1 When Toyota Motor Co. President Tatsuro Toyoda preaches the corporate gospel his firm pioneered -- lean production -- automotive executives listen closely.
2 But these days they don't get lectured on how Toyota forged the industry standard for low-cost production 20 years ago.
3 Instead they hear how Japan's No. 1 automaker was jolted into further economies by the Japanese auto crisis of the 1990s, shaving production costs by dlrs 3 billion over the last two years.
4 Cost reduction has become the industry's driving force, with the Japanese leaving Americans in their wake in the 1980s, and Americans recently turning the tables -- with a little help from the surging Japanese yen.
5 Chrysler and Ford have scrimped and scraped to shave costs down to where they squeeze more profit out of every vehicle sold -- more than dlrs 1,300 and dlrs 1,000 respectively last year -- than probably any other automaker.
6 European manufacturers such as Volkswagen -- Europe's largest auto manufacturer which earns less than dlrs 100 per vehicle -- and Fiat are trying to slim down drastically, knowing only the lean will survive.
7 Some 40 automotive CEOs gathered in this Swiss Alpine resort last week for their annual Automotive Governors' Summit, representing dlrs 600 billion of auto business and 80 percent of the world's automobile production. Their discussions about the world's largest private-sector industry closely examined cost control and supplier relations.
8 'Customers don't pay us as much as they did. We have to provide more to them for less,' said Klaus Beyer, president of German auto parts supplier ZF. 'We need to come up with more customer value, and there's no way we can raise prices.'
9 Among those participating in forum meetings were the presidents of Chrysler, Fiat, Ford, Renault, Toyota, Volvo, VW and General Motors' international operations, and major suppliers such as Dana International, ITT Automotive, ZF and Nippon Denso.
10 Chrysler Chairman Robert Eaton, the 1990s' guru of low-cost production, was quizzed on how Chrysler has become the most profitable-per-car automaker in the world.
11 Toyoda spoke of the crisis in 1990 when low Japanese interest rates and the rising yen caused domestic consumption to soar, but made Japanese cars far more expensive overseas.
12 From 1990, 'the costs of research and development, testing and parts suddenly swelled even for Toyota,' Toyoda said in a presentation. 'This gave rise to a phenomenon by which our profits decreased even though sales actually increased.'
13 So in mid-1990 Toyota tackled runaway costs through 'value analysis,' or reducing manufacturing costs, and 'value engineering,' or paring costs throughout the developmental process.
14 Toyota greatly reduced model variations -- some had a choice of 14 dashboards -- and radically restructured its Technology Development Division.
15 'With the full cooperation of suppliers in lowering their costs, we achieved a cost reduction of 160 billion yen (dlrs 1.6 billion) and 150 billion yen (dlrs 1.5 billion) for the fiscal years of 1993 and 1994,' Toyoda said.
16 Profits improved sharply, while job security at Toyota and affiliates was guaranteed, he said.
17 Economics are slowly forcing the Japanese to abandon their 'keiretsu' system of dealing mostly with affiliated suppliers, said Tim Leuliette, president of ITT Automotive, which makes dlrs 5 billion worth of auto parts yearly. 'We've picked up more Japanese business in the last year than in the four years before that.'
18 That's partly due to a practice pioneered in the United States by Chrysler: constant cutting, not raising, of auto parts prices.
19 'First price is the highest price -- we're learning to live with it,' Leuliette said. To illustrate, he said in 1994 the average auto supplier in the world lowered prices 3 percent, but earned more than ever.
20 The auto industry is still top-heavy, with the top five of the world's 28 manufacturers accounting for 50 percent of all auto production. Of the 2,500 so-called Tier One suppliers, who build components such as complete brake or transmission systems, the top 150 account for three-quarters of car parts.
21 But Tier One will grow, with suppliers designing and manufacturing more products themselves, and delivering full brake systems or door units ready to install, Leuliette said.
22 'That's because the average supplier's labor cost is 25 percent that of final manufacturers',' he said. 'We're talking dlrs 12 an hour instead of dlrs 48 an hour.'
23 ITT Automotive's taking over assembly of finished parts, for example, reduces brake system tests from eight to one. Suppliers are also putting their own staff on foreign automakers' assembly lines.
24 'All this is new in the 90s,' Leuliette said. 'We're just beginning.'

Chrysler and Ford have scrimped and scraped to shave costs down to where they squeeze more profit out of every vehicle sold - - more than dlrs 1 , 300 and dlrs 1 , 000 respectively last year - - than probably any other automaker .
shave costs down
How were costs minimized?