Toyota Overhauls Its R&D Efforts

Toyota's new research and development structure will aim for quicker decisions and lower costs.

The changes to core engineering and design programs bolster the authority of the company's chief engineers, consolidate research and development into three groups based on geographical regions and limit final design decisions to smaller teams. Toyota, Japan's largest car maker, dubs the effort its new "global architecture."

The revisions come as the auto maker seeks to recover from a series of setbacks during the past several years that have eroded its global market share, forcing it to relinquish its crown as the No. 1 car maker by sales volume.

"We are gradually starting to see the results of our reform efforts," President Akio Toyoda said during a news conference at the company's headquarters in Toyota City, citing as examples the recent launches of the new Prius C hybrid hatchback and remodeled Camry midsize sedan in the U.S. and Japan, and the Etios subcompact in India.

Toyota said the R&D changes are expected to improve the company's' competitiveness vis-à-vis global rivals, as costs are reduced through more parts standardization and sales are increased by improvements to the vehicle lineup's design and functionality.

"In order to build better cars, we are remaking the way we develop them," said Takeshi Uchiyamada, Toyota's executive vice president in charge of R&D.

Mr. Uchiyamada said a major challenge for Toyota is cutting costs while improving product design, a seeming contradiction that he aims to resolve by using more common parts and working more closely with key suppliers.

"We won't feel we've succeeded until we raise the use of standardized parts to about 50% among similar-size vehicles in our lineup," Mr. Uchiyamada said. He added that it will likely take "several years" to achieve that goal.

Using more standard parts reduces the need for smaller lots of dedicated components that can't be shared among models. Greater volumes of common components help auto-parts suppliers spread out the cost of production.

To spur that drive, Toyota has shrunk the number of regional managers for the Toyota brand to three groups: North America and China; Japan and Europe; and Australia, Russia and emerging markets. Consumers in these geographical categories tend to buy the same type of vehicles, Toyota officials said.

The company said that organizing development according to the three regional groups is likely to promote parts sharing across similar vehicles and help streamline procurement of components from global suppliers. For example, Toyota has worked to cut the variety of radiators it procures from suppliers to just 21 specifications, down from more than 100 previously, said Shinichi Sasaki, another Toyota executive vice president.

The changes, which were implemented starting last year, also allow Toyota's chief engineers to report directly to top product-planning executives instead of intermediary development-center chiefs, as had been the case previously. Toyota said that will eliminate bureaucracy and allow new vehicles to get to market faster than before, though the company didn't detail any specific development time frames.

Final decisions about vehicle styling will be limited to smaller teams of executives and designers newly empowered to approve more ambitious designs, but who also will be held more accountable for flops, Toyota officials said. Mr. Toyoda said that shift will help avoid the pitfalls of a "too democratic process," which he blamed for uninspiring vehicles and an overly lengthy approval system for new cars.

                                          Courtesy of The Wall Street Journal