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Toyota scion Akio Toyoda reportedly lined up to replace CEO Watanabe

Posted by: Ian Rowley on December 22, 2008

Could this week get any worse for Toyota CEO Katsuaki Watanabe? Yesterday, Watanabe took the unusual step of announcing a huge profits revision at a year-end press conference which is held every December in Nagoya. It was so unusual, in fact, that Toyota now projects it will make its first ever operating loss in the fiscal year ending March 2009. “The speed, breadth and depth of the downturn is beyond what we had imagined,” Watanabe told reporters.

Today, Japan’s Asahi Shimbun is reporting that Toyota will replace Watanabe, 66, with Akio Toyoda, the grandson of Toyota founder Kiichiro Toyoda in April.

According to the Asahi report, the appointment of a family member to the top job would help unify the company at a crucial time. If it was to happen, Toyoda, 52, would be the first family member to lead the company since Tatsuro Toyoda who stepped down in 1995. The newspaper calls the return of a family member “taisei hoken”—a reference to the restoration of imperial rule in Japan in 1868. Toyota denies the story and says nothing has been decided.

Changing CEO now would seem an odd decision. While Toyota is suffering, it is difficult to see how it could be handling the crisis differently or how a new chief could change things.

Toyota’s short term problems are to a large extent unavoidable. Yes, it could have stayed out of big trucks—it opened a Tundra plant in Texas in late 2006. But the collapse in auto sales makes it very difficult for any automaker to respond in a timely manner. Even Honda, which doesn’t have big exposure to the collapse in large SUV sales, slashed its forecasts last week.

And unlike European and U.S. automakers, Japanese carmakers and especially Toyota are suffering from the surging yen. For the year that ended in March, the yen averaged 114 to the dollar. In recent weeks the yen-dollar dipped below 90. Every one yen of change against the dollar costs Toyota $450 million in operating profits. The yen has appreciated even more against other currencies, including the euro. In some ways, it’s remarkable that Toyota only expects operating losses of $1.7 billion and still projects a small net profit.

Perhaps most important, though, is that it’s difficult to see what instant difference Toyoda would make. The Asahi’s suggestion that it would unify the company is vague to say the least. A Toyoda appointment wouldn’t make the yen weaken or car buyers enter showrooms. It’s not as if Watanabe has been a complacent leader. During the record earnings years of 2006 and 2007, Watanabe repeatedly warned that Toyota must redouble its cost cutting and other efforts. He has also voiced concerns that younger managers at Toyota have only ever known good times and worried how they would handle a crisis. Toyoda, 14 years Watanabe’s junior, might be better off biding his time.

Reader Comments


December 24, 2008 2:43 AM

In Japan, it is considered honorable for a top CEO to tender his resignation when major corporate objectives are not met despite inaction by the board of directors. It is considered a personal humiliation when the board of director is required to ask for the resignation of its CEO. Honor and shame rank high in the moral fabric of Japanese society. In stark contrast the US auto CEOs feel no shame or dishonor coming before government begging for hand-outs after arriving in corporate jets. So pervasive is the belief in honor and shame in Japan that when Toyota suffered a series of recalls, the PM met with Watanabe to discuss the implications on Japan's international image. It is to Japan's credit that for such a small nation built on volcanic rock it has managed to have 8 major auto manufacturers: Honda, Toyota, Nissan, Subaru, Mitsubishi, DaiHatsu, Suzuki, and Mazda. In contrast it is to America's discredit that for such a large nation founded upon rich resources it has managed only to have soon-to-be two major auto makers. Japan became a creditor nation to the world by selling and manufacturing real goods while US became a debtor nation to the world by speculating in real estate and crude oil with fake paper money. In the short span of 200 years, this current generation of America has forgotten that the founding fathers of this great nation believed and set examples in courage, fortitude, sacrifice and honor when they signed the Declaration of Independence and formulated the US Constitution. As America goes through its toughest economic crisis, every American will be tested as to whether they can put aside their self interest so that this nation conceived in the above virtues shall not perish.

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