Akio Toyoda’s Message Shows Real Leadership

Speech by Akio Toyoda

Once again Toyota shows they are the type of management I want to invest in. In my last post I discussed another: Jeff Bezos at Amazon. Google management is another management system I am glad to invest in. Toyota, Amazon and Google are 3 of my 12 stocks for 10 year portfolio.

Toyota continues to show they are an exceptional company that doesn’t waver due to short term pressures. They know the management system they have in place is excellent. They always try to improve. And they react to evidence that shows they have room to improve. They then access the situation and move forward.

via: Toyoda on Toyota: A New Regime, A New Future

Related: New Toyota CEO’s Views (2005) – Interview with Toyota President (2006) – Deming Companies – “2007 has been a difficult year for Toyota” – No Excessive Senior Executive Pay at Toyota – Webcast on the Toyota Development Process

He closes the speech with:

I have noticed Toyota tends to delete web content so I include the entire speech below:

Thank you very much for coming today.

I was appointed president of Toyota Motor Corporation at the Board of Directors meeting held on June 23rd, following the Ordinary General Shareholders’ Meeting on the same day. In addition to my comments here today, our executive vice presidents will provide remarks on their areas of business.

The global automobile industry has been facing extreme hardships since the latter half of last year. As for Toyota, we ended the last fiscal year with an operating loss of 461 billion yen. We expect our losses to deepen this fiscal year, and so all of us in the new management team at Toyota feel like we are setting sail during a storm.

Since the birth of Toyota, the company’s philosophy has always been to “contribute to society.” The first article of the Toyoda Precepts, our original statement of purpose as a company in 1935, states that we must contribute to the development and welfare of each country we operate in by working together—regardless of individual position—in faithfully fulfilling our duties. In other words, we must manufacture high-quality vehicles for the benefit of society.

“Contributing to society” at Toyota means two things. First, it means, “to manufacture automobiles that meet the needs of society and enrich people’s lives.” And second, “to take root in the communities we serve by creating jobs, earning profits and paying taxes, thereby enriching the local economies where we operate.”

Unfortunately, we are currently losing money and that negatively affects the amount of revenue we pay the government in Japan and our host countries. Like everyone in the company, I am extremely frustrated about this.

So, we must start again from the very bottom up.

The 70-year history of Toyota has been filled with many challenges. Toyota stood close to the verge of bankruptcy in 1950 and suffered a labor dispute that reduced its workforce by a quarter. As a result, the president and other top executives chose to take responsibility for the situation by resigning. But this experience also marked the starting point of the strong labor-management relations that have supported Toyota to this day.

In the 1970s, air pollution standards and two oil crises again threatened the auto industry, but we prevailed by building cleaner, more fuel-efficient cars. In the 1980s, we faced trade frictions and voluntary export restraints that threatened our business, but we overcame these by expanding production outside Japan.

So, Toyota has overcome many challenges during its seven decades of business. What has made this possible is the way we make our cars under our “customer first” and “genchi genbutsu” principles. Furthermore, all Toyota companies around the world have risen to the challenge each time to engage in technological innovation and increased productivity.

During the last 10 years, Toyota has seen a big increase in international sales and production. Since 2003, the pace of expansion has exceeded half a million vehicles a year. Since Toyota’s mission is to contribute to society through the manufacture of automobiles, I do not think we were wrong to expand our business in an attempt to meet the needs of customers around the world. But we may have stretched more than we should have, and that made us unable to capitalize on Toyota’s traditional strengths.

With this in mind, the way forward is clear.

As a company, we must reaffirm and all share the mission of contributing to society through the manufacture of automobiles. And, we must implement the principles Toyota has held to firmly through times of trouble.

Yes, the going will still be tough for the next few years, but if all Toyota companies around the world come together and reaffirm Toyota’s mission, Toyota WILL bounce back. My immediate goal is to work from this low point in our business upward so we can return to profitability as soon as possible.

To do that, I first want to build an unwavering commitment throughout the company to “strive to make better cars—”in other words, I want Toyota to have a “product-focused management.”

Rather than asking, “How many cars will we sell?” or, “How much money will we make by selling these cars?” we need to ask ourselves, “What kind of cars will make people happy?” as well as, “What pricing will attract them in each region?” Then we must make those cars.

The recently released third-generation Prius is a prime example of this spirit. I am certain this car will satisfy both the needs of society as well as our customers.

The second thing I want us to focus on is making sure our management places priority on meeting the needs of regional markets. In other words, a management style that closely watches consumers and markets, notices changes, and allows those best acquainted with a particular market to make prompt decisions.

The structure of our new executive vice presidents reflects this idea. I have asked each one to take responsibility for specific regions around the world.

Together, we will create clear “Regional Vision” plans by determining what role Toyota should play and what we want to achieve in each region. We will also consider our capacity and the market situation in those regions, in order to identify areas where we want to advance, and areas where we need to take a step back. These decisions will allow us to better prioritize the allocation of our resources.

Through these processes, I would like to make Toyota’s product development and product lineup more region-focused. We will change our policy from achieving “a full lineup everywhere” to “a lineup necessary to meet the needs of each region”. We will also launch new vehicles that anticipate consumer needs and are exciting to drive.

To further explain what I mean, let me give you a brief overview of the direction we will be taking in each region.

Mr. Ichimaru, executive vice president, will oversee the Japanese market.

