Coming to America

Hurrying to beat possible import restrictions, Toyota gets its foot in the door - and stubs its toe

Toyota knew it was taking a huge risk by shipping cars to the United States just a dozen years after World War II.

It didn't know the market. It had no sales infrastructure. It didn't have a knockout product.

And the real barrier to success ran deeper, down to the bedrock beliefs of the American customers the company was trying to court.

"People still clearly remembered the war," says Tatsuo Hashiguchi, who started his 39-year career with Toyota in the United States in 1958, the year the company began selling vehicles here.

"I would be walking down the street and people would call me 'Jap,' says Hashiguchi, 74.

"Also in those days," he continues, 'made in Japan' meant cheap and cheaply built. People didn't believe the Japanese had the capability of making a car."

'NOW OR NEVER'?

But waiting for the perfect moment didn't seem like an option.

In 1955, Toyota Motor Sales Co. President Shotaro Kamiya visited the United States. He was impressed by the number of Volkswagen Beetles he saw on the roads. He also sensed that the winds of U.S. economics and politics were blowing in the direction of strict import restrictions.

"If the U.S. goes ahead and restricts imports, Toyota will be cut out of the American market for good," he reported when he returned to Japan. "We've got to get in there now or never."

Not everyone at Toyota agreed it was time to go the United States — at least not until Toyota Motor Co. President Taizo Ishida made a U.S. trip the next year.

Ishida's trip included visits to the World Bank and the U.S. Department of Commerce. In both places, he heard that since U.S. automakers were reluctant to build smaller cars like the Beetles arriving from Germany, Toyota would be welcome in the market.

"So we took our chances and began exporting to the U.S. in order to stake our claim," former Toyota Chairman Eiji Toyoda wrote in his autobiography, Toyota: Fifty Years in Motion.

"It is commonly believed that we exported because we had confidence in our product," he wrote. "Although the Crown was doing well in Japan, we didn't have the slightest idea how it would fare over in the States. All we knew for certain was that once import restrictions were erected, any hope we had of exporting to the U.S. would vanish. We had to get a foot in the door."

Toyota couldn't even finance its own U.S. expansion, Hashiguchi recalls.

"We started with $1 million seed money from the Japanese government, which gave us $500,000 cash, and the other half paid for the cars and parts," he says.

"Back then, a Japanese person could only bring $200 into the U.S., and his passport was stamped that he had brought that much money in. The Japanese government had no dollars. As a country, we were not rich. But as a country we were thinking of doing something as an export to survive."

So Toyota got its foot in the door. But in the early going, it stubbed its toe.

ON DECK

The beginnings of the U.S. adventure were humble indeed.

Mitsuo Yamada, who then was in his mid-20s, has an August 1957 photograph of himself with an executive of American President Lines, a cruise ship company. They're standing next to the first two Toyotas exported to the United States.

Yamada was in his first year in the export department of Toyota Motor Sales, which had been unable to find a cargo ship willing to accept its vehicles for transport across the Pacific. So Toyota turned to the cruise line. The two Toyopet Crowns were placed on the ship's deck beneath a cloth cover.

On Oct. 31, 1957, Toyota officially established its American sales arm, Toyota Motor Sales U.S.A., in a former Rambler dealership in Hollywood, Calif. Customer response was underwhelming.

In 1958, it sold 287 Toyopet Crowns and only a single FJ20 Land Cruiser.

Things improved the next year, but not much. "The first two or three years, we were mainly selling Land Cruisers. Passenger cars were just five or 10 units a month," recalls Yamada, now 77, who worked in the United States from 1962-67 and later headed Toyota's German and Indonesian sales operations.

Toyota also had trouble attracting American managerial talent, remembers Hashiguchi, who had come to America to work for his father's Osaka import-export distributorship. One day, he met Kamiya, who offered Hashiguchi a job simply because he had heard of Toyota.

"If you graduated from Harvard in 1958, you're not going to work for a Japanese company," Hashiguchi says. "We were not getting the good employees in that sense. We had lots of hard workers, but not Harvard graduates."

Yamada says the Toyota Crown — which was renamed the Toyopet Crown for the United States — was fine for Japan, but didn't translate well to its new market.

"The driving conditions were very different," Yamada recalls. "In Japan at the time, you went only 35 or 40 mph. There were no highways. Japan was all gravel roads, and a two-hour drive was the maximum.

"But at that time in the U.S., they had a 55-mph freeway and they drove for a long time at high speed."

Yamada, who beams with delight when speaking of his early adventures in the United States, remembers the son of the Toyota distributor for Hawaii (which was not yet a state) telling him about driving a Crown to an area on Oahu with steep hills and strong winds.

"He was driving the Crown with the pedal all the way to the floor, but there was a long line of cars behind him honking. Especially uphill, the performance was not really sufficient."

'CALL OFF THE WHOLE THING'

Kamiya, the first president of Toyota Motor Sales U.S.A., realized the car was not competitive in the U.S. environment. According to Against All Odds: The Story of the Toyota Motor Corporation and the Family That Created It by Yukiyasu Togo and William Wartman, Kamiya sent a terse message back to Japan. That message: "Call off the whole thing."

In the spring of 1961, Toyota stopped selling cars in the United States, but didn't "call off the whole thing." It continued to sell Land Cruisers while it went back to the drawing board to work on a car that met the needs of the U.S. motorist.

Eiji Toyoda wrote in his autobiography: "In retrospect, that first initiative of ours was very poorly thought out indeed, but our timing was definitely not off. In fact, having this bitter experience behind us helped us work that much harder afterward to build cars that were right for the U.S. market.

"The pressure was on. Unless we exported a decent car as soon as we possibly could, this would spell an end to Toyota Motor Sales U.S.A. For us, it was do or die."

For the next few years, Toyota sold a few hundred Land Cruisers annually. That wasn't enough to keep regional offices in Chicago and San Francisco open, and staff in a New Jersey office was reduced.

The headquarters that had expanded from the old dealership to a building in Beverly Hills gave up that facility in favor of rented space. But Toyota Motor Sales U.S.A. stayed in business.

Jim Press, then president of Toyota Motor Sales U.S.A., said in a 2005 interview, "The reason our company is here is the Land Cruiser."

You can reach Larry Edsall at autonews@crain.com.