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«Table of Contents 1) Eiji Toyoda's Order - Project G21 2) Sedan Package Revolution - Body 3) Selection of the Hybrid System - THS 4) Sudden New ...»

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Table of Contents

1) Eiji Toyoda's Order - Project G21

2) Sedan Package Revolution - Body

3) Selection of the Hybrid System - THS

4) Sudden New President - Hiroshi Okuda

5) California's CALTY - Design

6) Power Play - Engine

7) A Second Tech Division? Production Technology's Help - Motor

8) Hirose Plant's First Major Challenge - IGBT

9) Cooling the THS - Radiator

10) Merging Two Different Cultures - Battery

11) The Two Product Planners - Commercialization

12) Human Network - Production

13) Superb Technical Presentation - ECO Project

14) The Big 3's Chill - Tokyo, Kyoto and Detroit

15) After Prius THE PRIUS THAT SHOOK THE WORLD HOW TOYOTA DEVELOPED THE WORLD.doc p. 1 / 104 Preface Sept ember 28, 1998. That was the day Toyota Chairman Shoichiro Toyoda stood before a crowd of journalists in Pavilion Gabriel, an exhibition hall often used to hold fashion shows near Place de la Concorde in Paris. Outside, the early autumn day was cold. Winter was approaching. Inside, there was a rising heat of expectation. He was there to personally introduce Toyota's new "litercar" Yaris which was to become available in Europe starting in t he Spring of 1999 and which would be manufactured starting in 2001 at a new plant still under construction in northern France. The Paris Auto Salon (show) was starting the next day and two days later Toyota's new showroom on Champs Elysees would open. More than 400 journalists from Europe and all over the world filled Pavilion Gabriele to hear what he had to say. They were all eager to learn about Toyota's strategy in Europe. With Chairman Toyoda were Executive Vice President Akihiro Wada, Toyota Motor Manufacturing Europe (TMME) Executive Vice President for Sales Juan Jose Diaz Ruiz, and Member of the Board and Development Supervisor of Yaris, Shuhei Toyoda who was not known to the media representatives. They gave a general presentatio n on the Yaris and

then settled down to answering questions. Basically, the 5 journalists wanted to know only two things:

Where was Yaris designed? How much more expensive is the European version compared to the one sold in Japan? Toyota executives could not believe what they were hearing when the questions quickly started to change. Journalists now wanted to hear about Prius, Toyota's hybrid vehicle. They asked, "We understand that Prius will be introduced in Europe in year 2000. What will be the price in Europe?" "How many Prius must you sell to make a profit?" "What is the technical difference between Japan's Prius and the one for the European market?" One after another, European journalists were asking questions about the Prius. Their questioning made the executives acutely aware of Europe's interest in and high expectations for Prius. They quickly became convinced that Prius would be a milestone in automotive history and that it would lead auto technology into the 21st Century. Prius was launched in Japan in December 1997 and its innovative mechanism and overwhelming fuel efficiency immediately caught the attention of auto makers and journalists around the world. Then President Hiroshi Okuda announced in July 1998 that Toyota would begin exporting 20,000 units annually to North America and Europe starting in 2000. The European public fell in love with the car. "Toyota - Hybrid vehicle - Prius"-Apparently those words described the impression many European journalists 6 had of the company. However, they did not really explain what Toyota was doing. There are several types of hybrid systems. One type is propelled by an electric motor while generating electricity with an internal combustion engine. Another type us es power from both engine and motor to move the car. Toyota's Prius, however, utilizes an entirely new driving technology that uses the a dvantages of two types of hybrid propulsion. During acceleration or driving downhill when engine efficiency is low, the car runs on the motor alone. During normal driving condition, the car uses both the engine and motor, storing extra electricity in the battery. When cruising at high speed, the car runs almost entirely on the engine, and the generator is kept off. When extra power is needed to accelerate while cruising, electricity is drawn from the battery to give more power to the motor.

