Learn how Toyota taught GM how to make cars in a new way.

Hey there!

Today, we are jumping into chapter 5 of Smarter, Better, Faster. This is a great introduction to the concepts of Lean manufacturing. The lessons learned here though don’t only apply to manufacturing. If you want to learn more you should checkout this podcast episode from NPR.

Rick Madrid strolled into the job interview at the old General Motors plant rockin' mirrored shades, an Iron Maiden T-shirt, and some cutoff jeans he bragged were "the greatest aphrodisiac in Northern California." It was 1984, and he was kinda trying – he'd combed his beard and slapped on some deodorant, but no way was he covering up his tats with sleeves.

Madrid knew the Fremont, California, plant pretty well – he'd worked there before GM shut it down. It was infamous as the worst auto factory on the planet. For 27 years, he'd hammered rims into place, hyped up the United Auto Workers, and served up "magic screwdrivers" (vodka and OJ) in plastic cups tucked into car frames for his buddies. Quality? Pfft! Neither he nor GM cared – they just wanted to crank out cars.

But now, GM and Toyota were teaming up to reopen the plant. Toyota wanted to build cars in the US, and GM wanted to learn about the magical "Toyota Production System." One catch: 80% of the workers had to be from the old crew. So Madrid and his pals lined up for interviews with New United Motor Manufacturing, Inc. (NUMMI).

Compared to some of his wild coworkers, Madrid was pretty chill. Sure, he'd partied and hooked up in the warehouse, but he hadn't done coke on the job or visited the "parking-lot brothel." And he never messed up a car on purpose – like the guys who hid whiskey bottles and loose screws behind door panels just for laughs.

In his first interview, Madrid faced a UAW rep, two Toyota execs, and a GM manager. They chatted, tested his math and assembly skills, and asked if he planned to drink on the job (nope, he was over that). Then one of the Japanese guys asked what bugged him about the old plant.

Never one to hold back, Madrid let it all out. He hated working on messed-up cars and having his ideas shot down. He told them about a time when he suggested a better setup for a tire machine, but no one listened. At GM, workers were just cogs in a machine, and no one cared what they thought.

On the drive home, Madrid kicked himself for being so honest. He really needed that job – why didn't he just keep his mouth shut?

So Madrid gets the call, right? The Japanese execs dig his honesty, and they're offering him a job. But first, he's gotta jet over to Japan for two weeks to learn about the Toyota Production System. He and about two dozen other workers head off to the Takaoka auto plant near Toyota City, Japan. They all wonder why they've been flown halfway around the world to train in a factory that looks just like the one back home.

Madrid's checking out the Japanese plant, and everything seems pretty familiar – assembly lines, the hissing and buzzing of tools, and cleaner bathrooms, of course. He watches a dude putting bolts into doorframes using an air-powered gun. Then, something goes wrong – the bolt gets stuck halfway in the doorframe. Back at GM, they'd just mark the door and let the car move on to be fixed later. But not here.

Instead, the worker pulls a cable that turns on a spinning yellow light, fixes the hole's threads, and starts over. A manager comes over, but he's not mad – he's helping out. The worker even barks orders at his boss! They fix the problem, and the assembly line starts up again. Madrid's blown away – at GM, they'd never stop the line for anything.

That one bolt changed everything for Madrid. He realized they could compete by learning from the Japanese. Finally, he could take pride in his work.

As Madrid trained in Japan, he found more surprises. One time, a worker came up with an idea for a new tool to install struts. The manager went to the machine shop and came back with a prototype, and they worked on it together. The next day, everyone had their own version of the tool. Madrid learned that the Toyota Production System (called "lean manufacturing" in the US) was all about giving power to the workers on the assembly line. They were the ones closest to the problems, so it made sense to let them solve them.

John Shook, was one of Toyota's first Western employees. He told Duhigg something cool: "Every person in an organization has the right to be the company's top expert at something." Like, whether you're attaching mufflers or you're a receptionist or a janitor, you know more about your job than anyone else. Toyota thinks it's super wasteful if a company can't take advantage of that knowledge. They hate waste, so their system is all about using everyone's expertise.

