Toyoda Automatic Loom Works, automobile department (1933–37) · Toyota Motor Co., Ltd. (1937–82)
Revenue · FYE Mar 2026
$320.5B (¥50.69tn)
Net profit · FYE Mar 2026
$24.3B (¥3.85tn)
Toyota Motor: long-term performance & turning pointsSales (revenue) and profit-margin ratio
Sales (¥ bn)Net margin (%)
1890From the loom patent to a car business set free
1891Toyoda Sakichi is granted patent no. 1195 for a wooden hand loom
1926Toyoda Automatic Loom Works incorporated at Kariya with ¥1m capital
1929The British patent for the automatic loom is sold to Platt Brothers
1933An automobile research department is set up inside the loom works
1935The A1 prototype saloon and G1 truck are completed; the truck goes on sale
1936The passenger car goes on sale; the 1936 law makes car making a licensed business
1937Toyota Motor Co., Ltd. founded with capital of ¥12m
1938The Koromo head-office plant is completed and fixed as the founding anniversary
Toyota began as a department inside a loom maker. Toyoda Sakichi’s automatic loom paid for the research — the British patent sold to Platt Brothers in 1929 funded his son Kiichiro’s car project — and by 1937 that department had been cut loose as Toyota Motor Co., which a year later opened a plant at Koromo roughly fifty times the size of the loom works. The vessel was built long before there was demand to fill it, and that order of operations became the company’s habit.
Sakichi’s inventions and the making of the loom business
Toyoda Sakichi (豊田佐吉) was born on 14 February 1867 in Yamaguchi village, Shikichi district, Totomi province — today Kosai in Shizuoka prefecture. Inspired by Saikoku Risshihen, a book of self-improvement published in 1870, he set his mind on inventing a loom when the Patent Monopoly Ordinance was promulgated in 1885. He filed for a wooden hand loom in 1890 and was granted patent no. 1195 on 14 May 1891. Toyoda Kiichiro (豊田喜一郎) was born on 11 June 1894 as Sakichi’s eldest son, and grew up on the grounds of his father’s works, watching things being made at close quarters. He looked back in later years on that childhood exposure to machinery: an engineer must think of machines as family, and the most important thing is to be touching them at all times.
In 1926, acting on his father’s wishes, Kiichiro drew up plans for a new factory at Kariya in Hekikai district, Aichi prefecture, and on 18 November that year Toyoda Automatic Loom Works was incorporated with capital of ¥1m. Toyoda Risaburo (豊田利三郎) became president and Kiichiro managing director. Kiichiro worked on refining the non-stop shuttle-change automatic loom his father had invented, and in 1929 sold its British patent to Platt Brothers of England. The proceeds became the seed money for automotive research. In Japan at the time Ford and General Motors ran knock-down assembly plants inside the country, and volume production of a domestically made car had barely begun.
On 1 September 1933 Kiichiro set up an automobile manufacturing department inside Toyoda Automatic Loom Works. In October the research began by stripping down an American-built Chevrolet saloon, sketching its parts and working them up into drawings for prototypes. Foundry techniques developed for looms were applied to engine casting, and cylinder blocks were prototyped over and over. The corporate-history section of the company’s 有価証券報告書 (annual securities report) records this moment as the start of automotive research. Formal board approval was obtained after the fact: Kiichiro pushed the new venture forward as an accomplished fact while its prospects were still unclear. What underwrote the judgement was the expectation that the money earned from looms, and the machine-tool skills that came with them, could be turned directly to machining car parts.
From prototypes to licensed manufacturer under the 1936 law
In 1935 the automobile department completed the A1 prototype saloon and the G1 truck, and left the prototype stage behind. In November of that year it managed to put the truck on sale, and in September 1936 the passenger car followed. Toyoda Eiji (豊田英二), who joined the automobile department of Toyoda Automatic Loom Works in April 1936, was ordered by Kiichiro to open a laboratory at Shibaura in Tokyo, where he handled radiators and the strip-down analysis of the German DKW, among other work. Eiji was Kiichiro’s younger cousin and a graduate of the engineering faculty of Tokyo Imperial University. The Shibaura laboratory existed to accumulate fundamental technology, its role being to bring in-house the component technologies that volume production would require.
In 1936 the Japanese government promulgated the Automobile Manufacturing Industry Law to push domestic car production, and designated the automotive arm of Toyoda Automatic Loom Works a licensed company. Being licensed brought protection backed by military demand, but the scale of investment that volume production required went beyond what the loom business’s own finances could carry. Kiichiro was forced to separate the automobile department from the loom business, and began preparing for it to stand alone. The law had the effect of shutting foreign-owned assembly firms out of the domestic market, giving Japanese makers their opening at volume. Under an industrial policy that traded protection and control for domestic production, Toyota gained in military procurement a demand it could count on.
On 28 August 1937 Toyota Motor Co., Ltd. was incorporated with capital of ¥12m. Toyoda Risaburo became president and Kiichiro vice-president. The corporate-history section of the securities report enters August 1937 as separation and independence from Toyoda Automatic Loom Works — the founding of the company — with capital recorded as ¥12,000 thousand. Immediately after the separation Kiichiro addressed the representatives of Toyota dealerships from across the country, setting out a corporate philosophy of building excellent cars at low prices. The Shibaura laboratory became the new company’s research division, and in May that year Eiji transferred to head office at Kariya to take charge of a newly created inspection and improvement department.