When braking, the car decelerates by using the motor as a generator, and the produced electricity is collected in the battery as regenerated electricity. When stopped, the engine is turned off except for times when the air conditioner is used or when the battery is extremely low and needs to be charged. These complex modes are controlled by nine on -board computers that exchange information. The power-partitioning system equipped with a planetary gear distributes engine power to the wheels or to the generator. This system uses the engine and the motor in their 7 most efficient states, so as to allow the Prius to achieve the miraculous fuel economy of 28 kilometers per liter (66 mpg; Japanese 10-15 city driving mode). Consequently, only half as much CO2 is created, and the emission of toxic chemicals such as NOX also is reduced to one-tenth of the legal requirement.

THE PRIUS THAT SHOOK THE WORLD HOW TOYOTA DEVELOPED THE WORLD.doc p. 2 / 104 ForToyot a, however, fuel economy is not the only good thing about Prius. The new body package allows sufficient cabin space inside a small body. Moreover, Toyota was able to design and ma nufacture most of the units and parts within the company from scratch. Hiroyuki Watanabe, Member of the Board and Electric and Hybrid Vehicle Engineering Division General Manager, emphasizes. "Not just the combination of engine and motor but the very technology to combine different power sources will become the core technology of the future. The fact that we have accomplished this within the company is extremely significant." "The technology to combine different power sources will become the core technology" - what does it mean? How did Toyota develop this technology? Is Prius really a 21st century car that may change the his tory of auto development? How did Prius affect world auto makers, such as the Big 3? 8 Havi ng watched Toyota for four years, I inter viewed many people involved in the development of Prius in the course of six months to get answers to those questions. I would like to thank especially Mr.

Shinji Miyatake and Mr. Shoichiro Ohtsuka of T oyota Motor Corporation's Nagoya Public Affairs Division for their help with my project. I also would like to thank many others at Toyota for their cooperation and help. April 1999 Hideshi Itazaki *Toyota Motor Corporation merged with Toyota Motor Sales in 1982 and became the present day Toyota Motor Corporation. Except in a few instances, the name Toyota refers to the consolidated company. **Titles and positions used throughout this book, including addenda in parentheses, are as of original publication date: April 20, 1999. 9

Chapter 1 Eiji Toyoda's Order - Project G21

Evenast he bubble economy was at its peak in 1990, Toyota Chairman Eiji Toyoda (now Honorary Chairman) repeatedly expressed his sense of crisis at every chance. At the regular Board meetings he would ask, "Should we continue building cars as we have been doing? Can we really survive in the 21st century with the type of R&D that we are doing now?" The new models being introduced by auto makers during the bubble economy period had grown fancier and larger, loaded with excessive features an d accessories. Toyota had applied its best technology towards developing sedans that could compete with the top luxury cars of the world such as Mercedes-Benz and BMW, and that had culminated in the introduction of the Celsior. With every model change, other Toyota models, such as Mark II, Corona, and Corolla, had b ecome more luxurious. Corolla, which initially had been designed as a popular sub-compact car, now cost close to two million yen, and was nicknamed "mini- Celsior" due to its long list of features and accessories, as well as its exterior design. Eiji Toyoda, who had led postwar Japan's motorization with fellow engineer Soichiro Honda (founder of Honda Motors), was concerned. "There is no way that this 10 situation will last much longer. There will be a rebound some day. If we fail to implement proper R&D, we will eventually suffer the consequences." Toyoda grew more and more wary, and he wanted young engineers to thi nk of cars that would be truly appropriate for the 21st century. However, during the bubble-economy period, trying to implement new R&D programs in general was difficult because everyone was too tied up with what had to be done immediately. Nevertheless, Toyota repeatedly stated this opinion at every Board and study group meeting.

