Japan: Toyota Halts Production After System Failure

Facts

• On Tuesday, production at all 14 of Toyota's Japanese facilities was halted after a 24-hour system malfunction prevented the assembly plants from processing orders for automotive parts. The company is set to resume operations on Wednesday.¹
• While Toyota ruled out a cyberattack the corporation has fallen victim to them before, including last February, when it was forced to suspend operations after supplier Kojima Industries was hit by a system error caused by a cyberattack.²
• In addition, group firm Toyota Industries has reportedly suspended operations at two engine plants in response to Tuesday's shutdown.³
• The 25 affected production lines account for a third of the company's global production. This comes as Toyota's domestic production had begun to rebound following a semiconductor shortage in the Japanese market.⁴
• Toyota's Japan output was up 29% in the first half of the year — the first increase in two years — and averaged about 13.5K vehicles daily.⁴
• The difficulties facing Toyota come as multiple Japanese firms have reported receiving harassing phone calls — believed to have originated from China — following Japan's decision to release Fukushima water into the Pacific Ocean.⁵

Sources: ¹CNN, ²Al Jazeera, ³CNBC, ⁴Reuters and ⁵The Japan Times.

Narratives

• Narrative A, as provided by HBS Working Knowledge. COVID has shown how the much-vaunted, just-in-time manufacturing system could entirely fall apart, and revealed that it may be hard for Toyota to return to the status quo it built decades ago. The business world is feeling the aftershocks of COVID and a period of geopolitical instability in Asia and Europe that could spell the end of this lean, efficient, and cost-effective model, as businesses instead become forced to invest in more resilient systems.
• Narrative B, as provided by Nikkei Asia. Though heightened tensions with China over the Fukushima wastewater release have demonstrated the risks of malfunction in Toyota's current system, this episode has highlighted a more fundamental problem in Japan — the country is woefully unprepared for potential cyberattacks. Japan's lax cybersecurity infrastructure poses a threat not only to businesses but international diplomacy, as it has previously caused US secrets to be leaked to China. Tokyo desperately needs to bolster its cyberinfrastructure if it wants to be a dependable world partner in trade and global security.