In 2006, therefore, President Katsuaki Watanabe tapped the brakes. He ruled that the engineers in manufacturing and product development indeed could say no to sales, if that's what it took to ensure quality.
Watanabe thus reversed a principle that had guided Toyota since its earliest years. To appreciate what a radical decision Watanabe's was, one must explore Toyota's history and the origins of the growth-comes-first mentality.
It may have germinated during the war years. Soon after Kiichiro Toyoda built his first car, the Japanese military stepped in. Forget cars, the military ordered; we want trucks for the war effort. As Toyota's only customer, the government set production quotas, in effect telling manufacturing to keep up with orders.
The company never said no. At one point, to meet those objectives, Toyota built trucks with only one headlight.
After the war, Toyota set out to rebuild itself. But in December 1949, it foundered. It needed 20 million or it would fail. At today's exchange rates, not adjusted for inflation, that would be just $167,000. Then, it was a fortune for the struggling company.
Toyota's problems lay in Japan's postwar inflation, a shortage of capital and its tendency to stockpile parts and build vehicles despite a lack of customers.
In essence, Toyota was operating a sales bank akin to the one that nearly bankrupted Chrysler Corp. several decades later. The just-in-time inventory discipline of the Toyota Production System had not yet been put in place.
The Nagoya branch manager of the Bank of Japan had to step in and mediate a rescue plan. He did so despite opposition from his bosses at the nation's central bank, the equivalent of America's Federal Reserve Board, back in Tokyo.
"The central bank governor said, 'We don't need to help Toyota. If we want automobiles, we can buy them from the United States. There's no need for Japan to build passenger cars,' " recalls Susumu Yanagisawa, 74, a Toyota retiree.