Toyota Changing Its Corporate Culture Profile : WORKPLACE: In a bid to become a fiercer competitor, the Japanese auto giant scraps its old seniority system and increases its budget for research.

Not long ago, Hideki Ueda, 36, was an assistant manager at Toyota Motor Corp., with a staff of four to boss around and a title and salary to match.

Now, like 1,000 other former Toyota managers, Ueda has returned to the ranks of his staff. Although he retained his higher salary, inside the company he is just plain Mr. Ueda, researcher.

“One feels a bit bereft,” Ueda admitted in a telephone interview. “On the other hand, I’m rid of a lot of niggling, mundane tasks. . . . The wind blows more freely through the company.”

Ueda’s demotion is part of a sweeping internal restructuring of Toyota, until now the staid and lumbering giant of the Japanese auto industry. To respond more nimbly to advancing technology and become an ever fiercer competitor internationally, Toyota is trying to cast aside decades of hierarchical, group-oriented tradition in favor of individual creativity and an easy, informal flow of ideas.

To that end, the company put half of its white-collar managers back to work on the front line. It reduced the number of approvals needed for any single idea to be put into effect. It will base future promotions and raises more on merit than seniority, upsetting a revered Japanese custom.

And the company decreed that employees will be known simply by the title - san (Mr. or Ms.), rather than by their rank, with even the company president to be addressed as “Toyoda-san.”

In a language so hierarchical that Japanese sometimes switch to English simply to escape the pressure, that apparently cosmetic change might be the most revolutionary aspect of Toyota’s action.

The restructuring affects about 25,000 white-collar workers among Toyota’s total labor force of 68,000 in Japan. It does not affect the company’s blue-collar work force, which has long relied on small “teams” that encourage ideas to flow from the bottom.

The change reflects a Japanese trend to slim down and invest for the future in a way that suggests that competition from Japanese industry is unlikely to ease up any time soon.

Like most big firms, Toyota is plowing money back into future productivity; this year, it will increase capital spending by 12.5%, fully half of which will go to research and development, according to the Japan Economic Journal.

All this might seem surprising for a corporation that already ranks sixth in the world, according to Fortune magazine, with handsome profits and growing sales. Toyota sold 4.1 million cars in its fiscal year ended June 30, a 6.2% increase above the previous year.

But Toyota has suffered a slight drop of market share, and executives are worried that the company might be growing too comfortable with success.

“Toyota’s good point was said to be its very solid organization,” said Iwao Isomura, managing director and member of Toyota’s board. “That’s fine for repeating what you’ve done before, but we wondered whether it was right for responding to all the changes that might come our way.”

Among those changes are a maturing of the auto industry, which means Toyota cannot continue to grow as quickly as before, and an aging of the Japanese population.

Both those changes, in turn, mean more and more bosses for fewer and fewer employees, an industrywide problem in Japan. Isomura said a U.S. company would respond to such top-heaviness with layoffs.

“But in Japan, that’s not the way,” he said. “So our challenge is to find a way to use everyone.”

Analysts here generally applauded the changes, although they said their effect will not be seen for some time.

“I think it’s obviously going to take awhile for them to get used to it, particularly in this culture, and it’s going to be hard to stick to it,” said Sheryl Hogg, who analyzes the automobile industry for County NatWest Securities Japan Ltd.

“I think they’re smart to recognize the problem now and try to do something, instead of waiting until it’s too late. . . . I think it is going to have beneficial effects.”

“It’s going to take time. There’s no quick remedy for the big corporation disease,” agreed Keisuke Kasagi, an analyst for W. I. Carr. “But it’s the right step to take at the moment.”

In one sense, Toyota is only playing catch-up. Honda has long been known as a more flexible company, and Nissan gave its designers more freedom several years ago--a change that has led to less stodgy cars and growing popularity for Nissan, especially among younger buyers.

But Hogg said she believes that Toyota’s restructuring is “more far-reaching.” Toyota, she said, is “huge and very staid, and it is trying to energize itself and become more youthful.”

“In some ways, I’m sure it causes a lot of shock,” she said. “If you’ve been sitting around waiting to get your kacho (manager) title, I’m sure it’s not a very pleasant prospect.”

Ueda, the manager-turned-researcher, acknowledged a certain “loneliness” resulting from his loss of rank, and he also said that his job has become tougher.

Before, any idea had to pass across his desk; now, he will be consulted by his colleagues only if he can prove that he is “capable and trustworthy and responsible,” he said.

Indeed, the need to prove one’s worth will likely weigh heavily on most white-collar workers if Toyota’s changes, which went into effect Aug. 1, take hold.

Where workers could previously expect promotion as long as they showed up for work and demonstrated loyalty, now performance will count most--and greatest weight will be given to recent evaluations, “regardless of seniority or past evaluations,” according to a company statement.