Toyota Attempts Reinvention

Toyota is utterly serious about changing the way it does business in the wake of the vehicle recalls of the past 14 months that have tarnished its once-sterling reputation. If you need evidence that the giant Japanese car builder is ready to change its ways, all you have to do is look at the changing of the guard in the company’s global board of directors. In a bold move, the board has been slashed from 27 members to just 11, and in a Japanese company like Toyota, this is not a ceremonial move. The board is typically a working group that makes both broad policy and day-to-day decisions, so a sweeping ouster of 16 board members is a huge step. Further, one of the ousted board members is Katsuaki Watanabe, who was president in those heady days before Toyota stubbed its toe on recalls. This signals major change.

So how will the broad changes affect consumers? Toyota CEO Akio Toyoda has plans for significant growth, despite the fact that industry analysts and Toyota executives have suggested that the headlong pursuit of additional sales is a factor that led to Toyota’s recent quality problems, including the devastating recalls. In a press conference introducing the Toyota Global Vision, Toyoda suggested that his company could sell 10 million vehicles globally each year by mid-decade. Last year, Toyota sold about 8.2 million cars worldwide, so the growth objective is substantial, but Toyoda claims it can be done -- while still maintaining product quality and improving customer satisfaction.

One key change in product philosophy is to move decisions from corporate headquarters in Japan to regional markets, implying different vehicles for different parts of the world, all bearing the Toyota insignia. This could have special benefits by enabling Toyota to regain its momentum with American customers -- while also catering to Asian car-buyers in giant emerging markets like China, who have far less to spend than their North American counterparts.  Interestingly, the regionalization strategy is the complete opposite of the globalization strategy that Ford Motor Company has been pursuing over the last several years. Ford has tried to rationalize its vehicle development costs by spreading them over more units with the thinking that a good small car, for example, will sell equally well in Europe, the United States and China. The Toyota plan would look toward vehicle models individualized for separate markets, and the company would like to see half of its sales coming from emerging markets by 2015.

One thing Toyota is not going to do is turn its back on hybrid vehicles, although some industry experts feel that hybrids will continue to struggle to become mainstream vehicles that are purchased by the masses, largely because of their high costs. Toyota will introduce 10 more hybrid models by 2015, but all of those models were in development before the announcement of the new Global Vision. In light of changes on the board, Toyota may very well back away from its hybrid-heavy future product strategy in order to put more emphasis on conventional gasoline- and diesel-powered cars -- though we are unlikely to see a diesel-powered Toyota in the United States in the foreseeable future.

What Toyota’s new plan makes clear is that the company has been humbled. It has admitted its fallibility, and it has now taken steps to change course and deal with a market that is constantly changing but, at the same time, still craves conventional gasoline-powered vehicles. Will its new plan bring it to 10 million sales a year? We’ll just have to see.

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