The Koromo plant and the idea of flow production
On 3 November 1938 the head-office plant was completed at Koromo in Aichi prefecture — the town now called Toyota City — and the company fixed that date as its founding anniversary. The site covered some two million square metres, about fifty times the loom works at Kariya. It was an investment that put in place a system for integrated volume production of a popular car before the demand for one had grown. The Koromo plant held casting, machining and assembly on a single site, sparing the trouble of hauling parts between factories. In designing it, Kiichiro laid the machines out in the order of the process. That was the reverse of the thinking behind the typical factory of the day, which gathered machines of the same kind together by department.
For the move to Koromo, Kiichiro wrote a meticulous pamphlet of his own setting out his intention to introduce flow production. At Kariya the prevailing method was to put semi-finished castings into a warehouse first and machine them later; Kiichiro’s principle instead was to make, each day, only what was needed in the quantity needed. Eiji gave this the Japanese-English name just in time. Under wartime controls on materials, however, the premise that the parts you needed would arrive when you needed them collapsed, and the method never took hold. Production that bypassed the warehouse tied up less capital in work in progress — an urgent consideration for a late entrant short of capital.
As the war in China dragged on, demand for trucks rose sharply and the Koromo plant met its target of 500 vehicles a month. Output was turned over to increasing military truck production, and development of passenger cars effectively stopped. Toyoda Steel Works — today Aichi Steel — was established in March 1940 and Toyoda Machine Works — today JTEKT — in May 1941, so that steel and precision machine tools could be supplied from within the group. In August 1945 the vehicle-body manufacturing business was transferred to Toyota Auto Body Industry, now Toyota Auto Body. In November 1943 the company absorbed Chuo Boseki to broaden its base, but shortages of materials sent production into a steep decline in the later part of the war.
1939Defeat, a broken cash position, and a restart with sales split off
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY1954 · unconsolidated
Revenue$52M
Net income—
Net margin—
→
FY1959 · unconsolidated
Revenue$198M
Net income—
Net margin—
1940Toyoda Steel Works (today Aichi Steel) established
1941Toyoda Machine Works (today JTEKT) established
1945The Koromo plant is bombed; truck production resumes three days later
1945Toyota Auto Body Industry established to take over body manufacturing
1949Shares listed on the Tokyo, Nagoya and Osaka stock exchanges
1949Aichi Kogyo (today Aisin) established
1949Nippondenso (today Denso) established as a second company
19501,600 voluntary redundancies; Kiichiro resigns and Ishida Taizo succeeds him
1950Toyota Motor Sales established, splitting sales from manufacturing
1955The first-generation Crown and the Toyopet Master go on sale
1957Toyota Motor Sales U.S.A. established
1959Motomachi, Japan’s first plant dedicated to passenger cars, is completed
The war ended with a quarter of the Koromo plant destroyed, and four years later the company came within reach of collapse: the Dodge Line dried up demand, the money owed on instalment sales stopped coming in, and Toyota survived only on a syndicated bank loan — at the cost of 1,600 voluntary redundancies, its founder’s resignation and the splitting off of its sales arm. What it built in the decade that followed — the kanban system, the first Crown and the Motomachi plant — took revenue from $51.7M (¥19bn) in 1954 to $197.8M (¥71bn) in 1959, and left a company determined never to be at a bank’s mercy again.
From bomb damage to trucks back on the line
On 14 August 1945 the Koromo plant was bombed by American B-29s and about a quarter of it was destroyed. The war ended the following day, and on 16 August vice-president Akai Hisayoshi (赤井久義) told the assembled executives that Toyota had a responsibility to build and supply the trucks reconstruction would need, urging them to start again. The plant resumed production on 17 August, abandoning the material-saving wartime specification and switching to trucks built to the standard one. Much of the equipment had escaped the raid and would run as soon as materials could be found. Post-war production planning was reassembled from the ground up, beginning with a recount of the machine tools that had survived the fire. Under the occupation, passenger-car production was banned, so for the time being trucks alone carried the business.
Anticipating that car production might be prohibited outright, Kiichiro cast about for new businesses tied to the necessities of life — pottery, or making ちくわ fish sausage — in order to protect his employees’ livelihoods. When permission to continue building trucks and buses, though not passenger cars, came through in November 1945, those schemes lapsed. In April 1946 the company established Kanto Electric Automobile Manufacturing, today Toyota Motor East Japan, giving it a production foothold in eastern Japan. In July 1948 it set up Nisshin Tsusho, now Toyota Tsusho, hiving off the procurement function. In May 1949 Toyota listed its shares on the Tokyo, Nagoya and Osaka stock exchanges.
In 1949 the severe fiscal austerity of the occupation’s Dodge Line caused demand for cars to collapse. Collections on instalment sales stalled, squeezing manufacturing funds directly. Toyota resorted to soliciting 1,600 voluntary redundancies and to a rescue plan that split manufacturing and sales into separate companies. Kiichiro took responsibility for the redundancies and resigned as president in June 1950; he was succeeded by Ishida Taizo (石田退三), who came from Toyoda Automatic Loom Works. A cash position driven to the edge of bankruptcy was saved by a syndicated loan from a group of banks, orchestrated by the manager of the Bank of Japan’s Nagoya branch. Eiji looked back on it in later years: having been through an experience that took us to the brink of collapse, the managers who came after worked desperately to build up savings so that it would never happen again.
