Passion fuels Toyota r&d chief
Product development priorities: Share parts and raise quality
Mitsuhisa Kato says it is his responsibility to make the Toyota New Global Architecture a success.
TOYOTA CITY, Japan -- At the height of Toyota Motor Corp.'s recall crisis in mid-2010, President Akio Toyoda quietly ordered a highly unorthodox personnel change: He plucked a veteran engineer named Mitsuhisa Kato from a Toyota motorsports affiliate.
Kato had been sidelined from his prior job as a product development chief engineer at Toyota, so bringing him back was an unusual move. But the engineer had two skills the young CEO needed: a prescient understanding of the causes of the spiraling quality problems and a passion to build more exciting cars.
Two years later, Toyota's embarrassing recalls are in the rearview mirror, and Kato has joined his boss in the boardroom as the company's new global r&d chief, overseeing all product development.
The outspoken, sometimes fastidious Kato, 59, took the helm in June, filling big shoes vacated by Takeshi Uchiyamada, a man internally revered as the father of the Prius hybrid.
He inherits a company at a fragile turning point. After three years of reacting to crises -- from the financial meltdown to the recalls to last year's earthquake -- Toyota wants to grow again.
Kato's top mission will be overhauling Toyota's product development strategy, moving toward increased use of common designs and parts and global models. Kato will have to steer Toyota through a makeover that could be turbulent and painful but is essential to staying in the race against rivals Volkswagen AG, Hyundai Motor Co. and General Motors.
Kato's earlier frank, sometimes prickly, opinions got him noticed.
Even before the recalls, as Kato rose through the ranks as the chief engineer for the Corolla and then the Japan-market flagship Toyota Crown sedan, he was waving red flags about the company's gangbusters growth -- which was later blamed for the quality lapses and recalls.
"The company was growing very rapidly, and the workload was very hectic. And I kept saying that it was a problem and that we were pushing too much," Kato said in a recent interview.
Perhaps partly because of that naysaying, Kato was eased out at Toyota in 2006 to become president of Toyota Technocraft Co., Toyota's tuning and motorsports affiliate. At least there the self-confessed lead-foot could indulge his inner need for speed.
Driving performance cars on twisty mountain roads is a beloved pastime of Kato, who confesses to earning his share of speeding tickets during his reckless youth. But Kato also has a mellow side, saying his ideal vacation is lounging on a tropical beach.
While at Technocraft, where Kato prepared Toyota cars for Germany's Nurburgring race, he made a powerful ally: Akio Toyoda, the future CEO with a weak spot for high rpms.
It wasn't long before Kato's warnings about too-rapid expansion proved right.
When the recall headlines hit in early 2010, the recently installed president knew Kato had insights others lacked. By June of that year Kato was back at headquarters in Toyota City as a senior managing officer, overseeing all the company's chief engineers under Uchiyamada.
Room to fail
A key lapse, as Kato saw it, was Toyota's inability to nurture talent as it struggled to chase ever-expanding sales.
"In that kind of a situation, it's hard for people to grow in their work environment because they were not allowed to fail," Kato said. "People couldn't grow professionally."
To tackle the problem, he began rethinking all of r&d, which at Toyota combines both lab work and product development.
"At that time Hyundai was coming on very strong in the market, and we felt a bit threatened by them and were trying to see what we could do," Kato says. "We began discussing different, better ways to develop vehicles. And one of the methods we hit on was commonization, sharing parts over different platforms."
The result: The Toyota New Global Architecture, or TNGA, a new product development strategy that was unveiled in broad terms in April.
The goal is to reduce development time and shave engineering costs by 30 percent, partly through standardizing half of the 5,000 components that go into a typical Toyota vehicle.
Kato says TNGA will improve quality, product appeal, cost competitiveness, supply-chain management and even human resources.
Quality will improve because streamlined product development will allow engineers to pinpoint design glitches more easily. It also will deliver more exciting cars that are more fun to drive -- and, as a bonus, less costly to develop and produce.
Instead of having a number of engineers spread thin over several projects for several vehicles, the streamlined process will concentrate them on one project that covers several vehicles.
This will focus their energies, reinforce each other's talents and foster mentoring. To Kato, this is a particularly important upside of the new approach: It makes time for engineers to grow because it doesn't spread staff as thinly as before.
Or so the thinking goes. TNGA is still a work in progress. It could be three years before the first car developed entirely under this process comes to market. And if not expertly executed, there could be problems.
Massive commonization could open the door to massive recalls because any botched design would be repeated millions of times on multiple nameplates. It also may put new stress on small suppliers as automakers gravitate toward global parts makers that specialize in the commonized parts and can deliver them worldwide.
Indeed, Kato already is ratcheting up the pressure on suppliers.
In Japan, he has warned the company's traditional parts makers that he will look overseas for cost-competitive suppliers that can deliver high-tech products.
Toyota needs less proprietary and more generic designs that can accommodate standardized parts from big global suppliers. The implications for Toyota's smaller Japanese suppliers are so threatening that some of them have trouble believing Toyota would make such a radical change.
"When I talk about this with suppliers in Japan, I really need two hours or more to discuss this over drinking sake," Kato says. "And then they finally get what I'm trying to say."
'Only one chance'
Kato, who used to motivate engineers on his Corolla team with the motto "ichigo-ichie," which roughly translates as "you've got only one chance in this lifetime," is undeterred.
"It's my responsibility to make TNGA a success," he says.
Insiders describe Kato as a man who combines a chief engineer's broad view with an exacting attention to minutiae.
Consider one episode with the recently redesigned Toyota Avalon sedan. Kato took a keen interest in how the car and its American chief engineer -- a first for Toyota -- were coming along.
During one meeting, Kato zeroed in on the proposed heating and cooling vents, a seemingly minor detail.
"Kato-san looked at the placement of the registers and said, 'Uh, I'm not sure that's OK,'" recalls Randy Stephens, who led development of the Avalon at Toyota's tech center in Ann Arbor, Mich. "He'll do that at different times. And I think what he's trying to do is show us we need to look more deeply at key items. It's a little bit different mentality for us."
Kato's vent inquiry sparked a flurry of study reports to justify their design. More important, his query showed Stephens that Kato expects to be a hands-on manager and will challenge his chief engineers to rethink every assumption and to be ready to prove that they have considered every angle.
'Be the president'
Kato will oversee a major shift of more product development responsibilities to the United States from Japan. After the Avalon, North America increasingly will do more cars on its own under his watch.
To make that happen, he is urging American chief engineers to think more like Japanese ones. Back at headquarters, they handle more than the engineering nuts and bolts. They oversee everything from engineering and production to sales and marketing.
"His message was I have to be the president of this vehicle, not just the chief engineer," Stephens says. "He wants you to be in charge of everything, be it manufacturing, sales or service."
The lessons are still sinking in. But Toyota is a big ship to turn. And Kato, now as before, isn't rushing things.
"It's not going to be in one or two years," he says of the changes. "Perhaps some of the thinking may be reflected in cars launched this year or next. If that happens, I will be happy."
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