Bloomberg News

Toyota President Seeks End to Turmoil With Global Revamp

March 06, 2013

Toyota President Seeks Exit From Troubled Reign in Global Revamp

Toyota’s struggles were compounded in September as Chinese consumers shunned Japanese cars because of a territorial dispute between Asia’s two biggest economies. Photographer: Peter Foley/Bloomberg

Toyota Motor Corp. (7203) President Akio Toyoda cleared out the remnants of top management inherited when he took the helm in 2009 in a revamp to restore the fortunes of the world’s biggest carmaker after years of turmoil.

Toyota yesterday announced the retirement of the only three executive vice presidents not appointed by Toyoda and laid out a new, more clearly defined corporate structure with a greater focus on emerging markets. Three outside directors will join the board for the first time, including former General Motors Co. (GM:US) Vice President Mark Hogan, who’s known Toyoda since they worked at a U.S. joint venture more than a decade ago.

“It’s been a gradual, steady process and this is just part of the change that’s in his mind,” said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $300 million in assets. “It’s good for Toyota.”

The shakeup marks a turning point for Toyoda, 56, who took over after Toyota’s first annual loss in almost six decades and whose efforts to remold the company his grandfather founded have been hobbled by mishaps and disasters. Although Toyota outsells all other carmakers, it’s facing increased competition in the U.S. and has been losing out to GM and Volkswagen AG (VOW) in China, the world’s biggest car market.

Losing Ground

Toyota (7203)’s introduction of a system to hire outside directors and its appointment of a director, including a foreigner, signals a change in the governance of Japanese companies, Kengo Nishiyama, senior strategist at Nomura Holdings Inc. said in an e-mailed statement. Toyota’s move to hire outside directors may prompt other Japanese companies to follow suit, he said.

Toyota rose 0.3 percent to 4,845 yen as of the 11:30 a.m. trading break in Tokyo. While the stock has gained 58 percent since October, the advance has been on the tail of a slide in the yen that has boosted the value of earnings from overseas.

Before Toyota’s yen-fueled rally, the shares had slid about 15 percent under Toyoda’s reign and net income was a sixth of the level in the year before the company booked its record loss in fiscal 2009. Japan’s biggest manufacturer remains the giant among global carmakers by market value, yet its revenue in 2012 was less than Volkswagen’s. Five years ago, Toyota was more than $50 billion ahead.

Toyoda’s shakeup has been a while coming.

‘Bigger Picture’

After taking over as president in the midst of a U.S. recession and slumping sales, he was thrust into the first of many crises with the humbling recall of millions of vehicles starting in 2009 and a grilling the following year by U.S. lawmakers over safety. By March 2011, Toyoda was able to take stock, laying out a vision for the future and seeking to draw a line under the past. Just two days later, Japan was hit by a devastating earthquake and tsunami that played havoc with supply chains, followed months after by flooding in Thailand, the carmaker’s southeast Asian manufacturing hub.

“After the reshuffle, Akio’s burden should be reduced and he should be able to have more time to concentrate on the bigger picture,” said Takeshi Miyao, an analyst for Carnorama Japan in Tokyo. “Toyota’s new management is impressive in the sense that the roles for each executive are clearly defined.”

Key to the plan’s success will be Yasumori Ihara, who was named executive vice president in charge of emerging markets. Ihara, 61, who was rehired by Toyota when Toyoda was named president in 2009, has the challenge of reversing the company’s declining sales in China, the world’s largest automobile market.

Territorial Dispute

Though Toyota outsold all other carmakers worldwide last year, it trailed behind GM, Volkswagen, Nissan Motor Co. (7201) and South Korea’s Hyundai Motor Co. in China.

Toyota’s struggles were compounded in September as Chinese consumers shunned Japanese cars because of a territorial dispute between Asia’s two biggest economies. The wave of anti-Japan sentiment led Toyota (7203), which previously counted on China becoming its third million-unit market in 2012, to push back that goal until after this year.

While the demonstrations have since subsided, Toyota sales in the country fell this year while GM’s gained.

Toyota may also need help in the U.S., where the company saw sales of its Camry, the most popular car in the country, drop the most in 16 months in February.

GM Veteran

Toyoda turned to old colleague and GM veteran Hogan, 61, naming him to the company’s board -- the first foreign director since 2007. Hogan’s ties to Toyoda stretch back more than decade, when both worked at the now-defunct Toyota-GM joint venture plant in California called New United Motor Manufacturing Inc. in 1987.

