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Future Vision
By Katie Sosnowchik
Portrait Photography By Jim Robinette
After 42 years with
the company, Fujio Cho knows Toyota—inside and out. He easily
recites the facts and figures that has earned the company its ranking
as the world’s third largest automaker in terms of vehicles
sold: operating income has increased by 400 percent over the last
10 years despite harsh economic conditions in the Japanese economy;
income has risen steadily over the long-term; net sales have soared
by 1.7 times in the past decade; total assets and number of employees
have doubled. And, as of 2001, Toyota had achieved over 10 percent
share of the global automotive market in terms of sales. It manufactures
autos in 27 countries and regions worldwide, and sells vehicles—5.54
million cars, trucks and buses in the fiscal year that ended March
31, 2002—in more than 160 countries. Brand names include Toyota,
Lexus, Daihatsu and Hino.
Cho also knows the automobile industry—an industry he believes
is still maturing and thus will continue to burgeon. He foresees
that motorization will accelerate in emerging markets such as China
and India and it will become possible for virtually all people around
the world to enjoy the high degree of mobility afforded by automobiles.
And therein lies the challenge in which Cho is also equally versed:
striking a balance between the environment and the market growth
that is anticipated.
“When considering the potential environmental impact resulting
from the motorization of emerging markets, the need for higher levels
of environmental response is apparent,” he wrote in Toyota’s
recently released 2002 Environmental Report. In a speech given at
the Detroit Auto Show in 2001, he drove home the issue even more
forcibly: “Toyota and the other automakers will not survive
the 21st century unless we pull together now and find ways to limit
the car’s impact on our earth. We need to make this new century
the start of a unified effort to better tune the automotive industry
to the needs of the earth. It is more than just good business for
Toyota; it is the key to the future of our industry and a necessity
for a healthy future for people everywhere.”
After years of working fairly quietly on environmental initiatives,
Toyota gained global visibility with the 1997 launch in Japan of
Prius, the world’s first mass-produced gasoline/electric hybrid
vehicle. The Prius made its North American debut in June 2000 and
is now the best-selling hybrid sedan in the U.S. market, with accumulated
sales surpassing 30,000 units. Toyota projects sales of about 17,000
cars in the U.S. for the 2003 model year.
The Prius has since been joined with two other hybrid offerings:
the Estima Hybrid minivan, which came out in June 2001, and a mild
hybrid version of the Crown luxury sedan, released the following
August. Beginning in February 2002, Toyota also began offering the
RAV4-EV to retail customers in California. This zero emission, electric
version of Toyota’s RAV4 SUV was first made available nationally
in 1997 through a special fleet lease program to major corporations
and utilities.
Next up: limited marketing of a fuel cell hybrid (FCHV) sport utility
vehicle (SUV) in Japan and the U.S. around the end of this year.
Initial plans call for Toyota to lease 10 units in each country
during the first year to entities that have access to a hydrogen-supply
infrastructure and after-sales service.
A milestone came in April of this year, when Toyota announced that
total cumulative sales of its hybrid vehicles topped the 100,000
mark. With nearly 103,000 units sold by the end of March 2002, this
represents a 90 percent share of the world hybrid vehicle market.
In a unique collaboration between the public and private sectors,
Toyota worked with the City of Irvine, CA, the Irvine Co. and the
Orange County Transportation Authority to launch ZEV·NET
(Zero Emission Vehicle—Network Enabled Transport), a pilot
program that offers participating commuters zero and low emission
vehicles to get from the Irvine Transportation Center in the Irvine
Spectrum to their place of employment. Once there, fellow employees
share the vehicles for short trips during business hours. At the
end of the business day, the vehicles are driven back to the transportation
center, where they are used by a returning Irvine resident for the
commute home.
While its vehicles are the most tangible element of its environmental
initiatives, Toyota also concentrates heavily on achieving environmental
progress behind-the-scenes as well. Company executives cite a holistic
approach to environmental stewardship and commitment to continuous
improvement at every stage of the life cycle of its products, from
design to dismantling. For example, in its 2001 North American Environmental
Report, programs are categorized in four sections: developing cleaner
vehicles; making manufacturing cleaner and more efficient; greening
sales, distribution and service; and recycling end-of-life vehicles.
A sampling of its stated goals include: by 2005, reduce energy usage
by 15 percent per unit of production from the 2000 base year, which
in turn decreases CO2 emissions by 15 percent per unit of production;
within two years, develop a database to track greenhouse gas emissions
associated with sales and distribution operations; implement material
and design strategies that will increase the recyclability of vehicles;
and meet a goal of a 95 percent vehicle recovery rate by 2015.
