Behind Japanese inroad in US auto market. Toyota's executives restate aims of quality and lower cost

Back in the mid-1930s Kiichiro Toyoda returned to Japan from a trip to Europe and America with a dream to build Japanese-made cars. In the aftermath of World War II, when Mr. Toyoda set about rebuilding his car company, he made a decision that was to prove vital for both Toyota and the whole Japanese car industry. By concentrating on small cars he believed his company could survive the competition from car manufacturing giants as Ford and General Motors. Even then Toyota's first attempt to export its cars to the United States in 1958 failed because its early models could not withstand the long-distance and high-speed driving of the US.

But the picture looks quite different 30 years later. Japanese cars have gained a big share of the overseas market, accounting for 20 percent of total Japanese exports.

On Monday, Japan relaxed its voluntary auto export restraints, opening the way for higher car shipments to the US. The Japanese government wants the increased shipments to take place ``in a prudent manner,'' keeping them down to 2.3 million in 1985. The previous ceiling was 1.85 million, and without new government restraints exports might have risen to 2.8 million units in '85, according to government officials.

Though the new, higher curbs may benefit such smaller carmakers as Isuzu Motors and Suzuki, Toyota no doubt will remain the biggest competitor of GM, Ford, and Chrysler. Last year, in fact, Toyota became the most profitable company in Japan with record sales of more than 5,000 billion yen and net profits of 251 million yen in the fiscal year ending June 30, 1984 -- up 24.9 percent from a year earlier. The current year promises to be as good with its record half-year sales figure last December of 2,886 billion yen, a 9.8 percent increase from the same period a year earlier, and net profits of 126 billion yen, up 26 percent.

Why has Toyota been so successful? The current president and Kiichiro Toyoda's son, Shoichiro Toyoda, brushes aside any notion that there is anything mythical about this company's accomplishments. ``I would say we were very lucky,'' he explains. ``We Japanese are very good at making small cars, and Americans are good at making big cars. When the oil crisis occurred, the demand for small cars increased. Since they [Americans] didn't produce small cars, they had to import them from Japan.'' Mr. Toyoda says.

GM hoped to acquire this technology for making small cars when it began a joint venture with Toyota last year to manufacture subcompact passenger cars on GM's former assembly line in Fremont, Calif. In return, Toyota counts on getting easier access to the American market at a time when protectionist sentiments appear to be mounting in the US.

Besides the small-car technology, Toyota takes pride in its unique kanban -- or signboard -- system which ensures high quality of its products. Under this system, each worker is not only responsible for making a fixed number of parts, but he also has to check them for any mistakes. ``The production worker has to be willing to produce better goods whether or not the inspectors are waiting at the next process,'' explains Mr. Toyoda. ``He has to be responsible in his job.''

As part of Toyota's agreement with GM, the Japanese company trained about 240 leaders of the new joint venture company, the New United Motor Manufacturing Inc. (NUMMI), at its factory in Nagoya. in addition Toyota has sent some of its own people to Fremont as supervisors.

Could the Toyota system work at NUMMI? ``It's a test case, and we'll have to see,'' says the president. ``A lot would depend on labor-management relations. I think it could work if all the members make the effort to produce high quality cars at less cost more efficiently . . . and always to be on guard not to produce poor quality products.''

Toyota may have to resort to more such foreign investments if it wants to expand its market share in an increasingly protectionist climate. Four years ago, the Japanese government decided to keep down Japanese car exports to the US as a way of quelling such sentiments. Those curbs ended Sunday, and the new 2.3 million unit level became effective.

Along with Nissan president Takashi Ishihara, Mr. Toyoda said the decision by the Ministry of International Trade and Industry to maintain export restraints was ``regrettable.'' The Japanese auto industry's views had not been heard, he said, and the new measure goes against the interest of American consumers.

``Our duty is to sell good products at a lower price,'' Toyoda says. Therefore, a free market is necessary because ``each automaker has to make the effort to produce better products and sell them at a lower price.'' Toyoda also argued that there should be free trade, especially since the US auto industry has recovered recently.

When asked about future foreign investments, Toyoda said his company is ``too busy'' with the GM joint venture to begin another. An analyst at the Vickers da Costa securities firm agrees that expansion is ``unlikely for the immediate future. Toyota is one of the most conservative companies, it will never make decisions like that until it has weighed out all the pros and cons.''

Toyota's efforts to set up a joint venture with a Taiwanese company fell through last year, and recent reports have suggested that Toyota might be looking at other areas such as China or Latin America for possible investments.

While little has been mentioned of the latter, Toyota's chairman (and the president's cousin), Eiji Toyoda, led a large business delegation to China two weeks ago. The chairman denied later he had any discussions with the Chinese on the possibilities of building an auto plant in China or of establishing a joint venture. Toyota plans, however, to set up a training center in Peking to help promote after-sale services, according to reports.