Yoshi ro Kimbara, then Executive Vice President in charge of R&D (now Advisor at Aisan Industry Co., Ltd.), concurred with Toyoda's view. Consequently in September 1993, Kimbara founded G21, a project committee to research cars for the 21st century. "G" was for "globe," but many employees thought it stood for Kimbara's "kin" (which means "gold" in Japanese), since Kimbara was known for his eccentric personality. Kimbara advocated a small-size car with a large cabin as the most important prerequisite for the 21st century car. Fuel-efficiency would be necessary since traffic congestion would THE PRIUS THAT SHOOK THE WORLD HOW TOYOTA DEVELOPED THE WORLD.doc p. 3 / 104 become an inevitable c hronic urban condition and fossil fuels would begin to deplete. The first and immediate prerequisite was "a small-size car." 11 Mostoft Introduction of the Center S ystem oday's passenger cars are powered by either of the two major driving systems: the FF system (engine in front, front-wheel drive) or the FR system (engine in front, rear-wheel drive). The FR system had been more popular but the FF system has replaced it because that layout allows a flat floor and larger cabin space due to the absence of a driveshaft under the cabin floor to connect the engine to the rear wheels. Recently Toyota has reintroduced compact FR models, such as Progres and Altezza, because many consumers enjoy the sporty performance of FR cars. The 90s, however, was the era of FF models and nearly all compact and sub-compact models were FF models.

In1992and1993,Toyot a implemented the lar gest organizational reform in its technical history by introducing the Center System, which divided the technical department into R&D departments for each individual model, FR and FF systems, and commercial vehicles. Until then, new-car development was supervised by the General Product Planning Division, a very large organization. A Chief Engineer (CE) was assigned per model -from Starlet to Century - to manage R&D. There also were individual development and design divisions for every key component, such as engine, chassis 12 or drive train. A CE would select the best component for his model from each of such departments. A CE controlled every stage of the development of a new model, from the engine to the exterior design. When there had been fewer engineers and fewer models to develop, each CE had the authority to develop unique and attractive products by selecting the suitable new technology. As the company grew larger, many problems began to surf ace. (At that time, Toyota had 12,000 engineers including 22 Chief Engineers, supervised by an Executive Vice President, tw o Senior Managing Directors, and more than 10 Directors.) It began to take longer for any piece of information to penetrate the organization. It also took longer to coordinate tasks. Engineers had difficulty grasping the bigger picture because the organization was too specialized. Any decisionmaking required a longer process. It was difficult to pinpoint who was responsible for what. These were all typical problems of a large corporation. In addition, the Chief Engineers, whose primary duty was the planning of a model, became swamped by coordination tasks, such as negotiating with other departments and so on. To solve the problem, the technical division was reorganized in September 1992 into the Vehicle Development Center I (R&D of FR models), the Vehicle Development Center II (FF models), and the Vehicle Development Center III (commercial and sports utility 13 vehicles). The Vehicle Development Center IV was established the following year specially for the R&D of units and new engines. Each of the first three Vehicle Development Centers included divisions for planning, design, and development and research for various components, such as vehicle, body, chassis and power train (engine). The Chief Engine er of each model was directly under the i ndividual Development Centers. This basically enabled the development of new models to be completed within a Development Center. The firs t three Development Centers were each staffed with 1,500 to 1,900 people, and the Fourth Vehicle Development Center was staffed with 4,000 people. The organizations were now scaled down to the size of 20 years ago - the perfect size for the head of each Center to supervise everything and for individual engineers to clearly know their roles and targets. Executive Vice President Kimbara commented on the results of introducing the Center System in the April 16, 1997 issue of the Nikkan Kogyo newspaper: "The consciousness of our engineers has changed from focusing on function alone to optimizing a car. It has become easier to develop a better car." The key players in the implementation of this massive engineering reform were Mr. Akio Matsubara, General Manager of Technical Administration Division (now Member of the Board), and Mr. Takeshi Uchiyamada, who 14 later became the Chief Engineer for Prius.

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