When Toyota first pitched this idea to General Motors, the Americans straight-up laughed at them. They were like, "Maybe that works in Japan, but it won't fly in California. Our workers just wanna do as little work as possible." But Toyota was like, "We'll only partner up if GM gives this a shot." Shook said their basic belief was that no one goes to work wanting to be bad at their job. If you set people up for success, they'll do well.

What they didn't say was that if they couldn't export the Toyota Production System, they'd be in big trouble. It's not just about hanging cords or making new tools – it's the culture that makes Toyota successful. If they couldn't spread a culture of trust, they had no backup plan. So they sent everyone to America and crossed their fingers, hoping it would all work out.

So when Rick Madrid got back to California, he told everyone about his experience in Japan. He mentioned the "andon cords" and how workers were calling the shots instead of the managers. He talked about assembly lines stopping just because a mechanic needed extra time to fix something. He was sure things at the Fremont plant were gonna change now that NUMMI was in charge.

His buddies were doubtful. They'd heard it all before. GM always said they valued employee input until workers started suggesting stuff management didn't like. Before NUMMI opened, the workers made sure their union memberships were current and had meetings to plan how to fight management if needed. They even set up a "NUMMI work-stoppage fund" in case they went on strike. They wanted a proper system for filing grievances, and NUMMI agreed right away.

Then NUMMI revealed their layoff policy. They basically said they wouldn't lay off employees unless the company's survival was at stake. They'd even cut executive pay or train people for other jobs to keep them employed. They promised to implement every employee complaint and suggestion, or publicly explain why not. This was a big deal because no American car company had ever made such a promise.

Workers were skeptical, but they went along with it. The factory started making Chevy Novas on December 10, 1984. Rick Madrid noticed right away that things had changed. There was no drinking on the job or fooling around in storage rooms. People were scared to mess up, but that also meant they were hesitant to pull andon cords or make suggestions.

Then, a month after the plant reopened, Tetsuro Toyoda – NUMMI's president – visited the factory. He saw a worker struggling with a taillight and asked him to pull the andon cord. The worker, Joe, resisted, but eventually, Toyoda helped him pull it. Joe managed to fix the taillight, and Toyoda apologized for not emphasizing the importance of the cord. By lunchtime, everyone had heard the story, and after that, people started using the andon cords more and more.

The important thing about the cords, employee suggestions, and Toyoda's apology was that they showed the company's fate was in the workers' hands. It created a sense of family and responsibility among employees. As workers felt more in control, their motivation skyrocketed.

Word about the NUMMI experiment spread quickly. When Harvard Business School professors visited a few years later, they found that productivity and motivation had greatly improved. Absenteeism had dropped significantly, and there were no issues with substance abuse, prostitution, or sabotage. NUMMI had become one of the most productive plants, even with the same workers as before. The worst auto factory on earth had turned into a huge success.

So, four years after NUMMI opened, a recession hit the auto industry. The stock market tanked, unemployment went up, and car sales took a nosedive. NUMMI's managers figured they needed to cut production by 40%. Everyone thought there would be layoffs, but instead, the top execs took pay cuts and workers were reassigned to other tasks instead of getting fired. That showed the company was really committed.

After that, workers were ready to do anything for the company. There were a few sales slumps over thirty years, but NUMMI never had layoffs. Each time business bounced back, people worked even harder. Rick Madrid retired from NUMMI in 1992, and a few years later, the Smithsonian featured his ID badge and hat in an exhibit. NUMMI was seen as a symbol of how workers and managers could unite through mutual commitment and shared power.

Now, NUMMI is often mentioned in business schools and by big shots as an example of what can happen when a commitment culture takes over. Since NUMMI started, "lean manufacturing" principles have spread all over American business. Rick Madrid was really happy with how his career as an autoworker ended at NUMMI. When they got an award for being a top-quality plant, he said that everyone, workers and managers alike, were the best because they were all devoted to each other.