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03/02/2010

There are winners who look a lot like losers. One of them is Akio Toyoda.

Until recently, the 53-year-old grandson of Kiichiro Toyoda, the founder of Japanese carmaker Toyota, had every reason to be proud. Since last summer, he has been CEO of the biggest car company in the world.

But the man who testified before a committee of the United States Congress in Washington last Wednesday came across as something of a tragic figure. His face illuminated by the photographers' flashlights, he read a statement in broken English that sounded like a declaration of surrender.

"All the Toyota vehicles bear my name," he said -- which isn't quite true, because his grandfather changed the company name slightly. "For me, when the cars are damaged, it is as though I am as well." He apologized for all of the accidents that were caused by defective accelerator pedals. "I would like to extend my condolences to the members of the Saylor family," he said, with a blank expression on his face.

The room was silent. Many of the members of Congress had to swallow when they heard Toyoda mention the Saylor family, whose last 50 seconds alive were caught on audio tape.

'Hold On! Pray!'

The tragic incident, which has received much media attention in the US, happened last summer. Mark Saylor, the father, was driving his Lexus, Toyota's luxury brand, on State Route 125 in California. With him in the car were his wife Cleofe, their daughter Mahala and the wife's brother, Chris Lastrella. Then the gas pedal suddenly became stuck, and the car took off as if controlled by an invisible hand.

Lastrella called the emergency number, 911. In an agitated voice, he shouted into the phone: "We're going 120! We're in trouble. We can't... There's no brakes. (…) End freeway half mile."

The emergency dispatcher asked Lastrella whether it was possible to turn off the engine by turning the ignition key. But by then a man's voice, full of panic, was already saying: "We're approaching the intersection! We're approaching the intersection! We're approaching the intersection!" The father said: "Hold on! Pray!" A woman screamed. Suddenly the recording ended. Shortly afterwards, the car's driver and passengers were dead.

The Saylor family accident contributed to the demise of the Toyota myth. Rarely has an automaker ruined its reputation so quickly and so completely. Once again, Toyota is acting as an example for the industry -- but this time for how not to do things.

Role Model of the Auto Industry

"The top is where Toyota is," the German business newspaper Wirtschaftswoche once wrote. Only a few years ago, Volkswagen CEO Martin Winterkorn called the Japanese rival his role model.

Three academics from the Massachusetts Institute of Technology (MIT) published the legendary book "The Machine That Changed the World" in the early 1990s after visiting the Japanese company's plants. The book became a new bible for executives in the auto industry and elsewhere.

The company had invented the "just-in-time" approach, a system in which the parts used in production are always delivered at precisely the time when they are needed in the factory. Toyota's technique of permanent quality improvement, known as "kaizen," also became well-known and highly influential.

Seasoned business journalists were suddenly writing articles that read like declarations of love: "Spend some time with Toyota people and after a time you realize there is something different about them," wrote The Economist in 2005. "The rest of the car industry raves about engines, gearboxes, acceleration, fuel economy, handling, ride quality and sexy design. Toyota's people talk about 'The Toyota Way' and about customers."

Toyota Takes a Beating

Toyota cars were indeed impressive, because of their quality and technical sophistication. The Japanese made gasoline engines more fuel efficient. Toyota was the world's first car company to develop the hybrid engine for use in mass production, and it invested billions in developing electric cars.

Most of all, however, the Japanese managed to outpace archrival GM. In the 1980s, angry US autoworkers were still smashing Japanese imports with sledgehammers. Two years ago, Toyota became the world's top-selling car company.

By contrast, Detroit's Big Three -- GM, Ford and Chrysler -- have come to epitomize the decline of the United States as an industrial nation, a place where once-profitable companies are suddenly reporting losses, and where pride has turned into shame. Only a third of the 600,000 workers Detroit once employed are working there today.

GM was forced to file for bankruptcy in the summer of 2009. Although the company, once a national icon, is still alive, it is in intensive care. Without constant financial injections from government coffers, GM and Chrysler would no longer exist. California Governor Arnold Schwarzenegger recently told Detroit automakers to "get off your butt" and increase the fuel efficiency of their vehicles, if they are not to fall even further behind their foreign rivals.

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• Part 1: The End of the Toyota Legend
• Part 2: Deaths and Lawsuits