Bottom-line profits of $10 billion. A cash pile of $15 billion. A string of record sales stretching over seven years.

With stats like that, it's hard to imagine anything that could rile Toyota Motor Corp. (TM), Japan's top car maker, which could soon unseat General Motors Corp. (GM) as No. 1 in the world.

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But there is one trouble spot: not enough experienced Japanese talent to go around the globe.
Executives note that Toyota's growth spurt of the past five years has taken place almost entirely overseas, all with the support of seasoned and stretched Japanese staff — a system that is reaching its limits.

"We have 280,000 employees at the group, and less than 70,000 of those at the Japanese parent," said Mitsuo Kinoshita, executive vice president in charge of human resources.
"To sustain the growth, each region needs to be self-reliant. But that's easier said than done," the 38-year Toyota veteran told Reuters.

With rivals such as GM and Ford (F) fighting for their very survival across the Pacific, staffing woes may seem minor.

But insiders say a culture of "kaizen," or continuous improvement, and other distinct corporate traditions have formed the building blocks of the 69-year-old company, and Toyota risked diluting that essence as its work force diversifies.

"Getting overseas staff to share our views on management and quality is very difficult. But that task is urgent," Kinoshita said, adding that Toyota envisaged annual sales growing by 2 million units to reach 10 million by 2010.

Some steps have been taken.

In 2001, Toyota spelled out what it believed to be the firm's DNA that helped it succeed, coining the now-famous term "The Toyota Way." The concept of kaizen and other values that had been understood implicitly by veteran Japanese staffers were compiled into a brochure and handed out to workers worldwide.

The following year, the auto maker set up the Toyota Institute at the foot of Japan's Mount Fuji to school foreign managers in the Toyota Way, to be passed down to local staff.

At the factory level, it created the Global Production Center in 2003 near headquarters to train leaders of overseas plants in everything from the right way to grasp a bolt to the best posture to use when spraying paint, in order to ensure consistent quality.

Toyota last month opened a North American branch of the centre to follow the Asian one launched in Thailand last year. With a European centre kicking off on Thursday in Derbyshire, England, all major regions will be covered.

PASSING THE BATON
While these measures were beginning to bear fruit, Kinoshita said Toyota needed to go further.
To motivate and tap a growing pool of foreign management talent, Toyota is looking to set up a grading system and a new salary structure for top managers overseas so they could be mobilised outside their home territory.

"Right now, the farthest a manager in France can go, for example, is to head the local factory," Kinoshita said.

"But if the talent was there, this person could be the best choice to head the U.S. region or elsewhere," he said, adding this could also facilitate factory-level support between regions outside Japan.

At the production level, Toyota planned to start educating trainers and factory line chiefs not just in basic manufacturing skills but also in the Toyota Way, he said.

While all this could work in theory, Kinoshita acknowledged that in practice, difficulties remain.
One major snag was higher staff turnover abroad than in Japan, where lifetime employment is still the rule rather than the exception. That means that even the more established overseas factories like its 21-year-old plant in California or its 18-year-old Kentucky site weren't quite ready to play the part of "mother plant" in holding the hand of a fresh factory, he said.

"A 20-year track record means a lot more for a Japanese plant than factories elsewhere," he said.

Ideally, Toyota wants experienced operations starting with the U.S. headquarters to stand on its own feet and take charge of any new plants in their region — preferably including South America. Toyota will open its sixth North American car plant in Texas later this year and another in Canada in 2008.

But for a company that is Japanese to its bones — none of Toyota's 26 board members is foreign, even though most of its profits are made abroad — trusting its overseas offshoots has proven tough.

"We're afraid of slipping, so we can't help but interfere," Kinoshita said, likening the Japanese headquarters to an anxious mother.

"But we can't let this go on much longer."

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