“I have lots of memories from that time,” Toyoda said.

After leaving GM, Hogan spent three years as president of Canadian auto-parts maker Magna International Inc. (MG) from 2004. He became an overseas adviser for Toyota in 2011 after the Japanese company recalled more than 10 million vehicles worldwide in 2009 and 2010 for defects associated with unintended acceleration.

Both were members of the NUMMI plant’s board from 1997 to 2002, and Hogan has been a member of both Toyota’s North American and international advisory committees, according to Julie Hamp, Toyota’s chief communications officer for North America. Hogan, who didn’t return a call seeking comment, has known Toyoda for more than 25 years, according to Hamp.

‘Unlocks Potential’

Hogan is “a perfect candidate,” said Jim Press, Toyota’s first non-Japanese board member and former U.S. chief.

His addition to the board and elevation of Jim Lentz, Mark Templin, Steve St. Angelo and Didier Leroy as chief executive for Europe “is absolutely what’s needed to be more flexible and dynamic,” Press said in a phone interview. “This unlocks the potential that’s there in the company. I’ve always said Akio was the guy to do it.”

Press, president of RLJ McClarty Landers Automotive’s international unit, resigned as president of Toyota’s North American unit in 2007 to be vice chairman and president of the former Chrysler LLC.

Hogan’s recruitment is the most interesting personnel change this year because Toyota is signaling the company will become more global in its decision making, said Ashvin Chotai, managing director of Intelligence Automotive Asia in London.

“Mark had extensive dealings with Japanese automakers and will add additional different international perspective to the board discussions,” Chotai said.

Aside from Hogan, Toyoda brought in Ikuo Uno, executive adviser at Nippon Life Insurance Co (0001)., and Haruhiko Kato, president of the Japan Securities Depository Center, as outside directors.

‘Father of Prius’

“The appointment of outside board members shows Toyota has opened up more and become fully global,” outgoing Chairman Fujio Cho, 76, told reporters yesterday in Tokyo.

Cho will be succeeded by current Vice Chairman Takeshi Uchiyamada, whom Toyoda referred to as the “father of the Prius” for his past work in developing the world’s best-selling gasoline-electric car. Uchiyamada, 66, who holds an applied physics degree from Nagoya University, became vice chairman in June 2012.

Toyoda’s nomination of four executives as directors will mean only two board members pre-date his ascension to president. Shareholders vote on the changes later this year.

Four Divisions

The overhaul of Toyoda’s top lieutenants is part of a broader realignment of the company’s main automotive business, which will be divided into four units, Toyota said. One division will focus on the Lexus luxury brand, another on mature markets, Ihara spearheads the third and a fourth deals with components.

Satoshi Ozawa, 63, who in 2010 was the first person Toyoda promoted to executive vice president, will oversee developed markets in North America and Europe. Masamoto Maekawa, 63, who was rehired alongside Ihara in 2009 and promoted to vice president last year, will run Japan.

Mitsuhisa Kato, also promoted last year, will continue to lead research and development. Seiichi Sudo, elevated this year, will take charge of the newly created unit that will develop parts ranging from engines to transmissions.

Among the six executives promoted this year to senior managing officer -- the level below executive vice president in Toyota’s hierarchy -- Lentz will oversee North American operations as the region’s chief executive officer. He was previously the U.S. sales chief.

Lexus International

Templin, head of U.S. Lexus operations and the luxury brand’s global marketing and product planning, was promoted at the new Lexus International division to manage global operations. He becomes the first non-Japanese executive to manage a division from Toyota (7203)’s headquarters in Japan, the company said.

St. Angelo, head of North American manufacturing and engineering, will be Toyota’s chief executive officer for Latin America and the Caribbean region, the company said. St. Angelo, like Hogan, was also a GM manager who worked at the New United Motor venture.

Johan van Zyl, head of operations for Middle East, Africa, and Latin America, will focus on solely managing the African operations.

Atsushi Niimi, 65, the executive vice president who managed production and dealt with supply-chain disruptions after the March 11 earthquake and tsunami, will retire. Shinichi Sasaki, 66, who was in charge of quality control during Toyota’s recalls, and Yukitoshi Funo, 66, who ran Toyota’s Asian business outside of Japan will also leave.

To contact the reporters on this story: Ma Jie in Tokyo at jma124@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editors responsible for this story: Ben Richardson at brichardson8@bloomberg.net; Young-Sam Cho at ycho2@bloomberg.net


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