Case Study The Group and the Aisin Fire

49

Toshihiro Nishiguchi -Alexandre Baaudet

Together, suppli- ers organized to sai^e Toyota from a devastating crisis that threatened to halt operations for weeks.

Toshihiro Nistiigtichi is TIK-JLipune.•^c' iiUJtlcl ot k)nt;-tci[ii colkiho- the Japanese nindcl ^ or at least tlie professor of management lutivL- piirtiKTshipM hL-twcL-ii iimi.^ aiul 'Ibyota niodel — iii\'olve,s more than a ,set at Hitotsubashi Universitv. tlK-ii .sLippllLTS IKIS attiLK'tL-ti nuieli att^'ii- of loni^-lerni relation.ship.s between a lirni Institute of Innovatioti tion tiDin husinu.s-s IVM.':UV1IL'I^ and piULti- ;inti a tew .select suppliers. As the Toyota Research. tioncis. Sc\'cr;il U,S. LIIKI l-iiiiopcan mito- gi'oLip'.s cc)llab(.;rati\'e re.spon.se to the .sud- Alexandte Beaudet is liiLikeis hiivc- :UtL'nipt(.-cl to cstiihli.^li sliiiikir den tiestriiction of a key .supplier's plant research adviser. partnt'isliips ut their cn\n. .seeking tn suggests, the relationships among a firms Transnational Consjlting iL'cluLL* tliL'ir sLijiiilicT Ixi.sc and cLiltixate .suppliers are equally important. More Department. Mitsubishi fL'lation.ship.s uitli their he.'it sLippliei^.' As generally, a complex mix of institutions Rasearcb Instiltile. a re.sult. the cafly invnhcnient of .suppli- permits self-organization during titnes of ers in prodLict-dcvclopnicnt and cost- crisis with little need for a leaders direct rctluciion etTort.s i,s lieconiing .standard control,' These strong relationships among practice in the aiitonKMiw iiidu.stn" and many firms along with the steady but beyond.- largei)' in\'isiblc control of a leader pro- mote tlexible and coordinated tesponses A recent cri.si.s involving Toytna and its to crises. In addition, they foster long- .supplier network suj^ge.st.s. ho\ve\er. that term competiti\'eness through decentral-

Sloan Management Review Nishigucfai • Beaudet Fall19gB group members. Based on data collected through in- A fire at one of Aisin Seiki's plants depth inten'iews v\ith key player.s in the incident, we de.scribc what took place during the Aisin Seiki crisis threatened to halt Toyota-group and how itidividiial firms came together to orches- trate the recoverv' effort." We believe that the episode operations for weeks. holds lessons for busine.sses adopting the Japatiese model of long-term supplier partnerships as v\'ell as izetl. groLijiwide efforts to solve day-to-day problems for businesses moving away from that model. Of and improve |')erformatice. course, competition for future contracts anti the pres- sure to maintain their I'cjiutations tnotivatetl the sup- 50 On 1-ebruaiy 1. 1W7. a fire at one of .-Vi.sin Seiki's pliers to cooperate with each other. Nevertheless, we plants threatened to halt Toyota-group tjperaiions for argue, it was the various capabilities developetl weeks. Aisin Seiki, one of Toyota's tnost tru.sted sup- through institutionalizetl problem-soh'ing activities pliet.s, was the sole source for proportioning valves within the that ensuretl the effective- (or I'-valve.s, in the industry parlance), a small but ness Lind rapitiity of the suppliers" collaborative effort. cruciLil brake-related part used in all Toyota \'ehicles.' For businesses of niLiny kintls, the capabilities de\'el- IJecause of Toyota's and Aisin's dedication to the opeti through comtiiitted partnerships CLUI enhance principles tjf just-in-time (Jl'l') production, only two competitivene.s.s. tlriving participants to responti effec- or thtee tlays' worth of .stock was on hand, A shut- tively to emergencies Lind to pursue continuous down of Toyota-group plants (including those of se\- imprt^vement on a daily bLisis."" eral hundred suppliers) seemed una\'oidable.

'I'he timing could not have been worse. Toyota plants The Aisin Seiki Crisis were operating at full capacity with le\'els of over- At -1:18 a,m. on Saturday. I'ebruaiy 1. 1W7. a fire time and use of temporaty workers unheard of in erupted in Aisin's Kariyii plant number one. Hy H:S2 years, in anticijiation of a last-minuie boom in auto- a.m., the lines dedicated to P-VLil\'es and to two other tnobile sales prior to the 2 percent consumption sales brake-related parts (clutch master cylinders Lind tan- tax increase slated ftir April 1. K\'eiy day lost meant dem master cylinders) were almost completelv' potentially huge and irretrievable losses in .sales and destroyed. Lilong with special-purpose machinei">' and profits for Toyota and rehited firms/ tirills that could take months lo reorder. The near tiestrLiction ofthe P-valve lines was potentially disas- Vet. remarkably, di.saster was averted, and assembly trous for Toyota; nearly all of its vehicles used Aisin plants were reopened after only two days of shut- P-valves manLiI'Lictured exclusively at the KLiriya phint. down. The recoveiy was accomplished through an w liich turneti out 32.SOO I*-VLih'es a day for Toyota immediate and largely self-organized effort by firms. and other Toyota-group assemblers such as Mino Lintl mostly from within but also from outside tiie Toyota Dailiat.su as well as for Mit.subishi, , and Isu/.u. group, to set up alternative production sites outside of Aisiti." Within days, firms with little experience LLsed in all vehicles, P-vaI\es cotitrol pressute on iVLir with P-\^alves were manufacturing and deli\'ering the brakes to help pre\'ent skidding. About the size of a parts to Aisin. v\here they were a.s.sembled and in- [lack of cigarettes, the part is mass-producetl using S|-)ected before being sent to Toyota's and other dedicated tcinsfer lines, which keeps costs down Lintl clietits' assembly plants. The collaborative effort, which ensLires high productivity and reliLibility, Although which in\'ol\'ed more than 200 firtiis (of which ap- strLictLirally simple Lind inexpensive, costing only j^roxiinately .sixty-two took direct responsihility betv\'een ¥770 and Vl.^iOO apiece, P-valves rec]Liire tor P-valve production), was orchestrated with vety complex, high-precision mac'hining lo ensure the reli- limited direct control from Toyota and with no hag- ability anti durability essential to the SLifety of Liny gling o\-er technical proprietary rights or financial brake sj'stem. com|5ensation. That Aisin was the sole supplier of this small hiit crit- The Toyota group detiionstrated its cohesion and ical pan was surprising to many in jLipan. To reduce resiliency at a time when many observer.s were dis- the risk of the \'eiy kinti oi' tiisruption it was now- cussing the weakening of traditional ties among confronting, ToyotLi had increased parLillel sourcing.

