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Toyota’s Reluctant Prince, Akio Toyoda

Will CEO and family heir survive his rendezvous with destiny?

by on Feb.24, 2010

The 53-year-old Akio Toyoda's future may depend on his performance before Congress.

He’s known, in Japan, as “the Prince,” groomed from childhood to take control of the family business, but whether Toyota President Akio Toyoda can rise to the occasion, or will be felled by indecision, like Shakespeare’s Hamlet, could come clear on the floor of a Capitol Hill committee room later today.

One thing is certain: the man who charged into his post, last year, under the mantle of reform, now faces a far more serious task than he or his backers could have ever imagined when he was formally anointed CEO of the world’s largest automaker.

Toyoda’s appearance before the House Oversight and Government Reform Committee will cap two days of contentious hearings meant to examine an ongoing safety scandal touched off, last October, when Toyota reluctantly agreed to recall 3.8 million cars, trucks and crossovers to handle concerns that those vehicles might race out of control unexpectedly.

Since then, there have  been a spate of additional recalls, bringing the vehicle total to more than 8 million, while still more Toyota products are targets of ongoing safety inquiries.  Meanwhile, investigations that could lead to possible criminal charges against Toyota and its management team have just gotten underway.

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“It’s time for decisive leadership,” said analyst Joe Phillippi, of AutoTrends Consulting, but the 53-year-old Toyoda initially seemed reluctant to step into the worsening safety scandal.

Toyoda was nowhere to be seen when a second recall for unintended acceleration – this one to repair potentially sticky accelerator pedals – was launched on January 21.

A Japanese TV crew eventually found him at the annual conference of world leaders in Davos, Switzerland, where he issued a quick apology before jumping into an Audi driving him away from the event.

Since then, the grandson of Kiichiro Toyoda has held three news conferences in Japan, apologizing for the company’s mistakes and insisting the automaker would redouble its commitment to its customers and their safety.  But when asked if he would make an appearance before Congress, this week, Toyota’s CEO initially said no, insisting there were others, such as Yoshimi Inaba, head of U.S. operations, better able to explain the company’s position.

A hail of criticism convinced Toyoda to reverse that position, and he will appear today, the second day of hearings.  But even that moment of hesitation surprised those who recall the forcefulness of purpose the family scion showed barely a year ago.

It was a curious time for Toyota when Toyoda’s promotion was announced, in January 2009.  The automaker had just learned that it had achieved a decade-long goal, pushing past General Motors to become the world’s largest automaker.  But at the same time, it was heading for the worst loss in its 70-year history, a deficit that would ultimately top $4 billion.

Toyoda spoke out in a manner unusual for Japanese corporate leaders, warning that his company was losing touch with its roots, and committing the sort of mistakes that could readily lead it to fail.  He promised to focus on making Toyota leaner, more nimble, less hierarchical and more in touch with its customers.

Such pronouncements generated mixed reactions – depending on the audience.  Company insiders say that mid and lower-level managers were generally pleased by the more modern tone, though Toyoda’s approach rubbed many senior managers and traditionalists the wrong way.

Meanwhile, the company’s public relations machine found itself in the unusual position of having to contradict their CEO, insisting Toyoda really didn’t mean that the company was in trouble.

But that was exactly what he meant, the chief executive explained.  During an appearance at the annual Management Briefing Seminars, an auto industry confab, in Traverse City, Michigan, last August, Toyoda stressed the need for “real breakthroughs,” both at Toyota and in the industry overall.

Toyoda proudly interrupted his own speech to show video clips taken during a driving stint at a 24-hour endurance race at the grueling German Nurburgring race track.  The car he shared driving duties in took fourth place in its class.  The Toyota president stressed that racing is a great way to develop not only products but the people who build them, since it requires quick thinking and leaves little room for error.  Toyoda emphasized the concept of “genchi genbutsu,” which translates into “go and see” – in other words, to check things out in the field.

Supporters suggested that was a policy Toyoda has practiced during his career inside the company.  He was an early proponent of using the Internet, setting up a presence in the mid-1990s, long before most competitors even took the digital medium seriously.

By more traditional measures, Toyoda had also been out front.  He served as Toyota’s top executive at NUMMI, the California-based joint venture with General Motors that helped the Japanese carmaker first learn about building cars on this side of the Pacific.  Toyoda later ran the company’s critical Chinese operations.

His stint at NUMMI wasn’t the first time the executive spent time in the States.  He received an MBA from Babson College – the same school attended by another automotive heir, Edsel Ford II.

Yet, surprisingly, Toyoda today has a surprisingly weak command of the English language, and unlike some other top Japanese automotive executives, truly appears to be dependent upon the translator who follows him closely during visits to the States.

That could create problems during today’s hearings, says a well-placed source, since it can give the impression of having something to hide – precisely the sense that many observers have gotten about Toyota itself, after months of damaging revelations.

If anything, observers say the CEO has shown an unusual level of humility since assuming his position.  But what some question is Toyoda’s ability to show leadership.  The slow reaction to the safety crisis, and the initial reluctance to appear before Congress have hurt the executive’s credibility, inside the company as well as in public, well-placed sources lament.  A poor performance, several warn, could cost Toyoda the support of elder backers within the highest circles at the company.

Already, there’s a buzz building about whether Toyoda is up to the tasks facing him.  The undercurrent might not be enough to cost him his job but it could relegate him to a more traditional, largely ceremonial role within the company, say experts on Japanese business.

It’s not only his reputation – perhaps even his job – that Toyoda must worry about.  He currently holds 4.5 million shares of Toyota stock, though that represents only about 1% of the total shares outstanding.

Leading up to today’s conference, Toyoda has struggled to overcome his reticent image.  “I am hoping our commitment to the United States and our customers will be understood,” he said, echoing the enthusiastic chant of “God bless America,” he offered at the Traverse City conference, last year.

Meanwhile, in an Op/Ed article in Tuesday’s Wall Street Journal, Toyoda resumed the mea culpa approach he has taken at recent news conferences, writing that it is, “clear to me that in recent years we didn’t listen as carefully as we should – or respond as quickly as we must – to our customers’ concerns.”

It remains to be seen if that message is a case of too little too late.

How Akio Toyoda handles himself later today will likely determine not only the reputation and fate of his company, but his own personal future.

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