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While the catastrophe of American bombing in 1945 affected all of
Japanese industry, Toyota's biggest crises came about five years
later. This financial and labor crisis was the inspiration for what
became the Toyota Production System.
The Toyota Story
 Toyota
Motor Company was formed in 1933 as an offshoot of the Toyoda
spinning and Weaving Company. It was the special interest of
Kiichiro Toyoda, son of Soichiro Toyoda.
The first Toyota truck was made in 1935
and the first passenger car in 1936. As the Japanese army began to
drag the country into its Manchurian and Chinese adventures, Toyota
converted almost entirely to truck production.
When World War
II ended Toyota had 3000 employees and no working facilities.
The economy was in chaos. Nevertheless, Toyota designed a new postwar automobile in
1947 and attempted to rebuild the firm.
The Japanese economy
continued to suffer and by 1949 raw materials and goods of all kinds were still in short supply.
Inflation was rampant, and urban dwellers often traded clothing and
furnishings for rice or potatoes. In 1949 the government took drastic
measures to control runaway inflation. The anti-inflationary
measures reduced consumer demand
and totally dried up commercial credit. Toyota's financial situation
then deteriorated rapidly. Toyota could not meet payroll.
 Toyota's labor union
went on strike in April of 1949 over impending layoffs. The strike was
bitter and negotiations dragged on until bankruptcy was imminent. In
the end management and labor agreed to reduce the workforce from
8,000 to 6,000 employees. President Kiichiro Toyoda and his
executive staff resigned.
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 After the strike, two of the company’s
new executives, Eiji Toyoda (now chairman of Toyota Motor
Corporation) and Shoichi Saito, visited the United States seeking
new ideas. According to legend he conceived the Kanban idea from
observing American supermarkets. Ford Motor Company certainly had a
major influence.
Another legend has Eiiji asking his
lieutenants why they needed inventory. There were, of course many
reasons. Eiiji's response was "Now, please eliminate those reasons."
Eiiji recognized that inventory was the footprints left by problems
and simply covered up the problems rather than permanently solving
them.
 Taiichi Ohno was put in charge of implementing the new
ideas that evolved into the Toyota Production System.
Ohno had a reputation for being undiplomatic (almost ruthless) but
he got things done.
He hired
Shigeo Shingo to first work on the setup reduction problem. Shingo
was spectacularly successful and the solutions became the famous SMED system.
It is likely that Shingo was responsible for many of the technical
innovations and production ideas that evolved at Toyota.
In the years after the war, Japan was
mostly governed by General MacAurthur's occupation staff. In an
attempt to distribute power more broadly in Japanese society,
MacAurthur's staff encouraged labor unions and greatly strengthened
them. Toyota management may not have fully appreciated the new power
of the labor union, thus helping to provoke the strike.
Whatever the reason, the strike must have
had a profound affect on Toyota's approach to employees. There has
never been another strike.
Toyota's Learning Experience
Toyota emerged from World War II as a small manufacturer
of third-rate cars in a backwater market. Today they are challenging
General Motors for the position of largest vehicle manufacturer in
the world.
The turning point
seems to have come with the financial and labor crises of 1949-1950.
The crisis led to a paradigm shift about the role of people in
Toyota's operations and this was more important even than the many
process and technical innovations that all became part of the Toyota
Production System and Lean Manufacturing.
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