Daihatsu dismantles keiretsu: is this the end of the Toyota Production System?

In an effort to produce a cheaper car, Daihatsu seek cost savings by cutting out the middleman and basically dismantling their reliance on t...

In an effort to produce a cheaper car, Daihatsu seek cost savings by cutting out the middleman and basically dismantling their reliance on the keiretsu system. Is this the end of TPS?

A recent article in Reuters describes how Daihatsu, an affiliate of Toyota, is busy at dismantling the Toyota Way and the keiretsu system in order to obtain parts at a much cheaper price instead of obtaining them from traditional trading companies or preferred companies. This has helped to significantly decrease the manufacturing cost of their low cost cars.

What is especially interesting is that the person leading the charge is a true and tested Toyota man.

I certainly think that this space is worth watching. It is true that going through trading companies such as Toyota Tsusho certainly has an increased cost added to it, as with any middlemen. But will this lead to the end of keiretsu at Toyota as well?

I doubt it. It’s not about vested interests and the fact that you have massive Toyota suppliers who stand to lose. My rationale is simply on quality – Daihatsu is aiming to produce a cheap car to compete with the likes of Tata Motors or Malaysia’s Proton. Low price trumps overall quality in this case.

The main Toyota brand on the other hand is all about quality. While it is true that Daihatsu has the cheaper part, they do admit that looking for cheap, but reliable parts in China is a challenge. Toyota is selling in a different market segment from Daihatsu and aims to provide high quality cars at a reasonable price, and needs their keiretsu partners to supply quality parts.

Is what Daihatsu doing a potentially disruptive experiment? It certainly is. Will it completely bring down the Toyota Production System and its reliance on keiretsu? It may prompt rethinks, some soul searching, increased efficiencies and changes in how its run, but I doubt we’d be seeing its demise any time soon.

Photo credit: Justin C.



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K Bulsuk: Full Speed Ahead: Daihatsu dismantles keiretsu: is this the end of the Toyota Production System?
Daihatsu dismantles keiretsu: is this the end of the Toyota Production System?
K Bulsuk: Full Speed Ahead
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