Wednesday, December 24, 2008

Toyota Likely to Pick Scion As Next President

Toyota Likely to Pick Scion As Next President

From the moment Akio Toyoda joined Toyota's (TM) board of directors in 2000, rumors circulated that the scion of the Japanese carmaker's founding clan was being groomed for the top job. Now the 52-year-old executive vice-president is likely to succeed President Katsuaki Watanabe after winning the board's support, a source close to the Japanese automaker told BusinessWeek.

If Toyoda is appointed, he would be the first executive from the founding family to lead since 1995. He would also face the difficult task of restoring the automaker to profitability and getting it through one of the toughest periods in its 71-year history.

News about Toyoda, the grandson of founder Kiichiro Toyoda, was first reported in Japan's Asahi Shimbun newspaper on Dec. 23. A Toyota spokesman said no personnel decisions had been made.

Confirmation May Be Months Away

Toyota normally announces executive promotions by April and confirms them at the annual shareholder meeting in June, so Toyoda's formal appointment could still be months away. Typically, Toyota presidents serve two or three terms of two years each. Watanabe, who has been president since 2005, had considered stepping down several months ago for personal reasons but stayed on to help draw up an emergency plan as the U.S. financial crisis rattled markets globally, said the source, who requested anonymity.

It's unclear whether Toyota's profit warning on Dec. 22 played a role in hastening the board's decision to replace Watanabe. Hurt by a mix of unfavorable currency swings, slumping worldwide auto sales, and high materials costs, Toyota forecast an operating loss for this fiscal year through March 2009 of $1.7 billion—its first-ever annual loss. The profit revision was Toyota's second in six weeks and reinforced how the global auto industry has been slammed by the U.S. banking crisis. Net profit, which includes income from joint ventures in China, is forecast to shrink 97%, to $555 million.

Analysts expressed mixed feelings over news of Toyota's C-suite change. UBS (UBS) analyst Tatsuo Yoshida said that Toyoda could be a unifying force for the company, but questioned why the company had to act now. "I don't think it is a good time to change top management," Yoshida says. Others worried that a new president could slow the decision-making at a time when the company needs to be able to react quickly to unexpected events. "It would have the effect of intensifying the sense of crisis within the company," says Mamoru Kato of Tokai Tokyo Research Center.

Toyota's defenders say critics would be right if the company depended on a single authoritative figure, but the automaker's management reaches decisions by discussion and consensus. "When top management makes decisions, it does so as an organization, as a team," says a person with close ties to Toyota's management. "Akio's promotion isn't enough to assess what will happen to Toyota. The organizational changes in April and June should reveal a lot more."

Building a Web Site

Toyoda would appear to be well qualified to become the top executive. He has gone to great lengths to earn his promotions on merit, not because of his family connections, say observers.

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