Toyota Motor's outgoing chief executive Koji Sato warned hundreds of suppliers the automaker's survival is at risk unless productivity and competitiveness improve, citing rising pressure from fast-moving Chinese rivals and internal quality lapses, Automotive News reported.
"Unless things change, we will not survive. I want everyone to acknowledge this sense of crisis. Right now, we in the automotive industry are battling for our very survival. A difficult battle lies ahead. We must work together as one and strengthen our ability to prevail. To do that, we need to improve productivity across the board," outgoing President and CEO Koji Sato said while addressing the annual Toyota Supply Partners Convention, at the Toyota Arena Tokyo on 25 March.
The China Factor
Toyota's reputation for bulletproof simplicity has proved harder to sustain in an era of software-heavy platforms, precisely the area where Chinese automakers are gaining ground, rewriting the rules on how quickly, cheaply, and feature rich cars can be built.
Sato's response is structural. Toyota's new initiative, called 'Smart Standard Activity' strips back over-engineered quality thresholds that add cost without adding customer value. The goal is leaner production, lower component prices and a supply chain agile enough to compete with Chinese rivals.
Under the old regime, Toyota would routinely scrap steering wheels with barely perceptible resin wrinkles and reject wire harness components by the tens of thousands for minor discolouration—flaws a customer would never see or feel. That era, Sato made clear, is over.
Quality and Complacency
Sato was equally candid about internal failings. "We're not even doing the basics right," he said, a damning admission from a company that built its global reputation on process discipline. He pointed to a culture of "just to be safe" attitudes and entrenched assumptions about what "cannot be changed," creating backlogs and preventing teams from focusing on high-value work.
Even the Toyota Standard, designed to streamline development by leveraging existing knowledge, has in Sato's words become "a massive task list." The corrective plan involves a streamlined development process, greater software capability in-house, and a reduction in powertrain and software variants across the range.
Sato also apologised to suppliers directly, acknowledging that Toyota's limited understanding of its partners' sites and processes has placed "considerable burdens" on them.
Leadership Transition
Incoming CEO Kenta Kon, who moved from the CFO role on 1 April, echoed the tone at the same event. Despite Toyota Motor Corporation — which includes Toyota, Lexus, Daihatsu, and Hino, having delivered a record 11.32 million vehicles globally in the last financial year, Kon was unequivocal that the business is not in a "secure and comfortable position."
"Each side drives the other to grow stronger. The only way to achieve this, I believe, is to rebuild our weakened competitive foundations and restore Toyota's strength," Kon told the assembled supply partners.
Industry Implications
Toyota is also pushing for greater cooperation on emerging technologies, exploring partnerships beyond the automotive sector in areas including robotics, hydrogen, artificial intelligence and data centres.
The broader message from Toyota's leadership is that the systems and standards that drove the company's rise to the top of the global sales charts are no longer sufficient to keep it there. Survival, Sato says, depends on collective improvement across the entire ecosystem, not isolated efforts by individual companies.