Toyota scion to revive prudent culture

Akio Toyoda must revive Toyota's focus on low costs and affordable cars.

By Jorn Madslien
Business reporter, BBC News

Akio Toyoda's appointment as president of Toyota Motor Corporation had been widely anticipated.

Mr Toyoda, 53, is the grandson of Sakichi Toyoda, the founder of what would become the world's largest and, historically, most profitable automotive group.

As such, although the family only owns a small stake in Toyota, Mr Toyoda had long been groomed for the job.

My parents did not want me to work for Toyota Akio Toyoda, president, Toyota Motor

But he had not been the only one in the running.

His cousin Shuhei Toyoda, whose father Eiji Toyoda was president from 1967 to 1975, had been groomed in parallel for the same job - a sign of how the company likes to play safe.

By the mid-1990s, Shuhei Toyoda conceded defeat and stepped aside, giving Akio Toyoda a clear run for the top.

Failed strategy

When Akio Toyoda's appointment was announced in January this year, Katsuaki Watanabe's presidency came to an end.

Mr Watanabe had to hand over to Mr Toyoda after losing 436.9bn yen.

It was not a smooth handover. Nothing could have prepared Mr Watanabe for the humiliating ritual of his ejection from the presidency.

In front of some 400 Toyota executives, at a gathering in February, Toyota's honorary chairman Shoichiro Toyoda confronted Mr Watanabe with his failures; supposedly a blind chase for sales and profits, and an addiction to large gas-guzzling cars.

Learning from, or indeed copying, American carmakers to capture markets share in the US meant Mr Watanabe had taken the eye off the ball, in particular in mass markets where affordable quality was the key to success, according to the patriarch.

American cars for Americans

Such criticism against Watanabe may seem unfair, not least given the fact that much of the strategy he had been following had been hammered out, at least in part by his successor Akio Toyoda, prior to his appointment.

Toyota's Tundra: an "American car for Americans".

In a 1999 interview with Detroit Free Press, Akio Toyoda said he went to the US to learn American management styles.

"My parents did not want me to work for Toyota," he said. "My father said 'nobody wants to be your boss'."

After graduating with a law degree from Keio University in 1979, he earned a masters degree in business from Babson College in Massachusetts, which has a special focus on preparing heirs for running family businesses - "the dominant form of business organisation worldwide" according to its website.

Mr Toyoda then worked for a year as an investment banker before joining Toyota in the early 1980s as a junior manager.

He quickly rose through the ranks in Japan before returning to the US in the late 1990s, where he set out to make "American cars for Americans", according to Detroit Free Press.

Popular Prius

Toyota's strategy culminated in the enormous Toyota Tundra, a truck more American than rival models from General Motors, Ford or Chrysler.

Toyota's Prius is still going strong, though rivals are quickly catching up.

Toyota's drive into the American "big truck" market contributed to its recent troubles, which culminating in the first full-year operating and net losses in the company's history. Toyota suffered a 436.9bn yen ($4.4bn; £2.9bn) loss in the year to 31 March.

But Toyota has also been leading the way in the race for more efficient technologies, such as its Prius petrol-electric hybrid, a project that has long been supported by Mr Toyoda.

Since the launch of the first-generation Prius in 1997, Toyota has sold more than 1.25 million, and with more than 80,000 pre-sales orders for its just-launched third-generation model it is clearly still going strong.

Technological advantage

The Prius has long been hailed as an example of how Toyota's focus on technology has enabled it to steal a march on its rivals.

However, during the last few years under Mr Watanabe's watch, its rivals have caught up with hybrids of their own, as well as in areas such as hydrogen power or electric motoring.

"In some respects, Toyota - despite its expansion in recent years - is really no better off than its rivals," according to Ian Fletcher, automotive analyst at Global Insight.

"Its mass scale has now become something of a disadvantage."

Changing direction

Mr Toyoda's appointment is not expected to lead to a major change in direction for Toyota.

Supporting this view are his appointments of lieutenants Yoshimi Inaba and Yukitosho Funo to run the US operations and global sales; both were close allies of Mr Watanabe.

Broadly speaking Mr Toyoda is expected to implement a strategy already outlined by Mr Watanabe.

He must work to return Toyota's focus to what made it big in the first place, namely producing quality cars that people could afford.

To do so, costs must be cut, small, fuel efficient and competitively priced cars must be built, and a strong presence in "resource-rich and developing countries" such as China and India must be built.

But this must be done without losing sight of the lucrative US market, where some analysts say Toyota should gun for a sharp increase in market share to more than 21%, from some 14% currently - a gain that should be fuelled by the commercialisation of new technologies.

"It will be interesting to see whether... Akio Toyoda will be able to bring about the change in mentality and imagination that the company seems to need," observes Mr Fletcher.