Splitting sales from manufacturing, and spinning out the parts makers
In April 1950 Toyota made its sales arm independent as Toyota Motor Sales, severing at the institutional level the state in which manufacturing money and sales money were mixed together. Kamiya Shotaro (神谷正太郎) became president of the sales company. In May the same year the spinning business was transferred to Minsei Boseki, today Toyota Boshoku. Dividing production and sales into separate companies was a choice made at the price of a broken cash position. The separation lasted thirty-two years, until the two were merged again in 1982. The sales company took charge of the national dealer network while the manufacturing side answered for cost and quality, and the two raised their funds separately.
Under the 1949 corporate reconstruction and reorganisation plan, Toyota separated three plants — the electrical equipment works, the Kariya south works and the Nakagawa works — as second companies standing on their own. Nippondenso, today Denso, established that December, was forbidden to use the Toyota name and required to repay $388,889 (¥140m) of debt: harsh terms on which to set out. Its first president, Hayashi Torao (林虎雄), recalled being warned sternly by Kiichiro that damaging the credit of the group would not be tolerated. In June 1949 Aichi Kogyo, now Aisin, and Nagoya Rubber, now Toyoda Gosei, were established. The structure in which a finished-vehicle maker and specialised parts makers divide the work between them was formed in this period.
The Korean War, which broke out in June 1950, brought large orders for trucks for the American forces and gave Toyota’s recovery a push. In the same period Kamiya Shotaro, president of Toyota Motor Sales, carried negotiations with Ford over a technical tie-up to the very edge of signature, but the Korean War brought a US government travel ban that made it impossible to send engineers, and the talks came to nothing. Ford agreed instead to accept trainees from Toyota, and from July 1950 Eiji, then managing director, spent about six weeks studying at the River Rouge plant and elsewhere. Back in Japan, Eiji acknowledged the sheer scale of Ford but concluded that there was nothing Ford was doing that Toyota did not already know about. The policy of assembling volume-production technology by its own efforts, rather than through a partnership, was settled by that finding.
The production system, the Crown, and the Motomachi plant
The just-in-time thinking that wartime conditions had stopped from taking root was revived after the war, in the hands of Ohno Taiichi (大野耐一), who had also come from Toyoda Automatic Loom Works, as kanban. The mechanism by which a downstream process tells an upstream one how many it needs grew into the Toyota Production System, built around standardisation and improvement on the shop floor. In May 1951 a creative-suggestion scheme inviting improvement ideas from ordinary employees began. Suggestions ran to 789 with 8 per cent taking part in the 1951 financial year; by the 1965 financial year the figures had grown to 15,968 suggestions and 30 per cent participation. It was the shortage of money for capital equipment that made raising productivity through shop-floor ingenuity the method of choice.
In 1955 Toyota launched the first-generation Crown and the Toyopet Master, its first serious passenger cars, and so entered the passenger-car market. The Crown had independent front suspension and was a passenger car designed entirely with domestic technology. Demand at the time, however, centred on taxi operators and the wealthy, and monthly sales stayed at around 2,000 units. In March 1956 Toyota Motor Sales put industrial vehicles on the market, and in October 1957 Toyota Motor Sales U.S.A. was established, placing the window for exports to America inside the United States. The small Crowns exported that year lacked the performance for high-speed driving and were not accepted by the American market. No Japanese maker yet had a plant dedicated to producing passenger cars in volume.
Eiji, then executive vice-president, proposed a passenger-car plant sized for 10,000 units a month; president Ishida Taizo, judging the scale too large for the time, decided to build for 5,000 a month. In July 1958 an in-house committee for the construction of a dedicated passenger-car plant was set up, chaired by Toyoda Shoichiro (豊田章一郎). The judgement handed down was to hold the equipment to 5,000 units a month while designing the buildings alone on a scale that would take 10,000 in future. The Motomachi plant was completed in August 1959, eleven months after ground was broken, and an opening ceremony was held over 18 and 19 September. A line-off ceremony was held alongside it for a Crown Deluxe, the 500,000th vehicle Toyota had built since its founding. Ishida, giving the address, placed Motomachi at about 20 per cent complete and called for growth to not five times the number of units, but five times the substance. In December that year Motomachi reached the 10,000 units a month it had been aiming at.
1960The Corolla, capacity ahead of demand, and the crossing to North America
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY1960 · unconsolidated
Revenue$285M
Net income—
Net margin—
→
FY1988 · consolidated
Revenue$56.3B
Net income$2.4B
Net margin4.3%
1960Toyota Central R&D Labs established
1965The Kamigo plant, dedicated to engines, is completed
1966The Corolla goes on sale and the dedicated Takaoka plant starts up
1966Business tie-up with Hino Motors
1967Nakagawa Fukio dies suddenly; Toyoda Eiji becomes president
1967Business tie-up with Daihatsu
1973The first oil crisis; exports grow from 1974 with the Corolla at their head
1981Talks with Ford on joint small-car production in the US break down
1982Toyota Motor Co. and Toyota Motor Sales merge into Toyota Motor Corporation
1982Toyota Motor Credit established
1984NUMMI, a fifty-fifty joint venture with GM, is established in California
1985The board decides on wholly owned plants in the US and Canada; Kentucky chosen
1986Toyota Motor Manufacturing U.S.A. established
The Corolla set the shape of this era. Toyota raised Takaoka for it before the orders existed — one plant, one model — and repeated the pattern at Kamigo and after, under Toyoda Eiji, who took the presidency in 1967 with General Motors as his declared target. Revenue rose from $285.3M (¥103bn) in 1960 to $56.3B (¥7.22tn) in 1988, and by the end of the era the same instinct had carried the company across the Pacific: first a shared bet with GM at NUMMI, then a plant of its own in Kentucky.