Nuhiguchi • Beiudet Sloan Management Review Fall 1999 Its relationship with Aisin v\as distinctive, however,'' gradually increLised. however, reaching 60 percent by Aisin was one of Toyota's ck)sest sujipliers in sLiles. MLirch U and almost 100 percent by the end of personnel, and financial linkages: its outstanding co.st, March, The bulk of the P-valve pi'oduction was tak- quality, and delivety performLince record matie it tiif- ing place Lit LipproxitiiLitely sixty-two firms, including ficult to replace.'" Korit.su Sangyo. which gave full priority to the restocition of P-valve production and often worked Toyt)ia sLidtienly found itself in crisis. As Li resiilt of tlouble shifts through weekends. JIT operations, only one day's worth of I'-valves were in immediLite stock. PredictLibly, oti Monckiy. In total, the fire cosi Aisin V7,8 billion lind Toyota Februar\" 3. when assetiibly lines v\ere still riinning. about 70.000 vehicles and V16U bilHon in revenues," Toyota announced the following days' shuttlown Although Toyota t)fficials claim to have recoiiped 51 of twenty of its thiny assembly lines (including those nujst ofthe lost vehicle production throiigh increased of Toyota's contrLict assemblers); from TiiesdLiy. oveniiiie Lintl holiday shifts, losses in the range of Februarv- -i, to WednesdLiy, I-ebruLity S. pnicticLilly all V20 billion to V.^0 billion were umivoidable. mainly of ToyotLi's and most of its rekitetl firms' plants v\'ere because the creatit)n of alternativ e P-valve sites was dtised. bringing to a halt almost the entire Toyoia costly.'' In the end. however. Toyota and Aisin coiild group." As a re.sult, hundreds t)f tiered .suppliers who only he gratefiil that group members achieved a woiiltl liLive to wait for the reopening of their clients' rapid and effective recovery and averted wliLit could plants to resume deliveries wei'e Lilso Littectetl, as liLive been Li much more devListLitlng incitient. were local electricity, gas, anti transponation compa- nies. Such is the fragility of JIT: a surprise event CLin pLiralyze entire networks and even industrles.'- The Recovery Effort How could alternative P-\"Lilve pi-odiiction sites be oi-ganized and the deliverv- of the ret|uired 32,SOO P- How could alternative P-valve produc- valves a dLiy be resumed so tjLiickly? We describe the roles pkayed in the rect)very by six firms, which we tion sites be organized and the delivery visited during our fieltl research: Toyota, Aisin Seiki. of the required 32,500 P-valves a day he Denst), TLiiho Kogyo, Kav'aba Industrv". and Koritsu SLingyo. W'liile these firms differ in size, areLis of spe- resumed so quickly? ciLilizaiion. ptisition in the value chain, and financial linkages to Toyota, they share several characteristics: a commitment to. and capabilities for. JIT production Indeed. Toyoui was facing one of the worst crises in and the ability to .solve prohlems at their .source."' Its hi,stoiy.'" Hut on Tuesthiy, February i, only three days after the fire, the first alternative vokime P- Fi-om the lieginning. it was clear that lintil Aisin could valves (as oppo.sed to prototype I^-valv es tliLit liLitl rebuild its previous capacity, outside help would be been delivered one tiay earlier) were rtilling off teni- indispensable. It was decided then that firms from porarv" lines hastily set Lip by an Aisin sLipplier, both inside and outside the Toyota group would be KoritSLi Sangyo. niLirking tlie beginning of the recov- Lisked to set Lip LilternLitive P-valve production sites as erv' prtjcess. As Li result of this Lind niLiny other firtiis' sotjn Lis possible, with Aisin providing technical assis- efforts, bv' Tluirsdav. Febriiaiy 6. Toyota's 'laliara and tLince. tiesign drawings, jigs (e,g., specialized drills), Hino's Hamura plants v\'ere reopened, followed by tnLichine tools. Lind raw tnaterials (e.g,. cast iron) sal- the other car assembly pkints affecteti the next dav' VLigeti from the fire.-' Aisin was tt) immediately begin on a single-shift basis. By MondLty. Februaiy 10. a lit- setting Lip Lilternative prodtiction sites in its other tle tnore thLin one week after the pkint fire, all plants Lis well. Toyota-group assembly plants were back to nortiial with production \-olutiies of 13.000 tt) 14.000 vehicles Sixty-tv\'o firms responded to Aisin's call Linti itiimecli- per tla\'. After Linother week, the plants were in fiill ately began preparations to manufacture P-valves. operation at the previously planned production vol- Responding firms inckitled twenty-two of Aisin's own umes of IT.SOO vehicles per day. At that time, the sLippliers (e.g., Koritsu Sangyo): Toyota itself: thirty- proportion of P-vLilv es pit)duced by Aisin itself was six of Tov-ota's regLikir suppliers (e.g., Toyota keiretsLi less than 10 percent of the totiil amoiint necessaiy; it firms such as Denso and Taiho Kogyo. independent

Sloan Management Review Niihiguctii • Beaudet Fall 1998 suppliers sucli as K:ty:ih:i Industry' nnd Akebono solving capahilities developed through long-term col- Brake Industry', and firms belonging to other keiretsu lahoraticm and the flexible deployment of resources such as Sumitomo Electric Industries); and four non- enabled the firms to o\-erc(jme these obstacles and regular suppliers (e.g., Nnhco). ensured a ni\ik\ recovery of F-valve production and (if Toyota's assembly plants.

