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After turnaround, Toyota chief says growth must be sustainable

Automaker puts new plants on hold until 2015 to keep fixed costs down.


March 7, 2013
by The Associated Press

TOKYO—After four tumultuous years bookended by an unprecedented recall crisis and a return to the top of the global auto industry, Akio Toyoda is refashioning Toyota Motor Corp. into a leaner company that’s more imbued with the venture spirit of founder Kiichiro Toyoda, his grandfather.

In an exclusive interview with The Associated Press, Toyota’s president said he is putting new auto plants on hold for three years and reshaping the automaker’s structure to give more autonomy to regional divisions and foreign executives.

During his four years at Toyota’s helm, Toyoda has learned the hard way the costs of blindly pursuing growth, a strategy inherited from his predecessor that he ruefully acknowledges got him slammed by a cascade of recalls.

The spectacular recall debacle in the US, which began in 2009 and involved millions of vehicles, got him grilled at US Congressional hearings over safety, but also rallied American dealers to his side. Toyoda wept openly during one emotional show of support from Toyota dealers in the US. Then in 2011, an earthquake and tsunami in northeastern Japan wiped out auto suppliers and Toyota’s vehicle production plunged. Yet the automaker’s comeback has been stunning. It sold a record 9.75 million vehicles last year, regaining the crown of world’s No. 1 automaker from General Motors Co.

Despite the turnaround, caution lingers.

Whatever growth “a reborn” Toyota pursues must be “sustainable,” Toyoda, 56, told AP at Toyota’s Tokyo showroom. “We have to keep improving, getting better and better, not taking for granted that we have recovered.”

Toyoda said in the interview that the company won’t start building any new auto plants through 2015 to keep fixed costs down despite burgeoning sales and what he feels are good prospects for global auto growth. Plants already under way will still be completed.

He said that reflects a decision to focus on growing leaner and making better use of what it already has to boost profitability, not just sales.

“There are some plants that are busy, and some plants that aren’t so busy,” Toyoda said. It plans to be more flexible about shipping cars from one nation to another, such as the Yaris from Europe to the US, to improve factory efficiency.

The US also remains a critical market for Toyota, one that can continue to grow, and putting Americans to work on the American business, as well as helping lead Toyota globally, was simply common sense, he said.

It has only been in recent years Toyota has challenged GM’s seven-decade reign as top automaker. Toyota had been on what looked like unstoppable go-go growth up to 2007. Then things started going awry.

It collapsed into red ink with the 2008 global financial crisis, and then it got hit with one recall after another, spanning defects in floor mats, gas pedals and brakes, resulting in more than 14 million vehicles being recalled, mostly in the U.S.

The recalls tarnished Toyota’s reputation for quality and raised questions about its ability to respond to problems that crop up in its rapidly expanding global empire. Then the tsunami and quake hit in northeastern Japan, in 2011, crippling production.

Despite crawling its way back to the top, Toyota still faces major challenges, such as intense competition not only from US automakers but leaner rivals like Hyundai of South Korea and Volkswagen of Germany. Toyota’s sales are plunging in China, the world’s biggest auto market, because of a territorial dispute that has set off anti-Japanese sentiments, rallies and boycotts.

Toyota is expecting a $9.2 billion profit for the fiscal year through March 2013, but its parent operation, centred on its Japan business, is still in the red.

Speculation has been rife Toyota may move more production abroad, where profitability chances are better. Toyota has repeatedly denied such speculation, vowing to keep production of 3 million vehicles in Japan.

Despite his introduction of foreigners in top ranks of management—still a rarity among conservative Japanese companies like Toyota—Toyoda stressed the changes he hopes to spearhead herald a return to Toyota’s roots.

The Toyota Way, a production method that empowers each worker for quality control, also encourages employees to be innovative and independent.

Since joining Toyota in 1984, Toyoda has worked in NUMMI, headed the China operations and introduced Internet services, when such projects were still relatively rare, because of his personal interest in online technology. He holds a law degree from the prestigious Keio University, and an MBA from Babson College in the US.

“He kept saying the same thing: We must make better cars. He never waffled. He was consistent,” Takeshi Uchiyamada, promoted to chairman under this week’s overhaul, said of Toyoda.

Under Toyoda and Uchiyamada’s leadership, Toyota has continued to develop gas-electric hybrids, a technology in which the automaker has led the world.

The company has also introduced flashier edgier design not only in its Lexus luxury models but also its entry-level Corolla subcompact. Toyota raised eyebrows in the Japanese market recently by selling a hot-pink version of its Crown sedan, long seen as targeting the staid establishment.

The most important lesson of recent crises, Toyota said, was that Toyota should not ever grow too big or powerful as to forget the original spirit of making something from nothing. That was partly why he chiseled together the three-year electric-vehicle partnership with California startup Tesla Motors.

“I’m trying to apply the founding family’s principles to present-day society, globally, and for the Internet generation,” he said.

The Associated Press