Developing the Corolla and concentrating investment at Takaoka
In the first half of the 1960s, as incomes rose, the passenger car was becoming a practical item within reach of ordinary working households and not only the wealthy. Toyota had succeeded with the Crown as a company car and a taxi, but it kept stumbling in the mass market: the Corona of 1960 and the Publica of 1961 were both plagued by faults. In mid-1962 Hasegawa Tatsuo (長谷川龍雄), who would become chief engineer of the first Corolla, began to conceive a new popular car of about 1,000cc — a slightly larger Publica. Toyota could not then afford to bring out new models one after another, and Hasegawa judged that he needed strong backing from the top. He put the idea to Kamiya Shotaro of Toyota Motor Sales, arguing that the age of the motor car for the masses is coming without question, and we can do 10,000 a month. Kamiya replied: no — thirty thousand, including exports.
Vehicle development was approved in 1963 and given the prototype number 179A. Hasegawa set out a design principle that a popular car must score a pass mark of 80 or better in every respect, pursuing a high standard across the whole range rather than excellence in one place. There was no domestic precedent for MacPherson strut front suspension, and Hasegawa considered subcontracting it, but executive vice-president Toyoda Eiji dismissed the idea in a sentence: do it in-house, to build up the technology. In March 1966, six months before line-off, Eiji — by then vice-president — ordered the displacement raised to 1,100cc. Nissan’s planned new popular car had turned out to be a 1,000cc, and the aim was to differentiate by exactly 100cc. The design team redrew the drawings for every changed part within fifty-six days of the instruction.
In May 1965 Toyota began buying about 1.25 million square metres of hill land straddling Takaoka, Miyoshi and the city of Kariya, and in December set up a Takaoka plant construction committee chaired by director Noguchi Masaaki (野口正秋). Takaoka was designed as a plant dedicated to volume production of passenger cars, gathering production technology of international standard: a paint process combining electrophoretic and automatic electrostatic painting, and an online control system run by computer. On 24 September 1966 the first Corolla (model KE10) came off the line and Takaoka went into operation; after the formal announcement on 20 October, 1.3 million people attended the national launch events in November. Concentrating one model in one plant cut costs and turned the fight for passenger-car share from a contest between sales networks into a contest over the scale and speed of capital investment. On 1 March 1983 the ten millionth Corolla left the line at Takaoka.
Eiji’s investment philosophy, and answering regulation and the oil shock
In 1961, studying a plan for 50,000 units a month, Toyota concluded that specialising the head-office plant on trucks and Motomachi on passenger cars would still run into a capacity ceiling, and settled on building a plant dedicated to engines. The new works at Kamigo in Hekikai district, Aichi prefecture — today part of Toyota City — was named the Kamigo plant in June 1964 and held its completion ceremony in November 1965. In October 1966 Toyota entered a business tie-up with Hino Motors, and in November 1967 with Daihatsu, extending co-operation into commercial vehicles and small cars. When the Corolla’s popularity outran production, work began in July 1967 on a second assembly building at Takaoka, completed in January 1968. In October 1967, after president Nakagawa Fukio (中川不器男) died suddenly, vice-president Eiji became president. Asked at his inaugural press conference whether he had been chosen because he was a member of the Toyoda family, Eiji answered: my own view is that I was chosen because I am the right man for the job.
As president, Eiji held to a management style that committed to capital investment ahead of rivals even in a downturn. In a 1977 interview he disclosed that his sights were set on General Motors as the target, and said: normally we are thoroughly tight-fisted, but when the moment comes we invest all at once, one step ahead of everyone else. His reasoning was that a new plant runs at low utilisation and thin profit just after completion, but that being able to answer growth in demand ahead of rivals confers an advantage in both cost and supply capacity. The chain of dedicated plants built up at Motomachi, Kamigo and Takaoka proceeded along these lines. Striking first with capital investment was also a wager: get the demand wrong and you are left carrying excess capacity.
In the 1970s exhaust emissions became the issue, and in 1973 the nine passenger-car makers were summoned by the Environment Agency to a hearing. Eiji, who was concurrently chairman of the Japan Automobile Manufacturers Association, recalled that his responsibility for keeping the industry in step obliged him to take the position that we cannot do it. The 1976 regulation, holding NOx emissions to 0.25 grams per kilometre driven, was met across the whole model range — after implementation was deferred by two years — on the minimum condition that it be achieved without any loss of performance. Eiji explained that applying countermeasures at a time when the oil crisis was driving petrol prices up would worsen fuel consumption, and that the answer was therefore a catalyst that would prevent fuel economy from deteriorating. The first oil crisis of October 1973 caused demand to collapse; Toyota cut production sharply from January to March 1974, then switched to increased output from April and grew exports with the Corolla at their head.