Aisin asked machinery makers in Japan Preparations and beyond to gather every available The first step involved the establishment at 5:30 a.m. on Saturday. February 1 (while the F-\^alve lines were machine on hand, including exhibition still on fire), of an "emergency response unit" at Aisin 52 to centralize and coordinate efforts to deal with the models taken from showrooms and equip- crisis in an orderly and organized manner. At 6:30 a.m., the unit was reorgani;^ed and divided into four ment already promised to other clients. teams, dealing respectively with production (for example, the setting up of alternative production sites), materials handling (for example, the delivery Along with these firms weru ahout 150 others, includ- of materials to those sites), liaison with cu.stomers ing seventy machine-tool makers that were involved (for example, Toyota, which was immediately con- indirectly in the recoveiy process, since machinery, tacted), and general affairs (e.g., negotiations with drills, fixtures, and gauges had to be found to replace Aisin's union). The unit's first meeting was held at [he ones destroyed in the fire. Aisin asked machinery' ncKm; twenty-seven meetings subsequently totjk makers in japan and beyond to galher uver>' avail- place until Febaiar)' 21. The second step involved able machine on hand, including exhibition models contacting potential collaborators and deciding w ho taken from showrooms and eqi.iipment already would do what, since many kinds of I'-valves were promised to other clients. For the sake of fast recov- needed (there are niore than 100 main types of er>', both regular and nonregular suppliers of machin- I'-valves) and availahle equipment and capacity ery ic) Aisin were called on. The cooperatit)n of these differed from firm to firm. After consulting its clients suppliers was crucial to the success of the recovery on which F-valves should be given priority, Aisin effort: Lindoulitedly, many were hoping to increase started as early as Sunday, I-ebruaiy 2 (the day after sales to Toyota in the future. the fire), to fax design drawings to various firms that had already voluntarily offered their help (e.g., Taiho Kogyo, which had contacted Aisin on hearing ahout Firms were asked to machine the needed parts using the fire on the radio) or had agreed to the retjuesi Aisin's design drawings and forged blocks and to of Aisin or its clients (for example, Kayaba, which was deliver them to Aisin. Then Aisin would be responsi- asked for help on the day of the fire hy Mitsubishi ble for final assembly, quality control, and deliver^' to Motors and the next day hy Toyota and Aisin), Toyota and other customers, A few firms such as Nabco, Sumitomo Hiectric Industries, and Akebono Brake Industry already produced F-valvcs of different In many respects, of course, the firms that "volun- types, but (nost had no experience with this particu- tarily'" offered their help were forced to cooperate lar part. One firm, ihe sewing-machine manufacturer with Aisin and Toyota. Failure to do so might have Brother Industries, had never made car part-s."* jeopardized future business relations with Toyota- Althotigh the technology and skills involved in manu- group firms; moreover, because of JIT, most .suppli- facturing F-valves are relatively simple, their numer- ers were losing millions oi' yen every day that ous and complex orifices recjuire highly precise Toyota plants remained shut down. Still, coopera- machining. Without the dedicated equipment used by tion worked both ways. F(;r example, Toyota chose Aisin (which was largely destroyed in the lire). not to put pressure on Aisin to give priority to its P-valve production would be slow and ardLious. own models to the detriment of Aisin s other clients, such as Mitsubishi, even though it could The situation was discouraging: the suppliers recrLiit- have easily done so given Aisin's financial and ed lacked sufficient tools, were mostly unfamiliar commercial dependence on Toyota. Fressuring with F-val\-L' production, and were inexperienced in Aisin would have yielded Toyota short-term gains, responding to crises of ihis magnitude. Tlie problem- hut in the long run. the parties concerned

Niihigiichi • Besudet Sloan Management Review fall 1998 remember such actions and possibly retaliate in had to conduct some form of quality control hefore some fashion. deliver^', using general-purpose gauges,

After reviewing the faxed design drawings, its equip- Finally, in the first few days of the crisis, Aisin was in ment availabilit>', and its pertinent technical capahili- a state of chaos and was difficult to contact. Indeed, ties, each firm had to notify Aisin of its decision so confused were conditions at Aisin that during the on whether to participate in the recovery effort. The evening of the first day of the fire, Taiho Kogyo's process was not easy bec;iu,se most of the firms director of production control was wrongly informed had never produced F-valves and knew little ahout the that master cylinders, not F-valves, were the main technical implications of F-valve production. Moreover, prohlem for Aisin. Within days, Aisin installed 250 the design drawings they received lacked neces.sar)' additional fixed phones and 300 mobile phones in an 53 technical details for first-timers and needed to be attempt to accommodate skyrocketing inc|uiries. The decoded into something more readily understandable. magnitude of incoming calls, however, overwhelmed Aisin's capacity to respond.

To make matters worse, P-valve produc- Because Aisin lacked sufficient resources to provide direct assistance to e\'ery firm at once, collaborating tion had to be organized without Aisin's firms had to figure out hy themselves how to pro- gram their machining centers for F-valve production special-purpose machines and drills. and find or make appropriate drills. For example, Denso .scrambled for drills from all over Japan and To make matters worse, P-valve production had to he even sourced some special ones from a U.S. maker organized without Aisin's special-purpose machines arranged for hy Denso's Tennessee plant. Although and drills because these were seriously damaged in Aisin supported these efforts as much as it could hy the fire. As noted earlier, F-valves require highly pre- setting up a "drill center" to coordinate drill purchas- ci,se machining, and to manufacture more than 30,000 es and hy organizing meetings to discuss technical of them a day requires highly customized jigs, drills, prohlems and solutions, firms had to rely largely on and transfer machines. Instead, firms would have tlieir own capahilities to hegin P-valve produclion. to rely on general-purpose machines such as machin- ing centers to manufacture F-valves, whicli most For all these reasons, many firms declined to help at firms already possessed. This method would mean all, judging their equipment and capabilities insuffi- much higher labor content and lower productivity cient to manufacture I*-valves. But many accepted, than usual. including Oen,so, Taiho, Kayaha, and Toyota, which agreed to manufacture hetween two and five types of Compounding the prohlem, Aisin's know-how was F-valves each. These and other firms then immediate- largely restricted to the special-purpose transfer ly started preparations for F-valve production. machines, making it difficult for Aisin to instmct firms on how to manufacture F-valves hy other means. At this point, significant differences in the firms' Furthermore, although a few drills were,salvaged from approaches to F-valve production emerged. Denso the fire, there were only enough to allocate one drill gave lull priority to in-house F-valve production, and per firm, which slowed down production hecau,se some of Denso's other proce,s,ses were temporarily the drill had to he imed with extra caution to avoid outsourced to make room for F-valves. In all, ahout hreaking. Moreover, not one hut many different drills forty machining centers were made available at were needed, and the sciirce ones received from Denso for F-valve production. 'I'aiho met with thirty Aisin were not a perfect match for machining centers. of its suppliers the day after the fire to plan an appro- priate division of labor, eventually invoK ing eleven Yet another problem was the difficulty in controlling suppliers in the effort, with Taiho itself taking charge quality without Aisin's special-purpose gauges. To ol" the final proces.ses. Fifty machining centers were ensure the reliability and durability of the hrake .sys- made availal:)le at two of the firm's three local plants. tem, quality control is very strict, in\olving at least .seventy inspection steps per piece. Even though Aisin Toyota .set up temporary production sites in its was to douhle-check every incoming F-valve, firms Ilonsha plant, entrusting F-vaive production to the

