New Man at Helm of Toyota : Autos: The shift makes some wonder if the firm will pursue a less hard-charging strategy.
Toyota Motor Corp. on Wednesday announced a new president for the first time in a decade, raising hopes among some here that new leadership might also mean a change in the company’s strategy.
Toyota is widely admired as the world leader in producing high-quality autos at low cost. But it is also notorious for driving its employees hard, squeezing suppliers, pushing aggressively for market share worldwide, and refusing to help ease trade friction by moving more of its production away from Japan.
Now with a new president set to take over day-to-day management, Japanese critics are asking whether the company might also shift gears and sacrifice some of its vaunted efficiency to provide better living standards for its workers and help improve relations between Japan and its trading partners.
But few observers who know the company well expect the changes announced Wednesday to have much of an impact.
Shoichiro Toyoda, 67, president of Toyota and son of the company’s founder, said he will become chairman in September and let his younger brother, Tatsuro, 64, take over as president. Eiji Toyoda, a second cousin who is currently chairman, will continue to advise the company as honorary chairman.
Tatsuro Toyoda, an engineering graduate of the elite Tokyo University, has a master’s degree in business administration from New York University and spent four years as president of New United Motor Manufacturing, Toyota’s joint venture with General Motors in Fremont, Calif.
His brother’s international training made him an ideal choice for the presidency, Shoichiro Toyoda said at a press conference, where he brushed aside concerns that the Toyoda family, which owns less than 3% of Toyota, has too much influence over the company.
Most analysts don’t expect the younger brother to make a dramatic change in company strategy.
“You’re just replacing one part of the machine,” says Neal Doying, an analyst at Baring Securities Japan.
“We intend to push through with existing strategies,” said Shoichiro Toyoda. He hinted that he might share an office with his brother just as he now shares an office with his cousin, the current chairman, at company headquarters in Toyota City, about 200 miles south of Tokyo. “There isn’t much space in the facility,” he said.
Tatsuro Toyoda will face a difficult first year. Toyota is suffering from the double punch of “voluntary” restrictions on exports to the United States and a slumping domestic auto market. The company projects that its profit for the year ended June 30 will have fallen 39% to $1.6 billion on $72 billion in sales.
Two years ago, with $19 billion in cash, the company was dubbed Toyota Bank. Last year, nearly a third of its profit came from interest on the cash. As of March, however, the deposits had shrunk to $13.6 billion.
Toyota will have to spend about $2.3 billion to pay off bonds that come due over the coming year, further shrinking the cash hoard. Although the company has the highest possible credit rating, which enables it to borrow cheaply, the shrinking deposits will cut into profit.
Some $9.8 billion in investments the last two years are also weighing on Toyota’s balance sheet. This year the company will open an $800-million parts factory on the northern island of Hokkaido and a $1.2-billion assembly operation in the southern island of Kyushu. It is also building factories in Britain and the United States to get around restrictions on auto exports.
Toyota is by far the largest exporter of cars to the United States and the largest contributor to Japan’s $43-billion trade surplus with the United States. Although it has in recent years reduced the number of its exports, critics complain that the value of exports remains high because it is exporting more high-priced luxury cars. Also, Toyota’s slowness in joining other Japanese manufacturers in producing in the United States has exacerbated trade tensions, critics say.
Now the rapid expansion has left Toyota with more production capacity than it needs. “They expanded too fast from 1988 to 1990, and now they have to pull back,” says Mitsutoshi Tobita, an analyst at the Tokyo office of securities broker James Capel & Co.
Toyota could boost earnings and win kudos from some critics by simply cutting its investments and raising prices. Japan’s Ministry of International Trade and Industry has reportedly advised auto executives that higher prices would help boost their profits while at the same time reduce American demand for exports and thus ease trade friction with the United States. Such profits could be used to offer higher wages to workers and longer vacations, MITI argues.
While Toyota did raise prices slightly in January, along with other Japanese auto makers, it is unhappy with with the results.
“Our customers complain when we raise prices,” says Masaaki Ohashi, a member of Toyota’s board.
Analysts say that while Toyota has publicly backed away from a goal of 10% of the world auto market, it will continue its push for more market share.
“They don’t need to change,” says Ben Moyer, an analyst at the Tokyo office of Merrill Lynch Securities Co. “It is in their long-term interest to keep pursuing market share.”
Instead of raising prices, most analysts expect Toyota to boost earnings by doing what it does best--putting more pressure on factories and parts suppliers to cut costs.
Japan’s Export Machine
Although Toyota Motor Corp. has reduced the number of cars exported to the United States by about 30% since 1986, the company remains under pressure to cut further. The introduction of the luxury Lexus line has kept the value of their exports high.
1986 1990 Toyota 1,016,922 709,465 Nissan 620,753 377,758 Honda 458,268 390,761 Mazda 379,843 273,611 Mitsubishi 84,421 140,853
Source: International Trade Administration