In fact, the spread of recycling and “zero-waste” philosophies
throughout society is one of four major influences Cho identifies
as shaping society in the future. He emphasizes that automakers
will be expected to show environmental awareness and commitment
to environmental protection and recycling. One area in which Toyota
is active is the use of bio-technology and is currently in the final
phase of adapting a proprietary biodegradable plastic made from
sweet potatoes for use in vehicle parts.
Immediately following a North American investment briefing in September
in New York City, Cho sat down with green@work to talk about Toyota’s
public commitment to environmental progress. During the conversation,
he explored some of the areas he feels Toyota is making advancements
in its endeavor to become what he describes as a “leader of
global regeneration.”
WHAT AND WHO DRIVES THE ENVIRONMENTAL POLICIES AT
TOYOTA?
CHO: I take initiative in coming
up with basic guidelines. How to implement those is up to the executives
and managers in each division. There is so much we need to accomplish.
Over the years, we have valued the environment and have always considered
our efforts in this area to be very important. If those efforts
are now considered part of the culture, then I am delighted it is
so.
HOW DOES TOYOTA PARTNER
WITH ITS SUPPLIERS IN THE AREA OF ENVIRONMENTAL ACTIONS?
CHO: There are many areas where
we work with suppliers; but in terms of those areas such as hybrid
systems and fuels, and in particular state-of-the-art technology,
our basic policy is to marshal all of the resources of our suppliers.
So we mobilize their capabilities and work together with them in
this regard.
IS THERE A POLICY REGARDING
OUTSIDE VENDORS AND THEIR PROGRESS TOWARD ENVIRONMENTAL INITIATIVES?
CHO: We have what we call a
“consolidated environment management initiative” in which
[we] call upon other companies to participate. For example, we have
66 companies in Japan and 61 companies overseas involved in these
activities. We indicate our environmental policies to these companies
and call upon them to implement or execute those policies as well.
The same applies to our dealerships. We call on our 44 domestic
sales companies and 26 overseas distributors to likewise participate
in our activities regarding the environment. These companies are
all called on to formulate their own voluntary environment action
plan, which they are expected to implement. The specific content
of those plans should include, for example, CO2 emission reduction
and implementing zero plant waste programs.
We believe that ISO 14001 is very useful in carrying out, in a systematic
way, environmental and conservation activities through the establishment
of an environmental management system, thus enhancing the transparency
in this area and encouraging the participation of all employees
in those endeavors. Therefore, we urge outside companies who participate
in our consolidated environment management initiative to obtain
certification under ISO 14001.
Many of our plants are more or less concentrated in one, rather
broad geographical area, and many of our suppliers are located in
the vicinity. So, not just in the environmental arena, but in the
safety area and other areas as well, Toyota takes the initiative.
We don’t really force our suppliers, but we urge our suppliers,
to participate in these kinds of activities. This has been conducted
for many years; but especially in the past 20 years or so, the environment
has been emphasized as the major issue. So Toyota has encouraged
suppliers to join hands with us—by Toyota showing technological
initiative, we believe they will follow suit.
WHAT ADVANCEMENTS IN THE ENVIRONMENTAL
ARENA SHOW THE MOST PROMISE?
CHO: In the final analysis,
I believe the fuel cell is going to be the most promising technology
in this area. But we have also been dedicating a lot of efforts
into the development of hybrid systems. We consider this system
to be the “core” technology in environment-related area.
We are now trying to apply hybrid technology to the fuel cell as
well and working very hard on the development of what we call a
“fuel cell hybrid” vehicle.
DO YOU HAVE AN ANTICIPATED
TIME FRAME?
CHO: We have already sold over
100,000 units of hybrid vehicles. Especially in the United States
and Japan, we think we can increase those sales figures up to approximately
300,000 units per year by 2005. With respect to fuel cell vehicles,
according to our engineers, it will take another 10 years for fuel
cell vehicles to be mass produced to have any kind of impact on
the market. But we simply cannot wait that long; therefore, on a
trial basis, we have decided to produce 20 units of such vehicles
to be leased evenly in Japan and the United States—10 units
in Japan and 10 units in the United States. Our intention is to
lease those vehicles because they are considered a test.
IS IT A YOUNGER CONSUMER WHO WANTS
THESE KINDS OF VEHICLES?
CHO: Not necessarily, if you
look at the existing customers of Prius or those who are interested
in it. It appeals to many age groups.