Sloan Management Review Witrignchr • Beaudet division responsible for experimental prototype pro- The operatitjnal speed of the firms reflected their duction and machiner\' maintenance, whose engi- familiarity w ith Aisin or with brake-related parts and neers and operators possessed considerahle know- iheir technical capabilities with machining centers how in setting up machines for new models and and prototype making. In all cases, howe\er, work preparing the transition to volume production. was complicated by such difficulties as the lack of Kayaba's approach in\'oKed outsourcing F-\aKes to details in Aisin's design drawings, appropriate equip- three of its suppliers, with no actual F-\'alve produc- ment, and direct a.ssistance from Aisin. As a result, in tion taking place in any of Its own factories. It chose making many of ihe production decisions, firms had three prototype specialists, the largest with 110 to experiment and exercise judgmenl. which explains empk)yees and the others with only sixteen and six the variety of methods u.sed lo manufacture P-vaives; 54 emplo\'ees, respectively. Originally Kayaha had con- Taiho u.sed two drills: Toyota used only one for a tacted ahout ten suppliers, of which ihree were cho- similar task. At Kayuba, iwo of the three suppliers, sen on the hasis of equipment availahility and techni- including the six-employee firm, ended up making cal capahiiities. their own drills.

Onte ihe prototypes were appro\'ed. each firm The collaborating firms established their moved to xolume production. Kon'isu Sangyo began \'olume produclion on February' -i. Denso started \t)l- own "emergency response units" to ume production on the evening of February 5, w ith production volumes of 1,600 units a day (mi,sed to coordinate P-valve production activities. 2.200 on February 11 under pressure from Toyota). Taiho started \olume production the next day, begin- At this stage, the collahorating firms estahlished their ning with low hatches of about fifty units and gradu- own "emergency response units" to coordinate F- ally moving toward \olumes of 2,000 units a day, valve production aclivities. A challenge lor many Kayaha started on Fehrtiar\' 7 with a daily pi-ockiction firms was to ensure close collahoration among usual- \()lume of 520 imits. Toyota began volume produc- ly remotely related units. Kayaba .set tip a special tion on i-ebruaiy 6. team. Linder the direction of Kayaha's director of pro- duction engineering, to centralize control and coordi- Solving Technical Problems nate activities with the suppliers concerned; the team The next step in\'ol\ed sol\ing the technical proh- was composed of sixteen employees from the ciuality lems that emerged during volume production. Since a.ssurance, production engineering, and pLirchasing Aisin was unfamiliar with F-\al\e production hy departments. 'I'hree salespeople were also dispatched machining centers, it was unable to provide solu- to Aisin to obtain real-time information and feedback. tions on its own. A testimony to the firm's impres- At Toyota, the production control department was sive technical capabilities, Den.so a.ssumed an impor- put in charge of coordinating in-hou,se F-\aKe pro- tant role, w ith its engineers quickly solving one duction and direct a.ssistance to Aisin. prohlem after another, Denso's solutions were ihen disseminated to other participating firms during spe- Production Begins cial problem-solving meetings organized hy Aisin. The next step involved each firm completing its first Denso also modified Aisin's design draw ings and prototype In .send to Aisin for appro\al before vol- proce.ss instructions lo make them more appropriate ume production. It was a tiny second-tier supplier. for machining centers, which Aisin passed on to Koritsu Saiigyo, that first deli\ered its prototype on other firms. .Monday. Fehmaiy 3. only two days alter the fire." Denso, the largest and most famous supplier in These problem-.solving capahilities are the hallmark Toyota's group, was the second to deli\er a jiroto- of firms ingrained with the principles of the Toyota type on the early morning of Fehriiaiy 5. followed hy Froduction System CFFS), or lean production. The 'i'oyota and Taiho Kogyo iater that day. Kayaba's first capacity to disseminate solutions quickl)' is also char- prototype was ready on FeliRiary 6. delivered from acteri.stic of 'loyota-group firms; they regularly do the sixteen-employee supplier, followed hy those benchmarking studies and sei up problem-solving from the IlO-employee and the six-employee suppli- suitK' groups in Toyota's supplier association, tlie ers on February' 7 and February' 8. respectively. Kyobokai. or as part oi'Jishiikoi (voluntaiy study

