It's Official: Toyota Scion to Be New Chief

The Japanese automaker has confirmed that Akio Toyoda, the founder's grandson, will become its new president

By Ian Rowley

After weeks of rumors, Toyota (TM) on Jan. 20 confirmed that Akio Toyoda, a member of the company's founding family, is to become its next president. The change, to be rubber-stamped after its annual shareholder meeting in June, promotes Toyoda from his current role of executive vice-president. As part of the shake-up, current chief Katsuaki Watanabe becomes vice-chairman, replacing Katsuhiro Nakagawa, who will retire. Toyota Chairman Fujio Cho, who preceded Watanabe as president, keeps his current role.

Toyoda, 52, told reporters in Tokyo that amid slumping auto sales and falling profits he would try to balance necessary changes while respecting Toyota's traditions. "We're facing a once-in-a-hundred-year crisis," Toyoda told reporters gathered at the Japanese automaker's Tokyo offices. "I'll try to make changes without being tied down by the past."

Timing Is Right

Outgoing chief Watanabe added that Toyoda is the right man at the right time, noting that the rapidly changing sales environment for autos necessitates bold reform and new perspectives. "Mr. Toyoda has all the qualities required to address rapid change," he said.

News about the promotion of Toyoda, grandson of founder Kiichiro Toyoda, was first reported in Japan's Asahi Shimbun newspaper on Dec. 23. At the time Toyota spokesmen said no personnel decisions had been made, but an insider close to Toyota told BusinessWeek that Toyoda would indeed succeed Watanabe.

Today's announcement means a member of the Toyoda founding family will lead the company for the first time since 1995, when Tatsuro Toyoda (Akio's uncle) stepped down due to ill health.

Record Losses Continue to Mount

The promotion of Akio Toyoda comes at a difficult time for the company. Hurt by a mix of unfavorable currency swings, slumping worldwide auto sales, and high materials costs, Toyota forecast an operating loss for this fiscal year through March 2009 of $1.7 billion—its first such loss since 1938. The profit revision was Toyota's second in six weeks and reinforced how the global auto industry has been slammed by the U.S. banking crisis. Net profit, which includes income from joint ventures in China, is forecast to shrink 97%, to $555 million.

Next year could be even worse. In the year through March 2010, analysts project the company's operating loss will swell. If the supercharged yen does not weaken, warns CLSA Securities analyst Christopher Richter, Toyota's operating loss could swell to $11 billion next year, despite increased cost-cutting efforts and the benefits of lower raw materials costs. "It's a tough time to be taking command of the ship," he says.