Getting Toyota Out of Reverse

Shoichiro Toyoda, the honorary chairman of Toyota Motor, once recounted a conversation between two Japanese educators—Atsuo Ueda, an expert in the management practices of Peter Drucker, and Masatomo Tanaka, who was responsible for teaching about the automaker’s vaunted production system.

“Toyota,” Ueda observed, “operates exactly the way Drucker-san said a company ought to operate.”

Tanaka replied: “Yes, when we have trouble explaining what we’re doing, we can usually find a good explanation in one of his books.”

Never, of course, has there been a more crucial time for Toyota to go back to the books. The company recently recalled 3.8 million cars and trucks, as regulators investigate hundreds of complaints that its vehicles are prone to accelerating without warning. At the same time, Toyota’s finances have lurched into reverse: In May, the company reported a $4.3 billion deficit for the fiscal year—its first net loss since 1950. And with Toyota’s luster fading, consumers appear to be turning their attention elsewhere.