Nislsguctii • Beaudet Sloan Management Review group) activities, usually in the presence, and .some- are also a.ssociaied with Toyota and many other times under the supenision, of consultant.s sent free Japanese firms, were e\iclent throughout ihe etiort as of charge by 'Foyota. These efforts, along with the well. At Aisin, with union cooperation, meetings of company presidents, the training pro- the majorily of employees were mobilized for the grams and internships held for lower-tiered suppliers' reco\eiy effort, which invoKed, for example, white- enijiloyees, and the constant flow of employees collar staff fiom public relations and accounting among firms, permit rapid horizontal and vertical dif- departments helping w ilh plant operations. Al Toyota, fusion of best practices. the siiualion often dictated lliai managers and work- ers make decisions and lake action immedialely wiih- Despite these efforts lo di.s.seminate the newly found oiil necessarily following normal procedures or best practices and to standardize F-\'al\e production, obtaining permission from superiors or hookkeepers. 55 the diversity in practices persisted as .some firms pre- luuployees, after all. were thrown into exceptional ferred to slick to their own methods. For example. circumstances that rec|uired overcoming the usLial de- Taiho declined five oLit of six design modificalions partmental divisions and relaxing many bureaucr.itic proposed by Aisin bec;iuse ihey created di.screpancy proceckires (for example, regarding orders for prohlems with 'l'aiho's existing ec|Liipment. machineiy and materials witlioul proper invoices or changing shifts of workers without prescrihed i)rior nt)tice). Once the major technical problems were soKed. the firms de\oted their efforts to raising produciiviiy and increasing \'olume througii kulzcii acti\'ities. Again, The How of employees also occurred among Urms, years of training in TFS principles ensured that the 1-or example, at leasi 300 Toyota employees from appropriate cajxtbilities and routines were already production control, maintenance, production engi- in place. At Toyota, tor example, cycle lime was re- neering, purchasing, Cjualily control, and materials duced from more than two minutes to one minute. handling could be seen at Aisin at any time during twenty seconds, within a few weeks, hy minimizing the first three weeks, helping Aisin set up more per- changeover times through ihe pre.setting of the manent F-valve a.s.semhly lines, among other tasks: machining centers {F-\alve protkiclion was still rela- oilier automakers sent ahout foiiy people to Aisin, tively slow becau.se of limits to increasing prockictiv- Toyota employees (in particLilar from the mainte- ity in the ab.sence of Aisin's s]iecial-pur]x>se transfer nance tlepartment) were atso SK:n\ Ko Denso to a.ssist machines). The results of the.se efforts were then in the F-\al\e production process, stasing until lliey recorded on video lo be stocked as "organizational ohseired that e\eiything was in order: they al.so \ isit- memoiy" should the need to nianufactiue P-val\cs ed the machine-tool makers to help them repair emerge again. Aisin's damaged transfer machines, an effort that was completed hy mid-March. Wiiliin the Aisin group, \arioLis flows of personnel also took place, for exam- Flexible employee deployment and ple, from Aisin sLi|5pIiers lo Aisin (about 250 people). In total, more than 500 employees from Aisin's cus- procedures, wbich are also associated tt)mers and sujipliers as well as Toytita-group firms were on site at Ai.sin during llie peak days of ihe cri.sis. with Toyota and many other Japanese firms, were evident throughout the effort. As these examples demon.str.ite. the I'-vaI\e recover)' effort in\ol\ed more ihan just individual initiatiws to set up lempcjrary produclion siles and increase j)ro- The ability of Toyota and the other firms to move quick- ductivity. The flow of employees within and among ly toward shortening ,set-up times and to resume full JIT firms, llie meetings organized to discuss and dissemi- produclion demonstrates how deeply ingrained the IPS nate .solutions to leclinical prohlems. and the group- is in lhe.se firms. For example, at Taiho. which used level coordinalion efforls exerted by Aisin's "euier- kiinhciu lo make F-valves and delivered them lo Aisin gency response unit" and Toyota's production control in eight batches |X'r day. managers .stre.ssed that this department all contributed to a successful outcome was the only way they knew how to do it. that was more than just the sum of individual efforts, The.se capabilities for groupwide coordination and Flexible employee cle|iloyment and procedures, which organiziitional learning were revealed once again sev-

Sloan Management Review FaU 1998 eral months after the incident, w-hen Aisin Seiki puli- these payments to their ov\n (second-tier) suppliers, lished a booklet on how to organize the rapid recov- and some of these then announced their intention ery* of production following a disa.ster such as a fac- to compensate their own (ihird-tierj suppliers in the ton' lire.'" Hased on lessons learned during the crisis, same- manner. the booklet was distiibuted to 500 firms, including all those that had joined ihe recovei-)- effort and all remaining Kyohokai members. Tlie gesture was a Lessons from the Toyota Group way of thanking the firms for iheir sufiport and What lessons can be drawn from the Toyota group's cnstiring that mistakes would not be repeated. The oi-gaiiiA'd effort to recover Irom the Aisin fire-? While lessons fiom the Aisin incident were thiis ruiordeci as the incident underscores the risk of single sourcing in organi/ational tnenion' for all cooperating firms to a JIT setting, ihe ilunues of such an event recuriing use should the- need ever arise.-' are low.-' Furthermore, apart from natural disasters or tires, there is usually little need for coordinated Settling Compensation responses ol the magnilude we liLive described here. P-valve production continued until March U) for (Strikes pose different problems because the- setting Den.so. until March 6 for Taiho (with one small- up ol alternative sites al other firms would he viewed volume item lasting until the end of March), until as interference and would generally be unacceplable April 10 for Kayaba. until mid-March for Koritsu. and to trade unions). .More signific'ant for t)ur purposes until March 15 for Toyota. Considerable expenses Lire the- iniijlications of the- recoveiy efibrt ftii' even"- were incurEvd during the recoveiy process, including day situations. labor costs (which were particularly high because of the hick of specialized machinery and experience in We believe that this episode demonstrates the bc-iie- F-valve production and because much o\' the work tits ot clustered firm networks of the kind that Toyota included overtime-) and uiLichinen" and tooling ctjsts.-- LUid its partners have constructed. The Aisin incident reveals the capacity of the-se networks not only for I'irms including Denst) and Kayaha had begun pro- self-organized, flexible re.sponses to a crisis but al.so duclion of F-valves without making any explicit tor roLitine problem solving that leads to increnientLiI agreements with Toyota or Aisin on eventual com- improvements in firm Ltnd grou|") pertbrmance. In pensation for their expenses. There was neither time other words, the capabilities that inLide possible the nor rea,son to do so. Eventually it was agreed that reopening of ToyotLi-group jilants in a few days Aisin would fully reiEuburse all firms for the expenses instead of months are the .same ones that have made incurred in F-valve production, including labor ccxsts. Toyota and its suppliers among ihe most competitive I-'or example, Denso would he compensated by Aisin in JapLiii and the world under nuriiial circumstance.s. for the more than V30() million in labor, ct]uipment. special-purpose oil. and other costs. The arrangement A variety of institutionalized practk'es fo.ster these addressed only direct expenses, hov\ever. More cajxibilities. For example. JIT has the effect of imme- important were the losses in output during the clo- diately revealing bottlenecks, forcing workers and sure of a.s.sembly plants incurred by Toyota and all managers to continuously strive lo detect Lind rapidly the suppliers involved. solve emerging problems. During the recovery effort, JIT made it easier to locate- hottic-ncc ks LIIKI improve Toyota settled the issue in a surpii.sing manner: il the prodLKtiv ity t)f the- emergency F-valve production announced that all its first-tier suppliers would sites. In a JIT environment, workers and managers receive a payment eciuivalenl to I percent of their gradually accjuire CLipabilities for effective and prag- respectiv e sales to Toyota from Januaiy to .March matic problem solving, enhancing their ability over 1997. This amounted to overall payments of more time to deal with emerging problems. As the Aisiii than Y15 billion, vvitli Denso. for example, lo receive episode reveals, these capabilities are shared not only ¥1.5 billion. Many of the firms x'iewed the offer as a by I'oyota and its group of first-tier su|>|oliers (fcjr reward for cooperation rather than as compensation.-' example. Denso and KayabaJ hut also by many sec- ond-tier suppliers.-' Toyota's decisicjn was then replicated throughout the network, as most of the first-tier suppliers These- mechanisms also work at the interfirm level announced in turn that they would pass on most of Lincl help foster groupv\-ide problem-solving capabili-