From the failed Ford talks to NUMMI, and then going in alone
The first half of 1973 was a boom in which cars sold as fast as they could be built; by the summer procurement of materials could not keep up, and Toyota at one point shipped cars without a spare tyre. Eiji recalled that in this period, with emissions regulation and the oil crisis falling on top of one another, he could not throw himself entirely into the business, and that Hanai Shohachi (花井正八) made up for it by running things inside the company. From the oil crisis onwards demand in North America for fuel-efficient Japanese cars grew, and became the tinder for trade friction with the United States. In the early 1980s voluntary restraints on Japanese car exports to America, and moves towards a local-content bill requiring the use of American-made parts, forced Toyota towards a decision on producing in North America. In June 1980 Toyota proposed to Ford of the United States that they jointly produce a small car there, but the talks snagged at the very entrance — over which models to cover — and broke down in 1981.
Setting up a plant in North America alone would require an investment of around $1.3B (¥300bn) for annual output of 200,000 to 250,000 units, and with average hourly wages of 19 to 20 dollars in the United States against 11 dollars in Japan, the wage gap left doubts about the cost calculation once the plant was running. President Eiji stated flatly that going into America alone is out of the question. After the talks were abandoned, Kato Seishi (加藤誠之), chairman of Toyota Motor Sales, who had once worked at General Motors Japan, called on GM’s headquarters at the end of 1981 and found a way in to chairman Roger Smith. At a meeting between the two chiefs on 1 March 1982 a plan took shape to build a small car based on the Corolla jointly at an idle GM plant, and the two sides reached broad agreement on a fifty-fifty venture. Because their combined share of the American passenger-car market exceeded 50 per cent, US antitrust law was the biggest obstacle. In July of that same year, 1982, Toyota Motor Co. and Toyota Motor Sales merged to form Toyota Motor Corporation, the company’s present name, with 0.75 of a manufacturing share allotted for each share of the sales company. Eiji became chairman and Toyoda Shoichiro president.
In February 1984 Toyota and GM established NUMMI, a fifty-fifty joint venture, at an idle plant in California. The negotiations ran aground for a time over the valuation of the Fremont plant, and the negotiating team went so far as to advise walking away, but president Eiji is said to have talked them round: the chairman has the right to say no. Negotiation is something you do with persistence. NUMMI became the place to test whether the Toyota Production System would function in a North American labour environment. Encouraged by what it found, Toyota set up a North American production study team in its overseas business office in February 1985 and, with North American sales reaching a million units a year, began examining a wholly owned entry in earnest. At an extraordinary board meeting in July 1985 it decided to build plants of its own in the United States and Canada, planning to produce 2,000cc-class passenger cars in America at a rate of 200,000 a year. Offers from twenty-nine American states and eight Canadian provinces were analysed for parts procurement, logistics, electric power, labour and public safety, and in December that year the area near Georgetown, Kentucky was chosen.
1989Number one in the world, and the rebuilds over quality and earnings
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY1989 · consolidated
Revenue$58.1B
Net income$2.5B
Net margin4.3%
→
FY2026 · consolidated
Revenue$320B
Net income$24.3B
Net margin7.6%
1989The Lexus brand is launched in North America
1989Toyota Motor Manufacturing (UK) established
1991Toyota Motor Kyushu established
1995Okuda Hiroshi becomes president, the first career man from outside the family in 28 years
1997The Prius, the world’s first mass-produced hybrid, goes on sale
1998Daihatsu becomes a subsidiary
1999Cho Fujio becomes president
2001Hino Motors becomes a subsidiary
2005Watanabe Katsuaki becomes president
2009The first operating loss and net loss in the company’s history
2009Toyoda Akio becomes president
2010The global recall crisis and the rebuilding of quality assurance
2011Three Tohoku affiliates are consolidated into Toyota Motor East Japan
2017Capital and business tie-up with Mazda
2020Prime Planet Energy & Solutions established with Panasonic
2023Sato Koji becomes president; Toyoda Akio moves up to chairman
2026CFO Kon Kenta named president after Sato’s three years in office
Toyota spent this era becoming the largest carmaker in the world, and much of it repairing what that scale had cost. Kentucky proved the production system travelled; Lexus, Britain, Indiana and China followed; Okuda Hiroshi broke the founding family’s hold on the presidency and bought share back with money. The same era brought the first operating loss in the company’s history, a recall on the scale of ten million vehicles, certification fraud at two subsidiaries, and revenue past $320.5B (¥50.68tn) on an operating profit that was falling.
Building alone in North America, Lexus, and a slipping share at home
Toyota Motor Manufacturing U.S.A. (TMM), established in January 1986, hired its entire workforce anew from people with no experience of car production, and made it an absolute condition that quality equal to Japanese-built cars be achieved. The first Camry came off the line in May 1988 and full production began that October. Cho Fujio (張富士夫), who served as president of TMM, recalled in a 1990 interview that in the early days information did not reach the local community adequately and there was fertile ground for a rumour to spread that Toyota was behaving badly, and said the operation then turned towards dialogue with the locality. Inside the plant the slogan TOP QUALITY was displayed, and in J.D. Power’s surveys both the Kentucky plant and the Japanese-built Camry ranked near the top. The two-stage approach — verify the application of the production system in a joint venture, then commit to full investment in a plant of one’s own — was repeated in later overseas expansion.
