No longer the beast, Toyota strives for beauty

A pugnacious President Toyoda has his task cut out as he steers his firm from troubled waters

Toyoda and Aston Martin CEO Ulrich Bez, both recognised for their contribution to motorsports by the German auto industry this year, were meant to switch cars later and cross the finish line side by side — Bez in the Lexus, the Toyota chief in the Zagato.

Akio Toyoda, first member of Toyoda family to take the helm since 1995, vowed at the start to take the automaker founded by his grandfather “back to the basics” of building cars that made people happy.

His appointment in June 2009 came as the $115 billion company reported its first loss in decades, after the global financial crisis forced it to idle the many factories it had built over a decade of relentless expansion. That growth in pursuit of profits came at the expense of quality and innovation, critics said. Barely six months later, the company plunged into its worst quality crisis in decades. Toyota took a firestorm of criticism over the slow response to recalling millions of cars to check for faulty accelerators in the US.

The safety crisis, which forced Toyoda to testify before Congress in February last year, threatened Toyota’s reputation and continued success in its most profitable market.
Today, even as the world’s biggest automaker is turning the corner on that crisis, with new evidence indicating human error and not faulty electronics was the cause behind most of the cases of unintended acceleration, things hardly look any better.

Biggest challenge
The biggest challenge for a company Nissan Chief Executive Carlos Ghosn used to call “the Beast” is Toyota’s brand image as a maker of durable and environmentally friendly cars — but not much else.

Once the world’s most envied car maker, Toyota is no longer the benchmark for rivals such as Volkswagen AG or Nissan Motor Co. That honour these days goes to a fast-rising Hyundai Motor Co, whose stylish cars are making Toyota’s look blander than ever.

Toyoda, a self-proclaimed ‘car guy,’ acknowledges in an interview with Reutersthat his company may no longer be the beast, but it can still try to be the beauty. His quest is to reboot the culture of a company that hasn’t been sexy for years. He wants investors to give him a longer time-frame to do that — even if it takes another decade or so.

The 55-year-old Toyoda’s campaign to inspire the group’s 300,000 employees to build more exciting cars was strengthened, he said, when he appeared on CNN’s Larry King Live after the grilling from US lawmakers last year. The turning point from that trying saga, Toyoda said, came when King posed his final question: What car do you drive?

“I thought to myself, should I say Prius? Would that sound good?” he remembered. “But then I decided to just let go and I felt a smile return to my face. I told him, ‘I drive about 200 a year. I love cars.’”

Toyoda said the incident made him realise that focusing on the product is what saved him from a crisis he had assumed would lead to his early resignation to take responsibility for the recalls.

He renewed his vow to lead Toyota into a new chapter with cars as the leading protagonist, declaring the day of the US congressional hearings — Feburary 24, 2010 — the beginning of a company renaissance. But making good cars requires profits, and profits have been tough to come by lately. The yen’s persistent strength has been especially tough for Toyota, which exports about 1.5 million vehicles from Japan, nowadays at a loss.

Even though the dollar is nowhere near the ¥90, Toyoda says is appropriate, he has vowed to keep building at least 3 million vehicles a year in Japan — three times that of Nissan or Honda Motor Co. Toyoda says the company has a social obligation to protect jobs and keep a strong manufacturing base in Japan.

All the while, Hyundai has been borrowing from Toyota’s business model to become a global powerhouse, helped in part by various free trade agreements Seoul has signed and a relatively cheaper currency.

Toyoda has no qualms about putting the front-runner label on Hyundai, and isn’t interested in the noise about losing the title as the world’s top-selling automaker — something that could go to Volkswagen this year.
“I think Hyundai is making great cars, and in some ways I think we’re trailing them,” he said in the interview.

“We have so much more room to improve. But as long as you know that — it’s like Steve Jobs said in his speech: ‘Stay hungry. Stay foolish.’ Those words really spoke to me,” he said.

“In the short term, you win some and lose some. But we’re working hard to build Toyota into a company that attracts investors who would look back 15 years and be glad they owned our shares. It's the difference between thinking of 10 years in the span of 10 years, versus 10 years as a part of 100 years.”

For now, though, investors aren’t impressed — Toyota’s shares are down 20 per cent so far this year while Hyundai’s have surged 25 per cent. While Toyoda may want to be judged over the long term, those who know him say he is constantly challenging the status quo and grows irritable when he senses resistance to change. Soon after the recall debacle, Toyoda gave regional operations more autonomy to make the company more nimble.

He slashed the number of directors to 11 from 27 to speed up decision-making. Toyoda surprised even his chief engineer, Takeshi Uchiyamada, with last year’s shock tie-up with Tesla Motors Inc after only a month after hitting it off with the electric vehicle start-up’s young founder, Elon Musk.

In the end, the executive vice president credited Toyoda for achieving his main goal of having the Silicon Valley company’s entrepreneurial spirit rub off, at least on a small scale. When the Tesla team came up with an electric prototype of Toyota’s RAV4 crossover in just three weeks to display at the Los Angeles auto show, young Toyota engineers challenged themselves to do it faster.