Nishiguchi • Beaudet Staan Managemenl Heview Fall 199B CLin become 'minicrises" whose resolution leLids to In this case, Toyota "pulled the cord" and new learning experiences. In other words, because ot its inherent fnigility, firms value JIT fbr the role it stopped the entire value chain, from raw plays in fostering problem-solving and continuous improvement capLibilities. at the individual firm and materials providers to assemhiy plants, ovenill group levels Lind for both routine Lind niLijor problems. forcing everyone to deal immediately with the prohlem. Several practices institutionalized within the Toyota group support the firms in their ciuest to develop the.se capabilities: information and know-how sharing 57 ties. Because orders from 'I'oyota woukI he severely in the Kyohokai and jishuken. regular tninsfers of curtailed until I'-valve production could be restored, employees among group firms, and cither practices it was impo.ssible for firms such as Denso or even involving tace-to-face contact,-'" These practices facili- Kayaba to ignore ToyotLi's and Aisin's troubles. Just tate orgLinizalional learning, encourage teamwork. as Toyota encourages its assembly-line operators to and Ibster a set of common "codes" and understand- stop tile line whenever LI serious problem arises to ings among group members regarding technology. promote rapid problem-solving at the source, so. in managemeni, and the "rules of the game." Thus they this ca.se, Toyota "pulled the cord" and .stopped the provide the basis for coordination and ease of coni- entire value cliLiin. from rLiv\- niLiterlLils providers to municLition during times of crisis and routine alike, assemhiy plants, forcing everj'one to deal immediate- as tacit Ligreements Lind understandings ensure that ly with the problem. The Aisin incident revealed the information is transmitted without having to explain extent cjf Toyota-group firms' CLipubilities for de;iling eveiy thing.-" effecti\'ely w^ith such problems, which were the prod- Lict of years of working in Lin environment w here Although the mutual dependence impo.sed by JIT. the interfirm coordinLition and collaboration v\'ere crucial competition for future contracts, and peer pressure to to keeping operations running smoothly. conform to group norms woLild seem to compel cooperative behavior, in reality, cooperation comes Given the incre-Lised competition within Japanese "•naturally" in a network where firms have deep Lind keiretsu. it is likely ihat ToyotLi suppliers cooperated intimate knov\'ledge of eLich other. Trust was niLini- to the extent they did in the hopes of being reward- fested throughoLit the recover)' effbrt. as firms simply ed hy increased business opportunities in the tLiture. assumed that compensation for their efforts would be We believe thai such incentives to cooperate were forthcoming and fair and that other firms would not insufficient, however; the necessLirv' capahililies to tLike advantage of the situation lo .steal proprietLirv' cooperate effectively had to he in jilace as well. secrets or new contracts.-" Incidents such as the Aisin fire further strengthen these sentiments, as trust and Many outside olwen-ers lielieved that the Aisin inci- reciprocity are deepened each time a crisis occurs. dent revealed the vulnerahiliiy of JIT environments, arguing at the time that Liny unexpected prohlem Cooperation is also promoted by Toyota: as the rec- c]Liickly leads to the breakdown of the system. Yet ognized IcLider, it controls the general direction of the neither Toyoia nor Liny other firm that we inter- group. Toyota's financial resources Lind control over viewed was considering ahLindoning JIT. With each the design process make it the nLitunil leader, but in vehicle containing more than 30,000 parts, it is just the long run. it is Toyota's performance record that too costly to keep security butTers tbr each compo- ensures that suppliers follow its suggestions and ini- nent: indeed, any production system is vutnenilile to tiLitives.-" Firms knov\' that it pays to fbllovs' this partic- unexpected crises such as a plant fire. LiUir leader, as suggested by Toyota suppliers' consis- tently above-average profits,"' Moreover, suppliers Although crises are impossilile to predict, the capaliil- accept the constant pressure to improve perforniLince ities required to overcome them effectively and rapid- Ix'CLiuse VLirioLis practices ensure that firms are not ly can be developed in advLince. The constraints left alone to develop capahilities and that Toyota imposed by JIT ensure that firms gradLially make the does not deniLind Linything tliLit it could not do itself. necessary preparations, since even routine prolilenis Toyota's demands (e.g., cost-reduction targets) are

Sloan Management Review Nishiguchi • Beaadet Fall \ m bnscci on rational calculations and indispulahlL' e\"i- Toyota-group practices, if the benefits are so great. tliLit 'Inyota i.s in\-anably able to ol'tcr. The answer is tiiat uniLilating Toyota's model is not easy; it i.s the product of decades of investments in Toyota".s leack'r.ship is Lintli.'^pLitL'cl and omniprcsenl, supplier capabilities and in trust and commitment. biit at tliL' satiK' titiiL'. it is lafi^uly decetitfalizcci and E\'en in Japan, many firms are unable lo replicate ot'iun invisibkv Kaihc-i- than .yiw dirctt and detailed either the structure or the performance of the orders to ils t;roup firms. Toyoia disseminates general 'I'oyota group. NevertIiele.ss. we belic'\'e thai the approaches, or "recipes." Hi\"ing firms ihe tools to Toyota model offers an excellent goal for firms to SL'lf-orj;ani/e in times ot crisis and deal aiitotiomoiisly strive toward. Through earnest and persistent eHort.s with emeri>ing prt)bletns. These tools are disseminat- to build supplier capabilities anti promote horizontal 58 ed lo I'irsi-tier suppliers, which are ihen responsible knowledge siiaring among suppliers, firtns can reap for disseminatini^ them to tlieir own network of .sec- SLibstLintial gains in kjng-term competiti\e perfor- ond- anti third-tier suppliers. In this way. .similar pat- mance. These efforts .should be the tiext step for the terns of behavior are replicated throughout the net- man\' firms that lia\'e already begun the work of work without any explicit orders from Toyota (as restructuring supplier relations in the direction of exemiilifietl by the replication of Toyota's 1 percent the partnership tiiodel. Moreo\er. Japatiese firtiis compensatoiy bonus policy throughoui the group). curretitly under pre.ssure to rationalize their supply An advantage of ihis approach is ihat responses may base and iidopt more market-oriented supplier man- be dltTerentiated and tlexibK- adapti-d to each firm's agement practices could also learn from Toyota. Its particular situation, as tlie "recipe" !ea\'es consider- approach towartl siic)ply ihain management gives it able rootii for discretion. both Hexibilit)" and continuous cost reductions anti has proved to be effective e\'en in the current domestic recession. One might \%-onder. then, why all firms do not adopt

