Selling cars, having fun: How Toyota stays No. 1

  @FortuneMagazine November 14, 2013: 7:09 AM ET
akio toyoda

Akio Toyoda turned a few sartorial heads wearing khaki pants rolled above his shoe tops at a speech for Meiji University students in Japan.

(Fortune)

Although he has been leading his family's company since 2009, the automotive world still isn't sure what to make of Akio Toyoda.

One school sees him as the leading cheerleader for Toyota Motor (TM), a laughing and smiling front man for a company that has been struggling more than usual the past few years. By the accounts of these critics, whose numbers have been shrinking, Toyota Motor is still under control of the usual gray bureaucrats who think cars should look like inoffensive lumps of clay as long as they never break. Akio is like the piano player in the brothel: entertaining, but hardly essential to the enterprise.

But a growing number of observers now see president Toyoda as the leader of a culture change at the world's largest automaker, dedicated to making cars you want to own, rather than ought to own. In a sense, he is transfusing the highly competent if uninspiring organization with his own passion for automobiles. By doing so, he has spurred a design and engineering revolution and is leading a revival of the somnolent Lexus line.

One thing for certain: Toyoda gives every indication of enjoying himself. No longer faced with tasks like appearing before Congress to apologize about unintended acceleration, he gives the impression that running a car company is just a walk on the beach. He made news recently when he arrived at a speech for Meiji University students in Japan wearing khaki pants rolled up above his shoe tops (see photo above) and riding a two-wheeled, stand-up electric bike. Wrote one Jalopnik blogger: "He shows up ... dressed like he just raided the Bonobos catalog to try and get young people excited about cars again."

Akio just wants to have fun. As he told Automotive News recently: "I have always said two things: Please make ever-better cars. And if it doesn't offer fun, then it is not a car."

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Even allowing for an imprecise translation from the original Japanese, offering "fun" is an unusual standard to be set by the president of a major automaker. But whatever Akio is doing seems to be working. Toyota gives every evidence of putting its problems of the last few years -- recalls, lawsuits, natural disasters -- behind it as it bulldozes the competition:

• Toyota has maintained its perch as the world's largest automaker for the first three quarters of 2013, outpacing General Motors (GM, Fortune 500) and Volkswagen, although its lead is shrinking. In September, Toyota's monthly group-wide global vehicle sales rose 6.3% to 832,000 vehicles. This year, it will sell nearly 10 million cars and trucks -- an all-time record for any automaker.

• Toyota is expected to post an operating profit of $26 billion in fiscal 2014 that ends on March 31 -- another all-time record -- thanks, in part, to the cheap yen (97 to the dollar) and Toyota's relatively high number of exports to the U.S.

• Despite stronger competition from Ford (F, Fortune 500) and Volkswagen, Toyota is hanging on to its 14.4% share of the U.S. market. It has invested more $2.1 billion in North America over the past two years and expanded production capacity nine times.

• Toyota remains the world leader in hybrids and plans to introduce 15 new or improved gas-electric models by 2015. That same year, it will introduce its first fuel-cell vehicle.

Toyota's brand new Corolla

Akio is picking his spots, devoting his time to areas where he can make the biggest impact. He's taken a personal interest in Lexus, appointing an American to lead its global expansion and making his own suggestions about the design and performance of individual models. Akio describes it as talking "with the right side of my brain." A veteran editor at Automotive News compared his contributions to the role Steve Jobs played at Apple. "What he brings to Lexus is a hard-earned reputation as a driver, a man who understands a car's driving dynamics and handling, and his sense of style."

Stamped in the sheet metal, Akio's influence can be seen in the 2014 Corolla, the 11th generation of history's best-selling car. The redesigned Corolla carries a more aggressive front end and a raised deck in the rear -- design features usually found on higher-end sport sedans -- and some versions are equipped with paddle shifters and leather-wrapped steering wheels. Buyers like the sporty options. Toyota sold some 23,000 Corollas in the U.S. in September, making it the seventh-most-popular vehicle.

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Akio has also been a key driver behind Toyota's new global architecture (TNGA) that will standardize development and manufacturing across its product line and lead to savings of up to 30%. For instance, Toyotas currently use more than 50 different air bag designs to suit different driver seating positions. TNGA will be based on a common hip point location to standardize body pressings and footwells, enabling the use of common pressings in different models, which will allow the number of air bags to be slashed to below 10.

The further growth of Toyota is constrained by stagnation in its home market of Japan, where the population is aging and young people are said to have little interest in driving. But it has room to expand in China, where it has been slow to grow and where sales have been dampened recently by anti-Japanese sentiment inflamed by a territorial dispute. Toyota expects to sell just 900,000 vehicles in China this year vs. 3.2 million vehicles for VW and 3 million for GM.

While Toyota has a bright future in Asia and elsewhere, Akio has yet to cash in. Though his personal wealth has been estimated at $1 billion, his 2012 pay was only $1.9 million -- a fraction of what the heads of some other automakers take home. As a result, he's taken to calling himself "the world's most fuel-efficient chief executive."

He may be right. To top of page



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