In 1989 Toyota launched the luxury brand Lexus in the North American market, entering through an independent dealer network the premium territory that Mercedes-Benz and BMW had occupied. In December that year it established Toyota Motor Manufacturing (UK) and began local production in Europe, extending to Europe the wholly owned approach it had established in North America. In February 1991 it set up Toyota Motor Kyushu, placing a domestic production base outside the Chubu region. In February 1996 it established Toyota Motor Manufacturing Indiana, and between September and October that year set up manufacturing and sales holding companies for North America one after another, shifting to a structure in which decisions were taken on a regional basis. In October 1998 a European manufacturing holding company was established as well.
In the first half of the 1990s, in the domestic passenger-car market after the collapse of the bubble, Toyota’s share of registered vehicles slipped, and in December 1994 fell below 40 per cent for the first time in eleven years. Its model range had not caught up with popular rivals such as Honda’s multi-purpose Odyssey, and criticism grew that the long continuation of an organisation headed by the Toyoda family was slowing decisions. In August 1995, in place of Toyoda Tatsuro (豊田達郎), who had fallen ill, executive vice-president Okuda Hiroshi (奥田碩) became president. Of all the presidents since the days of the old Toyota Motor Co., only two — Ishida Taizo and Nakagawa Fukio — had no connection to the Toyoda family, and this was the first career employee from outside the family in the twenty-eight years since Eiji took office in 1967.
Okuda’s expansionary reform, and reaching number one in global sales
On taking office Okuda declared publicly that we respect the Toyoda family, but personnel decisions will be made fairly. Immediately afterwards he concluded the acquisition of management control of Daihatsu, and in May 1996 he carried out a generational change in which only two of the nineteen executives at managing-director level and above were retained. Declaring that we will defend a 40 per cent domestic share in registered vehicles at all costs, he raised selling and advertising expenses for the 1995 financial year by about 40 per cent year on year, to $2.5B (¥235bn), and launched new models in quick succession. In December 1997 Toyota put the Prius, the world’s first mass-produced hybrid, on sale, seizing the initiative in environmental technology. In September 1998 it made Daihatsu a subsidiary by acquiring its shares, securing competitiveness in the minicar market. The domestic registered-vehicle share was still below 40 per cent as of 1997, but with a weak yen behind it earnings turned upward, and Okuda’s expansionary reform fed through into growth in global sales.
In June 1999 Cho Fujio became president, expanding the China business and codifying the Toyota Way. In July 2000 the financial holding company Toyota Financial Services was established, and in April 2001 the industrial-vehicle and logistics-systems businesses were transferred to Toyoda Automatic Loom Works, tidying the outline of the business. In August 2001 Hino Motors was made a subsidiary by share acquisition, deepening into a capital relationship a business tie-up with thirty-five years of history behind it. In August 2002 Toyota reached a basic agreement with China FAW Group on building a co-operative relationship in the automobile business, and in September 2004 it established Guangzhou Toyota Motor as a joint venture with Guangzhou Automobile Group, entering the Chinese market in earnest. In March 2006 it also formed a business tie-up with Fuji Heavy Industries, today SUBARU.
Watanabe Katsuaki (渡辺捷昭), who became president in June 2005, pursued a management style of relentless cost reduction and carried the expansionary line forward. In the year ended March 2008 Toyota recorded consolidated revenue of $254.4B (¥26.29tn) and operating profit of $22.0B (¥2.27tn), growing to a scale that closed on General Motors in global unit sales. Then, in the year ended March 2009, the global financial crisis brought Toyota the first operating loss in its history — $4.9B (¥461bn) — and a net loss of $4.7B (¥437bn). Revenue, above ¥26tn the year before, fell in a single year to $219.5B (¥20.53tn). Toyota found $3.6B (¥340bn) through cost improvement while keeping research and development in the environmental and safety fields outside the scope of the cuts and continuing to invest there.
Rebuilding after the recall crisis, the certification scandals, and the earnings question
In June 2009 Toyoda Akio (豊田章男), from the founding family, became president, entrusted with rebuilding the management of the company in the middle of a crisis. Almost immediately, a recall on the scale of ten million vehicles worldwide came to light, set off by floor mats and accelerator pedals. In February 2010 Toyoda Akio appeared before a hearing of the US House of Representatives and apologised, saying the recall problem was entirely my responsibility, and restated the order of priorities as safety first, then quality, then volume. In March that year he launched a special committee for global quality under his own chairmanship, setting regional quality supervision and stronger disclosure among its agenda items, and rebuilt the quality-assurance system. The dispute with the American authorities over disclosure was settled in March 2014 with an agreement on a penalty of $1.1B (¥120bn).
On 13 July 2011 Toyota announced that it would consolidate three companies with production bases in the Tohoku region — Kanto Auto Works, Central Motor and Toyota Motor Tohoku. With the yen in the seventies to the dollar and the disruption that followed the Great East Japan Earthquake, maintaining domestic production of three million vehicles had become the problem, and there was urgency about integrating the three affiliated companies scattered across Tohoku into a body capable of integrated production of small cars. In July 2012 Kanto Auto Works, as the surviving company, absorbed Central Motor and Toyota Motor Tohoku, and the name was changed to Toyota Motor East Japan. The three-pole domestic plan — Aichi at the core, Kyushu for luxury cars, Tohoku for small ones — took form with this. In 2016 Toyota introduced an in-house company system, reorganising itself into management units by model and technical field. From 2017 it concluded business and capital tie-ups with Suzuki, Mazda and SUBARU in succession, and in March 2021 a capital tie-up with Isuzu as well. In April 2020 it established Prime Planet Energy & Solutions, a joint venture with Panasonic, to bring production of prismatic automotive batteries in-house.