References Toyota currently account for 65 percent of Aisin's supplier relationships is already well documented, total sales, we do nol detail them in this article: interested read- The authors wish to thank Vaichi Aoshimn. Michael • 5. Another interpretation migbt suggest that the ers might benefit from consulting; A. Cusumano. Takahiro Fujimoto, Ken KusLtioki. Jens crisis occurred at a relatively good lime, that is, J,H, Oyerand W,G. Oucbi, "Japanese-Style Laagc-Hellman, Tom Roehl, Annique LJn, D. Eleanor when Toyota profits were at their tbirrf-highest level Partnersbips Giving Companies a Competitive Edge." Westney. and Lin Xu for their valuable comments, as ever due to booming sales in Japan, tbe recent 5/03" Management Review, volume 35, Fall 1993, well as the Japan Automobile Manufacturers' depreciation of the yen, and cost-saving efforts in pp. 51-63; Association, the Japan Auto Parts Industries' product development and other areas Ihat bave Nishiguchi (1994]; Association, the Institute for Inlernalional Economic saved Toyota nearly S2.5 billion See. T, Nishiguchi and J, Brookfield. 'Tbe Evolution of Studies, the International Motor Vehicle Program al B Bremmer. L, Armstrong. K, Kerwin, and K. Japanese Subcontracting." Sloan Management the Massachusetts Institute of Technology. Ibe Naugbion. 'Toyota's Crusade." Busitiess Week. Review, volume 3B. Fall 1997, pp 89-101; and Sasakawa Peace Foundation, and the Ministry cf 7 April 1397, pp. 44-5D, J.P Womack, D,T, Jones, and D, Boos, The Machine Education. Science. Sports, and Culture for the sup- • 6. In this article, tbe term "Toyota group" refers to That Changed the lVor/rf(NewYork: Rawson port received for our research. The above mentioned Toyota's network of core suppliers, including affili- Associates. 1990), people and institutions aro not responsible for any ates (e,g. Aisin Seiki). independents |e,g,. Kayaba • 9, Single sourcing is less common in Japan than is mistakes we might bave made. Industry), and affiliated vehicle assemblers (e g . usually tbought. as many Japanese automakers use ), Toyota itself distinguishes the Toyota "parallel sourcing"; see • 1, J,H. Dyer. "How Chrysler Created an American group, composed of fourteen of its closest affiliates, J. Richardson, "Parallel Sourcing and Supplier Keiretsu," Harvard Business Review, volume 74, from tbe rest of its suppliers. All Toyota-group affili- Performance in the Japanese Automobile Industry," July August 1996. pp. 42-55; ates and many of Toyota's important suppliers belong Strategic Management Journal, volume 14, July S.R Helper and M Sako. "Supplier Relations m to Ibe automaker's supplier association, tbe Kyohokai 1993, pp, 339-350. (245 members], for more details, see Japan and the United States: Are They Although a particular model's pans may be sourced Converging''.'' Sloan Maiidgnment Beview. volume M. Sakn, "Suppliers' Associations in the Japanese to a single supplier, slightly different versions are 3B. Spring 1995. pp. 77-84. and Automobile Industry. Collective Action for Technology often SDurced to a competing supplier, enabling Ihe T. Nishiguchi, Strategic Industrial Sourcing The Diffusion," Cambridge Journal of Economics, volume assembler lo compare each firm's performance and Japanese Advantage [^sv/yo(\i\ Oxford University 20. November 1996, pp 651-671. Within this associ- promote long-term competition between tbe suppli- Piess, 1G941, ation is a core group of aboul sixty firms that ers. Single sourcing is usually adopted by smaller • 2. J P Womack and D.T, Jones, lean Thinking. account for 8D percent of Toyota's total parts pur- assemblers in Japan, Banish Waste and Create Wealth in Your chasing costs. • 10. Like Denso Corp,, Aisin Seiki was originally a Corporation {tievjYQit Simon S Schuster, 1996] • 7 Interviews were conducted on March 24. 25. department within Toyoia before it was spun off as a • 3, H, Ulrich and G.J.B, Probst, eds,. Sclf- and 26, 1997. with managers of Toyota Motor subsidiary in 1949, Toyota presently owns approxi- Organiiation and Manageriien! of Social Systems Corporation. Aisin Seiki Co., Ltd , Koritsu Sangyo, mately 20 percent of Aisin shares, and several of (Berlin Springer-Verlag. 1984] Ltd., Taiho Kogyo Co,, Ltd., Kayaba Industry Co,, Ltd,, Aisin's executives were originally Toyota managers, • A. Although, in Japanese, tbe company's name is and Denso Corporation (formerly. Nippondenso Co,, including Aisin's current president Toyoda Kanshiro pronounced "Aishin Seiki." we use tbe registered Lid,). (the son of Toyoda Eiji, Toyota's former president and Eriglish name "Aisin Seiki~ in this article. Sales to • 8. Because the Japanese model of assembler- current honorary chairman). But these formal and

