunnels" to allow our team members to hear things better.

First, the vehicle goes through a quiet drive tunnel. As the car goes through, the tunnel has frequency modulations that simulate a rough road. This short test can quickly point out if there's an abnormal noise and is performed on 100 percent of our vehicles before they are shipped to the customer. Then, it goes into an isolated noise compartment. Here, all the doors and trunk are opened and closed, and the windows are lowered and raised.

Now, I'm going to need your help before I show this short video. I'd like everyone to be completely silent while we roll this. Let me tell you what you'll see and hear. First, you'll hear what it sounds like inspecting a vehicle in a regular plant environment… then what it sounds like in the quiet tunnel and chamber.

Here we go…
Quite a difference, isn't there! To a satisfied customer, that silence is the sound of quality.

There are two advantages in doing this type of on-line quiet inspection. First, we can identify potential problems before the vehicle leaves the plant. But equally important, we can go back to the initial processes and strengthen them, or, if necessary, improve the design quickly to eliminate the chances of repeat occurrences.

The results from this new initiative have been dramatic. In the six months since we introduced the quiet tunnels, we have reduced improper noises and rattles by over 90 percent.

Of course, the original number was not very large, but we've got it to a point where it's approaching 100 percent defect-free on many days… and since we build over 2,000 cars each day in Georgetown, we feel pretty good about it. Now, let me conclude my Camry story by giving you a few more numbers which illustrate the success of the project. The last generation Camry had a 23-month lead time from styling approval to start of production, but for this project we were able to reduce the lead time to 17 months. And the ramp-up from SOP to full production in Georgetown was reduced from 59 days with the last Camry launch to 16 days with this model.

Because of this increase, we were able to build 5,000 more vehicles during ramp-up than we did five years ago. In fact, the downtime between the two generations of Camrys was only about 90 minutes!

And in terms of our internal warranty data – this vehicle launch is the best ever for a North American vehicle. Compared to the last-generation Camry, our initial warranty claims were reduced by 33 percent. And again, that is from a good level to begin with.

So is our world different these days?

Of course.

But will we ever get away from important principles like forging strong partnerships with suppliers and thoroughly engaging team members on our production lines? No. Not if we want to compete and be successful in this great industry. The two pillars of The Toyota Way are continuous improvement and respect for people – and the Camry development and launch really embodied both of these principles.

I hope I've shown you how we've taken new approaches to significantly improve our vehicle development and launch strategies through the new Camry. As I've been involved in Toyota management for almost 24 years, I've come to understand one of Toyota's underlying strengths. The company is truly a dynamic learning organization.

The culture respects continuous learning, encourages innovation and challenge… and people pride themselves on their accumulated knowledge.

Within Toyota's culture, there is also the expectation that you will make great efforts to pass this knowledge onto the next generation. This never-ending cycle has strengthened the company and will be critical for our ability to compete in the future.

In fact, the development and launch of the all-new Tundra will incorporate many of the same principles I've discussed today… and probably add some new ones.

I appreciate your time and attention - thank you very much.