In the year ended March 2024 Toyota recorded a consolidated operating profit of $35.3B (¥5.35tn), the highest in its history, but problems over quality followed one after another. In 2022 falsification of emissions and fuel-economy test data was uncovered at the subsidiary Hino Motors, and in December 2023 174 instances of certification fraud across twenty-five test items came to light at Daihatsu, halting shipments of sixty-four models. The report of the third-party investigation committee concluded that a strongly top-down organisational culture and excessively tight development schedules had encouraged the wrongdoing. In April 2023 Sato Koji (佐藤恒治), an engineer by background, became president and Toyoda Akio moved up to chairman. Sato pushed through the separation of the development and certification processes and the introduction of third-party audits, and, saying it is not as though we are protecting an automotive industry of 5.5 million people, adopted a multi-pathway strategy running hybrids through to fuel-cell vehicles in parallel. In March 2025 he said that the power to earn can be lost in an instant, and moved to overhaul the pay structure. Revenue for the year ended March 2026 passed ¥50tn for the first time, at $320.5B (¥50.68tn), while the burden of American tariffs cut operating profit to $23.8B (¥3.77tn). In February 2026 Toyota announced the promotion of chief financial officer Kon Kenta (近健太) to president and Sato’s move to vice-chairman — a change of president after three years in office.
The turning points, read in full: what was at stake, what was chosen and what the revenue did around it. The Japanese edition is the edition of record and carries the sourced dossier behind each decision — background, options weighed, outcome — linked under every decision.
Key decision · 1937
The founding of Toyota Motor: turning a loom maker’s car department into a domestic volume-production business (1937)
A founding that kept betting with the loom business underneath it
What this founding shows is the shape of a business transition: money and technology earned in an existing business turned towards a next industry whose prospects were anything but certain. Using the proceeds of the patent sale to Platt Brothers as his stake, and the loom company’s experience of volume production as his footing, Kiichiro stepped into cars and set the shop floor running ahead of board approval. It was precisely because the loom business stood behind him that he could keep pouring money, people and equipment into a wager — a domestically built passenger car — that looked reckless at the time.
Kiichiro, the founder, died partway through his return to the presidency, and never saw with his own eyes the volume-production thinking come to fruition. Even so, a shop-floor culture that took cost reduction and standardisation as its creed was handed on to the management that followed, and pushed the volume production of Japanese passenger cars outwards from the Crown to the Corolla. That the founding judgement outlived the founder’s own tenure was because it was not one man’s flair but a shared bearing: to open a way for the Japanese car through volume production.
Motomachi, Japan’s first plant dedicated to passenger cars, and the turn to volume production (1959)
Do not wait for demand — have the plant ready first
The core of this decision lies in building a volume-production plant before demand had been confirmed. In 1959 the passenger car still belonged to the wealthy and the taxi trade, and a dedicated plant sized for 10,000 units a month was plainly a bet that ran ahead of demand. Holding the equipment to 5,000 a month while framing the buildings alone for 10,000 was also a carefully hedged way to bet, limiting the damage of a misjudgement while leaving room to expand. When president Ishida Taizo said in his address that the aim was not five times the number of units but five times the substance, he was declaring a philosophy of refining quality and content through volume production rather than swelling the count — a concern that runs on into Toyota’s later thinking about manufacturing.
The chain of dedicated plants that began at Motomachi — engines at Kamigo, the Corolla at Takaoka — produced a pattern in which concentrating one model in one plant lowered cost and secured supply capacity and price competitiveness at the same time. This posture of having the equipment ready ahead of demand goes hand in hand with the danger of turning into over-investment if the reading is wrong. The investment Toyoda Eiji called a make-or-break gamble came to be judged a decision of value in later years precisely because it came off. How much capacity to lay down in advance of demand that is not yet certain — this question of the scale and speed of capital investment remains, in altered form, for the Toyota of today, caught up in electrification and the reorganisation of production.
Launching the Corolla and concentrating investment at Takaoka (1966)
Not waiting for demand, but making the market with volume production
The core of this decision lies in building a dedicated plant first, without waiting for confirmation of demand, and trying to open up the popular-car market through volume production itself. The idea of a plant dedicated to passenger cars, laid down at Motomachi, was carried further at Takaoka in the form of concentration on a single model. The doctrine of the 80-point car set out by Hasegawa Tatsuo, chief engineer of the Corolla, held that a popular car should deliver a consistently high pass mark in every respect rather than stand out in one, and it was the other face of cost reduction through concentrated investment. As chairman Ishida Taizo put it, Takaoka was a step towards a system capable of 100,000 units a month: not a standalone factory but one move in a plan to keep building dedicated plants one after another.
The result was that competition in passenger cars shifted from a contest of selling power to a contest over the scale and speed of capital investment. The stance of readying equipment ahead of demand carries the danger of turning into over-investment if the reading is wrong, but when it is right it confers a first mover’s advantage in cost and supply capacity. The Corolla and Takaoka are the classic case in which the bet came off — and generated demand of its own so strong that the plant proved too small and had to be extended. How much capacity to stack up ahead of demand: the judgement about the scale and speed of capital investment is being put to Toyota again today, in the transition to electrification.
