Toyota: Rattled but Resilient

The Japanese automaker, still rich in its top ranks, saw its stock hold firm one day after losing North American chief Jim Press to Chrysler

by Ian Rowley

If the sudden departure of one North American chief last year was unfortunate for Toyota Motor (TM), does the loss of his replacement barely a year later shows signs of carelessness at the Japanese automaker?

Undoubtedly, the decision by Jim Press, chief operating officer of Toyota's North American efforts, to join Chrysler (BusinessWeek, 9/6/07) is hugely embarrassing for the Japanese automaker. Press, a 37-year Toyota veteran, only took over as U.S. chief in May, 2006, after predecessor Hideaki Otaka stepped down in awkward circumstances. Otaka resigned after a former employee launched a $196 million (now settled) sexual harassment lawsuit (BusinessWeek, 5/22/06).

In June, the highly respected Press became the first non-Japanese person to be invited to sit on Toyota's board in the company's 70-year history, a move supported by company luminaries including former Chief Executive Officer Hiroshi Okuda. The fact that Press is leaving so soon after the promotion to join a weaker rival only rubs salt into the wound. "This is huge shock—it's the kind of thing you would never expect at Toyota or from one of its executives," says Tatsuo Yoshida, an analyst at UBS (UBS) in Tokyo.

A Wealth of Management

Yet, while Chrysler's gain is Toyota's loss, there were remarkably few signs of panic among the investment community. Despite North America accounting for about 60% of the company's earnings, its stock price was largely unaffected by the defection.

At the close of Friday trading in Tokyo, Toyota's stock had fallen by just 0.5%, to $57. That compared favorably with declines of 0.8% and 1.1% at rivals Honda Motor (HMC) and Nissan Motor (NSANY), respectively. The wider Nikkei 225 market index dipped 0.8% to 16,122.

What explains the stock's resilience? One big factor is that few companies can ride out a management storm like Toyota. In addition to annual earnings of $14.2 billion and revenues of $208 billion, it boasts huge management resources.

That's partly because it suffers relatively few defections. A large majority of Japanese employees at Toyota stay for life, immersing themselves in the company's practices and passing them on to younger employees as they rise through the ranks. That creates an army of smart, committed managers schooled in the company's philosophies. "Jim Press mastered the Toyota way, and was the first top American executive who infused it into their American business," says Hirofumi Yokoi, an analyst at CSM Worldwide in Tokyo. "But Toyota's operations aren't just about one person. Toyota is systematic."

A Close Friend at Chrysler?

Indeed, thanks to its talent pool, analysts say the company should be able to absorb the blow. Shigeru Hayakawa, an experienced Toyota lifer, takes over for Press as president of Toyota Motor North America, while James Lentz, Toyota's group vice-president for sales and marketing, has been running that group since Press's promotion last year.

For Toyota, it also helps that Press, since his promotion, has had less hands-on involvement. BusinessWeek reported Sept. 6 that one reason Press may be leaving is that he missed the day-to-day engagement with the game of sales, marketing, and product planning since taking over for Otaka.