How Toyota Trained GM: An Example of the Value of Company Culture

GM’s fall in 2009 had come at a terrible time. The company had one of the best car plants in the nation, turning out nearly 8 million high-quality cars and trucks in just a couple decades, 6,000 a week. But everything leading up to this success was what had really shot them in the foot.

Back in the 80s GM was struggling, the cars they were building were terrible, and the company was losing money. One plant in Fremont, CA was struggling so badly that they could have starred on their own sordid reality TV show. Rick Madrid, who worked at the plant building Chevy trucks, said that there was a “lot of booze on the line, and as long as you did your job they really didn’t care.” Madrid himself admitted to bringing a thermos full of screwdrivers with him as he mounted tires at the plant.

Others report that people were also engaging in intercourse at the plant. No one lost their job or was worried about losing it because under the union rules, contract workers would basically have to commit fraud in order to get fired. The sex and alcohol weren’t the only problems. Some workers hated management so badly that they would actually sabotage the vehicles. In an NPR article, it was revealed that workers would put Coke bottles inside door panels to annoy customers. Showing up for work was also a big issue. The biggest focus for the plant was quantity, so the line was never stopped. Ever. Any problems or mistakes would be fixed later in a yard outside, but oftentimes this led to even more damaged vehicles.

In 1982, GM finally closed down the Fremont factory. But just a mere two years later, they reopened it with Toyota dubbing it New United Motor Manufacturing Inc., NUMMI. The new partnership with Toyota was drenched in hope for both companies. Toyota was struggling with foreign import restrictions, and GM was needing to produce smaller cars but they were far too poor in quality. Hoping to start factory building in the U.S., Toyota reached out to GM and the joint venture began—with almost the exact same work force that had been booted out two years previously.

Before the venture got underway, however, GM sent several of its employees over to Japan to see just what Toyota was doing differently to produce such high-quality vehicles. The difference was the oldest rule in the book: teamwork. Toyota employees worked in groups of four or five with supervisors to oversee any mistakes. If a mistake was caught, the line was stopped and the issue was fixed right then and there—even if it was something as small as a bolt. Madrid said that alone impressed him: “Fix it now so you don’t have to go through all this stuff.” In that moment his entire outlook changed, saying, “One bolt changed my attitude.”

After the plant rolled out its first car in 1984, the numbers began to skyrocket for NUMMI. Jeffrey Liker, author of The Toyota Way, stated, “The best measure they use is how many defects are there per 100 vehicles and it was one of the best in America.” The high that was coming off the NUMMI plant was sure to spread, and GM sent what a couple Wall Street reporters called the “NUMMI commandos” out to Fremont to learn the special trick to success. The 16 commandos were meant to spread the lessons from Toyota being implemented in Fremont. But GM was still lagging.

At one point, GM tried to replicate NUMMI in Van Nuys, but GM plant managers ran a fiefdom and change was shockingly resisted and despised. Some managers kicked commandos out for their presentations. GM was a vast and sprawling company, highly decentralized, and there was little control. It took another almost 10 years for GM executives to catch on and begin implementing the Toyota principles in force. With time, GM improved at an accelerated rate. Though not quite the quality that Toyota had in Japan, GM soon became the best it ever was.

Then the Great Recession hit along with a massive recall of 2.6 million cars due to ignition switch problems and failed deployment of airbags. At least 13 deaths were caused by the defects and the sluggish actions of GM to fix any issues. Comparing insurances wasn’t an issue for car buyers; it was comparing who was building a safer vehicle, and GM wasn’t winning. After two decades of glowing success, GM declared bankruptcy in 2009 and the company fell to ruins.

Years later though, GM is back to being one of the most profitable companies in the world. In fact, it was announced as one of the top 40 most profitable companies in the world in 2013. After declaring bankruptcy, GM was bailed out by the U.S. Treasury with $49.5 billion. GM was able to pay back about $38.4 billion through stock sales, loan repayments, and dividends. One Treasury official stated, “Our goal was never to make a profit but to stabilize the auto industry.” And stability is certainly what came back to GM.

The principles that Toyota gave to GM before its fall are sure to be helping the company stay on stable footing. The better-defined corporate culture and the focus on organization and fixing even the smallest things right away (like an ignition switch) have given GM’s future a better outlook. This serves as a firm lesson in the value of corporate culture and what it can truly mean to a business’s success. Do your employees identify with company vision and align around it? If not, how much could you stand to gain if you could achieve it?

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