Quite a number of customers purchased a Prius because of their interest
in the environment. But some younger people purchased a Prius because
of their interest in this brand new mechanism that they can’t
find on other conventional vehicles. When the car is powered by
battery or when it is fueled by gasoline or when the energy is being
regenerated—all of those functions are indicated on the panel.
This draws the interest of younger people.
There is even a Prius Club that has been formed on the Internet—a
forum for exchanging information among drivers of Prius cars. Many
of those people are very interested in the mechanism of the vehicle.
DOES TOYOTA, AS AN AUTOMAKER,
HAVE A RESPONSIBILITY TO EDUCATE CONSUMERS ABOUT THE ENVIRONMENTAL
IMPACT OF THE PRODUCTS IT MAKES?
CHO: Yes, but if I say that
we should educate consumers or enlighten consumers, then it might
give the impression that Toyota stands at a higher plane looking
down on those customers, and that’s not how we feel. Historically,
when selling our vehicles, we receive customer feedback. Out of
this feedback, we have been nurtured, we have been trained by the
customer, so to speak, which has resulted in higher performance
or more affordable price levels that we were able to reach.
The same holds true with respect to the Prius. Customers have given
us feedback about how they feel about this vehicle. At the same
time, we carried out various public relations and advertising campaigns,
which in a sense was an educational experience for both ourselves
as well as our customers. In our campaigns, we talked about the
importance of the vehicle in regard to the environment and conservation.
Through our advertisements, I think, customers became more and more
interested in this technology. But it was not a deliberate effort
to educate.
We do hold an environmental forum every 12 to 18 months; the last
one was in 2001. Yet, even going back to 1992, we carried out a
campaign featuring Dr. Dolittle, called “Let’s Talk,”
a dialogue in which we talked very frankly about the negative environmental
impact of vehicles on society. Our engineers were part of these
activities, which eventually led the way to the development of the
Prius. Even if the automobile technology is changed or improved,
unless the interest factor supporting that undergoes a similar change,
a newly-developed vehicle may not be feasible in society. So we
need to carry out a dialogue with society, especially in the area
of the environment and developing technology—that was behind
our decision to hold these environmental forums.
WHAT DIFFERENTIATES TOYOTA FROM
ITS COMPETITORS?
CHO: One differentiating point
I believe is that Toyota is engaged in a very broad area of environment-related
challenges, trying to find solutions based on our own in-house capabilities,
which actually requires a substantial amount of natural resources.
So we have been making substantial investments in research and development
in those areas.
HOW CAN GOVERNMENT PLAY A ROLE
IN ACCELERATING MOMENTUM?
CHO: Offering incentives to
the buyers of these vehicles is very important in achieving broader
acceptance of these vehicles.
When we talk about fuel cell vehicles, that will require refueling
stations for hydrogen. Governments will need to be fully aware of
these requirements in order to develop the infrastructure. That’s
why we have decided to market 20 units of the fuel cell vehicle
to sell in Japan and the United States by the end of this year.
Once they are on the market, the need for refueling stations will
become apparent. Bearing that in mind, we intend to tenaciously
talk with the government about infrastructure development.’
TELL US A LITTLE ABOUT THE AGREEMENT
BETWEEN TOYOTA AND NISSAN REGARDING HYBRID DEVELOPMENT.
CHO: Our stance is that environmental
technology is not something that one company should monopolize in
the market. Rather, for us to be able to benefit from a greater
volume of production which, in turn, leads to better prices for
customers, we need to have more customers using this technology.
When Nissan approached us with their desire for using our hybrid
technology, that was in line with our willingness to share as well.
It covers a 15-year period and calls for us to install our hybrid
system into Nissan vehicles here in the United States by 2006.
ARE YOU HOPEFUL FOR ADDITIONAL
AGREEMENTS?
CHO: We wouldn’t go out
of our way looking for customers for our hybrid technology, but
if anyone came to us wishing to use our technology, we are open
to negotiations. Of course, all the car makers in the world are
studying and researching fuel cell and hybrid technologies. But
if all of them come up with their own proprietary methods, that
could result in substantial wasteful activities. Imagine if all
of those different technologies or systems were converged into one
or two technologies, which could become the global standard—that
would go a long way toward reducing the cost of the parts and components,
which I think is very desirable.
WHICH OF TOYOTA'S ENVIRONMENTAL
ACCOMPLISHMENTS ARE YOU MOST PROUD?
CHO: I believe that our engineering
and technology people are at the leading edge of environmental technology—that
is a great source of pride. These people are fully aware of the
importance of their work, and they are passionate, dedicated.
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