Nishiguchi • 8eBudeI Sloan Management Review Fall 1998 informal linkages are not sufficient to explain is considered to be an independent supplier in the scheme can also be interpreted as having the objec- Toyota's high reliance on Aisin. The supplier's high Japanese auio industry, with both Toyoia and Nissan tive of spreading the unexpected gains from the performance and reliability must also be considered, owning approximately the same number of its shares lower yen and thus averting criticisms that Toyota • 11 Toyota vehicles are assembled not only in IB 5 percent and B,l percent, respectively). Its clien- was monopolizing them, Toyota's own assembly plants but also in plants of tele is diversified, with Toyota accounting for about • 24 Suggestions proposed for alleviating the risk of Toyota keiretsu firms such as , 25 percent of sales and Mitsubishi and Nissan interruptions caused by such disasters included |1) Araco. . Toyoda Automatic Loom accounting for 15 percent and 12 percent, respec- reducing variety of parts, among other reasons Works, Central Motors. Gifu Auto 8ody. Hino Motors, tively, Kayaba specializes in shock absorbers and because excessive variety of P-valves complicated and Motor Co On Tuesday. February 4. only hydraulic equipment and has 47 percent of Japanese the setting up of alternative production sites after Daibatsu's Ikeda plant was kept open. Mitsubishi, and 22 percent of world market share for shock the fire; |2) dispersing production facilities. (3] which also used Aisin P-valves and had only about absorbers, Koritsu Sangyo (320 employees) is a sec- increasing education efforts toward fire and accident two days' worth of stock, had to close some assem- ond-tier supplier higbly dedicated to Aisin Seiki, It prevention; and (4) increasing parallel sourcing. bly lines on February 5. Isuzu and Suzuki were not specializes in transmission-related parts. Regarding P-valves. however, unconfirmed reports affected, bowever, because they were able to priori- • 17. Mainly P-valve production was to be out- suggest that Toyota probably continue to rely 59 tize production schedules for models not using Aisin sourced in this way. Existing capacity to produce almost exclusively on Aisin for P-valves, indicating a P-valves and because tbey bad five days' and tbree clulch master and tandem master cylinders in-house reluctance to forfeit tbe many benefits of single or four days* worth of P-valves in stock, respectively. was deemed sufficient; ihese parts were not manu- sourcing. e,g,. possibility of important cost reduc- • 12, The Ministry of International Trade and factured solely at Aisin's Kariya plant, whereas P- tions through exploitation of scale economies; sim- Industry's estimates of the loss in output during valves were Only five firms were needed to assist plification of parts procurement and quality-control February 1997 caused by tbe fire were 8,3 percent Aisin with the production of the clutch master and activities, and building of trusted relationships with for the entire transportation equipment industry and tandem master cylinders, a reduced number of suppliers. 1 percent for all metal-related industries • IB, Wall Street Journal. 8 M2^]^^7. • 25. The examples of 320-employee Koritsu Sangyo • 13. As a consequence of the Kobe earthquake in • 19. Koritsu Sangyo is perbaps an exceptional case. being tbe first to complete a P-valve after the fire or January 1995, production was curtailed for several Its president heads Aisin's supplier association. It is of Kayaba's six-employee prototype specialist that days, but not as severely as in the aftermath of Ihe one of Aisin's best-performing suppliers, tbe winner made its own drills for P-valve use are telling in this fire. Most production equipment (e,g., jigs and fix- of several awards for quality. It is highly dedicated to regard, tures, machine tools, transfer machines) of the Aisin (the supplier's president wished he had had • 26. A Beaudet. "Knowledge Diffusion in the affected Toyota supplier plants (Sumitomo Electric thirty hours per day instead of just twenty-four to Japanese The Role of and Fujitsu-Ten] was salvaged intact or repaired help Aisin during this incident), the result of decades Kyoryokukai and Jishuken" (Hitotsubashi University. quickly, resulting in Dniy minor disruptions for of continuous and stable relationsbips involving not Graduate School of Economics, unpublished master's Toyota's assembly plants and only for a few models. only business transactions but also know-how thesis), In contrast, Aisin P-valves, which are used in almost exchange and capability-upgrading activities, • 27.1 Nonaka. "The Knowledge-Creating every Toyoia model, and their assembly lines were • 20, Kinkyu seisan fukkyu kodo gaido (Action guide Company." Harvard Business Review, volume 69, burned down, with three transfer machines seriously for the emergency recovery of production]. Aisin November-December 1991. pp. 96-104; damaged. After Ihe earthquake, no temporary pro- Seiki Co., Ltd., 30 September 1997, The booklet was I. Nonaka and H, Takeuchi. The Knowledge-Creating duction sites outside the affected suppliers were set edited by Aisin's Corporate Planning Office, following Company How Japanese Companies Create the up. since Toyota assisted them at the suppliers' own the Aisin president's directive that the office record Dynamics of Innovation {Uevi York; Oxford University facilities everything ihat happened from day one of the inci- Press. 1995]. • 14 "Sales, Profits Rise at Toyota Affiliates." dent so that its lessons could be compiled for later • 28, It should be noted that P-valves are relatively A//We/lVeeWKl9Mayl997. p, 7, use mature products and that Aisin's technology was not • 15. V. Reitman, "To the Rescue; Toyota's Fast • 21, The booklet contained; (1] a list of the major particularly advanced or of a proprietary kind Rebound after Fire at Supplier Shows Why It Is difficulties encountered during tbe crisis, including • 29, T, Nishiguchi and E. Anderson. "Supplier and Tough," Wall Street Journal. B May 1997, pp, Al and tbose caused by Aisin's mistakes |e,g,. distributing Buyer Networks," in E.H, Bowman and 6.M, Kogut. A16. drills made for special-purpose machinery tbat could eds . Redesigning the firm (New York. Oxford • 18. Toyota (69,000 employees] is the world's third- not be found!; |2] guidelines for organizing an emer- UniversityPress. 1995). pp. 65-B4, largest automaker and Japan's largest firm in terms gency response (e.g,. how to set up an "emergency • 30, J.H Dyer. "Specialized Supplier Networks as a of sales. Both Aisin Seiki |11,100 employees) and response unit" and various teams], (3] key points on Source of Competitive Advantage; Evidence from the Denso 156,500 employees) are part of what Toyota what made the rapid recovery possible; |4) a flow Auto Industry," Strategic Management Journal, vol- defines as the Toyota group, Aisin and Denso sell, chart describing Aisin's efforts from the beginning to ume 17, April 1995, pp, 271-291. respectively, 65 percent and 50 percent of their out- the end of tbe crisis; [5] a flow chart describing each put to Toyota and are. respectively. 20 percent and team's function; and (6] detailed guidelines for each 23 percent owned by Toyota Like many Toyota sup- team's activities [including examples of checklists Repritit 4014 pliers nowadays, their clients include every and order forms used during the crisis]. Japanese automaker as well as many other • 22 Hundreds of Denso employees were involved automakers in the world. Aisin specializes in brake- daily in P-valve production, working double shifts related parts (and its subsidiary. Warner-Aisin, in and weekends for the first two weeks. At Taiho. transmissions]; Denso specializes in electric and about seventy people were directly involved in the electronic auto components and is now the world's emergency production effort, including fifty-five peo- fourth-largest automotive parts supplier, Taiho Kogyo ple fully dedicated to P-valve production At Toyoia. (1,350 employees), although not nominally part of the twenty-five employees were directly involved in in- Toyota group, sells 74 percent of its output to group house P-valve production, while hundreds more were firms (59 percent to Toyota itself), is 58 percent sent to Aisin and other firms to assist in the recovery owned by Toyota, and has many former Toyota man- effort. agers occupying key positions, including Taiho's • 23, It should be noted that Toyota could afford chairman |in contrast. Denso has only one Toyota- such payments at the time because profits were bred executive]. Its mam products are engine bear- higher than expected, mainly as a result of the con- ings, aluminum die-cast products, and dies, Kayaba linued depreciation of the yen. The compensation

Sloan Management Review Nishiguchi • Beaudet Fall 1998