We launched the new Prius in Japan on May 18th and it has enjoyed wide acclaim with orders now exceeding 200,000 vehicles: a record. The new Prius is equipped with our latest hybrid system, and I believe the response to the vehicle shows our customers’ appreciation for its technology.

Strong sales are also the result of the Japanese government’s stimulus plan: the so-called “eco-car tax deduction” and the “scrap incentive for buying eco-cars.” I believe that wider adoption of eco-friendly vehicles will not only reduce CO2 emissions, but also lead the auto industry to focus more on environmental solutions that will help create a new, stronger economy. I would like to express my appreciation to the Japanese government for forming and implementing this policy in a timely manner, and hope that it will continue its efforts.

When it comes to the Japanese market, we must look at the entire market, including so-called “mini-vehicles” and used cars along with new cars. If we look at it this way, the size of the overall market is about 12 million vehicles. This compares to the traditional view of the new-car market, which excludes mini-vehicles and is expected to be less than 3 million units this year.

With this in mind, there are plenty of ways for us to increase sales as long as we provide attractive products. Furthermore, total vehicle ownership in Japan stands at 75 million vehicles, so business opportunities are abundant.

In order to approach our business from this new angle, we must reexamine our advertising and marketing as well. To that end, I am considering setting up a company that specializes in marketing. This new company will place the utmost priority on our approach to customers, and provide fresh ideas that will in the future be fed back to Toyota so that we can develop even better products.

Next, I would like to touch upon North America, which Mr. Niimi, executive vice president, will oversee.

Sales in the North American-market have dropped off sharply recently, but with vehicle ownership at 250 million units and with the population increasing, I firmly believe this market will recover.

And when it does, it may have a different look than today’s market with its focus on full-sized models. So we will need to be insightful in our approach to the full-sized-vehicle segment, where the market could shrink further.

That said, North America has been a major engine of growth for Toyota to this day, and it will remain an extremely important market for us. Toyota will further strive to establish a more autonomous operation in the region, continue planting roots in the local community, and work as a member of North American society to produce the best vehicles there.

As for the European market, Mr. Sasaki, executive vice president, will oversee this region.

Europe is full of major automakers, each with its own history and roots in national markets. Although Toyota has devoted a lot of resources to its European strategy over the years, to be more successful, we need to do more than just seek increased sales and market share. Instead, we need to develop a distinctive Toyota business model in the region so we are not lost in the crowd. In that regard, what distinguishes Toyota most is our hybrid technology. So, as stricter environmental regulations come into place, we are gradually shifting our focus to the hybrid segment. We are confident that this will create a stronger position for Toyota in Europe.

Europe is also a place where Toyota can learn about “automotive culture.” I have always admired the fact that cars play a major role in the lives of Europeans and that they love the experience of driving. Hopefully, we can find ways to transfer that excitement to other regions around the world.

Next, I would like to address emerging markets, such as China, Asia and South America. Mr. Funo, executive vice president, will oversee these regions.

These markets have amazing growth potential, and I can see that China will someday stand alongside the United States as a giant single market. In order to meet customers’ needs, we will—as always—take straightforward steps. First, we will take time to walk in our customers’ shoes, and then promptly launch competitive products that address their needs. Expanding our reach in these markets will help increase our overall sales volume and profits, so I am determined to establish proactive business plans in these areas.

This will require more than just introducing products that are available from other regions. We must make every effort to produce high-quality products targeted to regional needs and sell them at affordable prices.

We have had success with the Innovative International Multi-purpose Vehicle business model in emerging markets, and I would like to set up another business model for such markets.

These are the main points of my vision for Toyota’s markets around the world.

Now, let me turn to our product development and product line-up. Mr. Uchiyamada, executive vice president, will be responsible for these areas.

As I said earlier, I strongly believe that in order to achieve a low-carbon society, we must further enhance environmental technologies that achieve low fuel consumption. To that end, we will seek to improve the environmental performance of both our hybrid and non-hybrid vehicles.

However, this alone is not enough to ensure our success.

We also need to offer vehicles that bring joy to the driving experience and move people—emotionally. We also need to offer technology that anticipates peoples’ needs.

Together with Mr. Uchiyamada, I will work hard to develop cars that people fall in love with.

At the press conference in January, I talked about my desire to become “a president who is closest to the frontlines, or genba.” I believe that the essence of management lies in the genba, and Toyota employees play a vital role there.

A company’s competitiveness increases when its employees have a chance to develop and improve. There is a phrase we have always had at Toyota that says: “build quality in at each work process.” When each of our employees strives to do that, the result is high-quality cars. So, I believe that the basic principle of management is to think together and develop together with employees so we truly build quality into each stage of our work.

I have been with Toyota for just 25 years, which is short for a person taking up my position. But even during that time, I am thankful for the numerous opportunities to learn and to receive support from many people in many ways.

The reason Toyota has been able to grow is because of the strong support we have received from each and every one of our customers, dealers, suppliers, Toyota Group companies, and our predecessors in the company.

I would like to take this opportunity to express my sincere thanks and appreciation to them as well as our shareholders and stakeholders around the world.

I pledge to implement the steps I talked about today in a levelheaded manner, without being overzealous, while being united with others, and to never forget the gratitude I feel for these people.

June 25, 2009
Akio Toyoda
President, Toyota Motor Corporation