Toyota Takes Lead Before Government Forces It To
By George Anderson
As is the case with most business executives, Toyota’s North American president and COO Jim Press is no fan of government regulation.
Mr. Press concedes, however, that many times his industry and others have been forced to change by government regulation because of a failure on their part to “drive the process” instead of getting “run over by it.”
A case in point, he said, is the current situation the auto industry finds itself with issues such as global warming, fuel economy standards and the dependence on foreign oil.
Toyota is actively seeking to address these issues with its hybrid lineup. The company announced it is adding 10 hybrids to its line and the company expects hybrids to make up 25 percent of its total U.S. sales in the next 10 years.
While hybrid models have been successful for Toyota — the company’s sales of its Prius are up 133 percent this year– it’s not enough, said Mr. Press.
According to a report in USA Today, Toyota is also developing vehicles that run on “clean diesel, natural gas and hydrogen power.”
Mr. Press would like to see others work with Toyota so the industry doesn’t find itself dealing with regulations down the line because of a failure to address environmental and other issues important to the scientific community, consumers and legislators.
“Think of what we could do with issues like CAFE (corporate average fuel economy) and global warming if we join hands and develop our own vision for the future, rather than waiting for regulators to do it for us,” he said at the Center for Automotive Research’s Management Briefing Seminar.
“I propose we put together a meeting of top automotive leaders in a neutral location where we all leave our company name badges at the door,” he said. “That way, we can engage
in candid dialogue, unify and come out with a positive direction.”
Moderator’s Comment: What has been the track record of the retailing and related industries in getting out ahead of government regulation on issues important
to the medical community, consumers and elected representatives? Are there lessons for this industry in the advice given by Toyota’s Jim Press?
Jim Press is not going to be making many friends in the oil industry.
“Hybrids are a simple way to make an important difference in curtailing foreign-oil dependence, air pollution and greenhouse gases, plus they’re a lot of
fun to drive,” he said. “Being able to thumb your nose at gas stations on a regular basis is an added bonus.”
– George Anderson – Moderator
Many industries “get out ahead” of government legislation by dispatching lobbyists to Washington D.C. to influence our elected representatives. Thus, the corn lobby – and many others – protect their useless subsidies.
Recently, Major League Baseball claims they got out ahead of Congress by establishing slightly stricter drug testing practices and punishments. That is, if you see a little boy being chased by his dad with a switch as “getting out ahead.”
A more positive example that comes to mind is the ClearRx prescription bottle recently designed for Target, which gets out in front of sure-to-come legislation to improve usability of pill bottles with senior citizens in mind.
Additionally, Sierra Nevada Brewery here in NorCal recently introduced their fuel cell power generator, which provides enough power for their entire plant and saves them $400,000 annually in electric costs. It was completed with $3.5 million in government inducements that cut the total cost in half for the brewery, making their payout about nine years.
Let’s call Mark’s example “self-interested altruism.” Toyota has realized that, inevitably, consumer demand is going to turn toward cleaner and more efficient cars. Or rather, it will turn toward cleaner air and less economic dependence on oil, which in turn will drive political action. The manufacturers who don’t wait for the regulations will be the big winners, both from a branding standpoint and from not having very costly changes to make.
Big retailers who are currently facing a cultural backlash against huge warehouse stores (e.g. Wal-Mart) or the homogenization of Main Street (Starbucks) might also begin thinking about how to better integrate their stores into local cultures. Working hard to head off the regulation that often follows consumer frustration is worth it.
UK businesses try to give the perception, in response to threats of government action, that they have the public heart at heart and that they don’t need regulating except by themselves. Believe it if you will. A few businesses may take a few baby steps cosmetically but when it comes to looking at what they are really achieving, it isn’t very much that is positive. Far more smoke and mirrors than reality. Sad, I think, because for similar effort and expenditure they could probably stop pretending, make some significant improvements and win a whole lot more loyalty – and profit. I fail to understand why that is such a difficult lesson for business to learn.
The idea of a conference sans name tags seems a pretty good starting place. I’ve read that lots of Americans are buying hyrbrid cars. Mr Press’ ideas and policies seem sensible but I have to ask the question – is he really in the driving seat or are the customers?
Retail profits are terribly depressed due to the excessive (and growing) square footage of available retailing space. In most places in the US, retailers lobby for expanded development rights, instead of the reverse.
About 20 years ago, I had a retailing client in Italy, a major department store and discount store company. Their net profit before taxes was more than double the American averages because of tight government restrictions on retail space expansion. The government had strictly limited the retail space square meter growth to almost a “no growth” policy. This enhanced retail profits greatly.
If retailers across the US held a “Save This Country From Wasteful Building” month, and collected signatures at every cash register for petitions to freeze the total number of retail square feet per capita, there would be several results:
a. Retailers would be seen as allies in the Green movement; environmentalists who’d want to stop excessive commercialization
b. Excessive, profit-robbing expansion would be curbed, over time
c. Rents would rise, so retailers who currently have long leases would have enhanced assets and profit
d. Higher rents would be enhanced barriers to entry, protecting the incumbents’ profits
When Barnes & Noble reduced their store expansion rate, the stock rose and the profits did too.
For years, farmers got the government to restrict the land that could be used for growing crops, in order to gain higher crop prices. If retailers had “pull” and “vision” and knew how to position themselves as “on the side of the angels (environmentalists),” they could reap great profit increases.
In 1983, I bought a Plymouth Colt that got 44 mpg on the highway. How come the only cars that do that now are hybrids? As I understand it, gas has been reformulated to get fewer miles per gallon in order to reduce pollution. For as long as I can remember, cars in Brazil run on alcohol. I miss my old high mileage cars and I miss the old gas.
I really doubt Toyota is trying to stay ahead of government regulation. They are trying to stay ahead of the industry and their competitors. No company is in business to do the government any favors. They are in business to make money.