Deciding to produce in North America alone, and building the Kentucky plant (TMM) (1985)
Verify in a joint venture, then bet alone
The core of this decision is the two-stage structure of verifying in a joint venture and then betting alone. Having confirmed at NUMMI that its own production system would work in a North American labour environment, Toyota built a wholly owned plant in Kentucky. The trigger was external pressure in the form of voluntary export restraints, but what distinguishes Toyota is that it did not leave the move as a passive investment made to sidestep regulation: it set itself the heavier task of training complete novices from scratch and getting quality equal to Japanese-built cars out of them. The care with which it approached the choice of site — called one of the most difficult things in its history — also speaks to the weight of an investment made alone, with no line of retreat.
Going in alone, unlike a joint venture, leaves nowhere to retreat if it fails. Even so, having taken the risk in stages and measured it, Toyota grew Kentucky into the core of its North American business and shifted the structure from export-led to local-production-led. How to turn pressure from outside into competitiveness of one’s own — the Kentucky choice became the prototype for the local production that followed worldwide. The question of how to answer regulation and the pressure to localise remains, in altered form, in a production strategy shaken today by electrification and geopolitics.
A turn towards management that does not depend on the founding family’s pull
The core of this appointment lies less in the change of president than in the fact that the Toyoda family itself entrusted the making of a culture beyond the Toyoda family to someone outside it. Shoichiro, the third of the direct line in succession, had tried to change the culture, but so long as the domestic share held in the 40 per cent range he was blocked by voices saying there was no need to stretch so far. When the share fell below 40 per cent and Toyoda Tatsuro’s hospitalisation coincided with it, the founding family chose the career man Okuda without hesitation. It broke the pattern in which the head clerk hands power back to the house, and stepped towards management that does not depend on the pull of the Toyoda family.
Okuda’s snap decisions and his campaign of sheer volume did not immediately restore the 40 per cent share he had set as his goal, and the problem of an inefficient sales network remained. Even so, a management that judged the risk of not spending to be the greater one, poured money into expansion and set about breaking down an inward-facing culture turned to higher profits — with a weak yen behind it — and prepared the next pillars in global expansion and the hybrid. In choosing a strong Toyota even at the cost of diluting its own control, the founding family’s decision points to one pattern by which a family firm can keep growing beyond its own scale.
Responding to the US recall crisis and rebuilding quality assurance (2010)
Turning a crisis into a mechanism
The core of this response lies in turning an apology from the top — a one-off event — into a continuing mechanism of quality governance. At the congressional hearing president Toyoda Akio accepted responsibility as an individual, while transferring that responsibility into an institution, the special committee for global quality, and translating it into several circuits at once: regional supervision, disclosure, design and the training of people. A management that had put quantitative expansion first placed safety and quality back at the top through the crisis — and the meaning of this response is that it tried to leave that shift behind as organisational design rather than as words.
What the crisis put in question, however, was not quality alone. That distrust spread while the true cause of the sudden acceleration remained unsettled, and that the matter was finally closed with the American authorities through a penalty over the manner of disclosure, shows that accountability for how facts are communicated is weighed as heavily as the safety of the product. How a global company faces the regulations and the public opinion of different markets — the response of 2010 was an attempt to rebuild the governance of quality and the governance of disclosure at the same time, and it left behind a theme that has carried far into Toyota’s later management.
This English edition follows the Japanese one chapter by chapter. The Japanese edition remains the edition of record: it carries the source-by-source citations, the financial tables and the shareholder and executive records. 日本語版（詳細）— Toyota Motor full history in Japanese →
Toyota Motor Corporation — トヨタ自動車30年史 (Thirty Years of Toyota Motor, Toyota Motor Co., 1967).
Toyota Motor Corporation — トヨタ自動車75年史 (Seventy-Five Years of Toyota Motor, 2012), Part 1 chapters 1–2: Toyoda Sakichi’s inventions and his businesses, Toyoda Kiichiro’s loom development, the founding of Toyoda Automatic Loom Works, the Japanese car market and the surge in American imports, the prototype programme and the research laboratory, the assembly shop and the Koromo plant, wartime research and production, the post-war reorganisation and the labour dispute, the Ford training visit and equipment modernisation, the Toyopet Crown, and the preparations for volume production and volume selling. Official site
Toyota Motor Corporation — 有価証券報告書 (annual securities reports), including the 沿革 corporate-history section.
Nihon Keizai Shimbun — Toyoda Eiji, 私の履歴書 (My Personal History), “前を見つめて”, collected in 経済人 vol.22 (Nikkei Inc., 1987). NDL Digital Collections
Nikkei Business — 日経ビジネス: 25 Apr 1977, the editor-in-chief interview with Toyoda Eiji on Toyota-style rationalism (no.186, pp.20–23); 20 Sep 2013, Sato Masaaki on the three decisions Toyoda Eiji made, in memoriam.
Decide — 決断 (business world & Chinese survey: magazine for decisionmakers): Oct 1990, Cho Fujio; Mar 1998, Mizushima Toshio.
企業の歴史 : 明治百年 (Corporate Histories: A Century of Meiji, Keizai Shunju-sha, 1968), the Toyota Motor Co. entry.