(EN) Akio Toyoda Steps Down as Toyota CEO

Somewhat surprising to industry insiders, the CEO of Toyota Motor, Akio Toyoda, announced on January 26 his resignation, and he will step down as CEO on April 1, 2023, to become the chairman of the board. Hence, I will have a look at his impact on Toyota. However, just to be warned, if you expect glowing praise, you should look elsewhere. I believe he changed Toyota, a company I love, in a worrisome way. I am definitely not a fan of his work. Granted, being a CEO is not easy, and he did have to lead Toyota through a couple of crises (Recall,s Corona, etc.). Compared to other CEO’s, he is probably somewhere around average. But I believe he had a negative influence on the Toyota corporate culture.

Introduction

Akio Toyoda (豊田章男) is the great-grandson of Sakichi Toyoda, founder of Toyota Automatic Loom, and the grandson of Kiichiro Toyoda, founder of Toyota Motor. He was born on May 3, 1956. He studied law at Keio University (where I was a guest professor during my sabbatical), and finance at Babson College. Afterward he worked as a banker in the USA.

He joined Toyota in 1984. Supposedly his father advised him against it, saying, „There is no one at Toyota today who would want to have [Akio] as a subordinate“ (source). At one point he even was demoted from assistant manager to regular employee (source).

Aided by his family name, he joined the board of directors in 2000, became executive vice president in 2005, and finally president of the company in June 2009. He will step down as CEO on April 1, 2023, to become the chairman of the board. Strangely enough, this announcement was not made at an official press conference, but on the Toyota Times YouTube channel, where reporters could not ask questions, even with the usually extremely timid Japanese press that always risks losing its membership to the Japanese press club if the news is not pleasing enough.

Changes in Toyota Top-Level Management

Akio Toyoda made large and fundamental changes in the leadership of Toyota. He was demoting or removing many directors (from 27 to 9 in multiple steps) and vice presidents, and removing many advisors (from 67 to 9), including former presidents (source). People who were critical of Akio resigned (some say less-than voluntary), including one of the few foreign vice presidents, Didier Leroy (source). This will consolidate power with Akio, so „no one can stop Mr. Akio’s recklessness any longer“ (source).

It seems, it was also Akio’s intention to promote his son Daisuke (豊田大輔, born April 5, 1988), who was more-or-less pushed into an executive position, and is currently senior vice president of TRI-AD, Toyota’s self-driving technology development subsidiary (source). Even though the Toyota family holds only around 1% of the shares of Toyota (source), they still have a dominating control over the company. Insiders believed that Akio wanted to install him as the next CEO, running the publicly owned company Toyota more like a hereditary kingdom (source). Insofar, it is surprising that Akio now hands over the CEO seat to Koji Sato (佐藤恒治, born October 19, 1969), up to now president of Lexus, the luxury brand of Toyota. Is this a change in direction, or merely an extra step to install his prince Daisuke?

Leadership Style

There is also much criticism of his leadership style. It seems, Akio introduced the bad parts of Western leadership to Toyota, namely to eliminate anybody who disagrees with you. One article calls this „the tyranny of the naked king who does not listen to any complaints or criticism“ (source). A contact of mine compared the situation in upper management to „North Korea.“ While I have never myself met Akio in person, I have met with many who have seen his style. I have heard much criticism and little praise.

For example, at one point I talked with a higher-ranking Denso manager. Denso is part of the Toyota group, and in my view the best company within the Toyota group, better than Toyota Motor. At one point we discussed information sharing between companies. He said that Denso shares information freely, including confidential information, but only with companies they trust. If they do not trust a company, they share only the absolute need-to-know necessary information. I then asked him if they trust Toyota Motor. He laughed and refused to answer…which for me was answer enough.

In my view, one of the strengths of the Toyota way was that employees did not fear to speak up, and could often influence upper management. This also seemed to change. Another contact of mine who frequently did business with many companies in the Toyota group told me his view of the differences between Denso (best), Toyota Motor (worst), and the rest of the Toyota group. If he approached his business partner at the Toyota group, proposing a project, and the business partner was worried that his superior wouldn’t agree,

• at Denso they said not to worry, they will convince their boss to change his mind.
• at other Toyota group companies they said this will be a problem, but they should wait until the superior position is rotated in a few years, and they will get the agreement from its successor.
• at Toyota Motor they said to just forget about it, it will never be approved.

I also have been told that at Toyota, they now hire more „selfish employees,“ as they believe that they can stand up better to the more brusque Western business partners. I believe, however, that employees who put themselves before the company are not good for the company (albeit, companies often deserve them). In connection to this, another Denso manager also told me about exchange of people. When I was in the Toyota group (before Akio took over), it was common for employees of one company to have their desk at another company for months, exchanging information and deepening connections. They stopped that. Denso now tries to shield their employees as to not infect them with the in their view bad corporate culture that has developed at Toyota Motor.

Electric Vehicles… or Lack Thereof

One decision at Toyota that probably came from the very top and may be potentially problematic was to neglect fully electric vehicles and instead focus on hybrid electric and hydrogen fuel-cell-powered vehicles. When making business decisions, there is always the risk of a mistake, and I believe this was a mistake. Batteries continue to improve, and once they are good enough, there is no point for fossil fuels anymore. Nevertheless, Toyota pushed hybrid and hydrogen technology. Yet, on its own, Toyota is simply too small to establish a good hydrogen network. Toyota is definitely behind on electric vehicles (source). Electric vehicle sales are steadily increasing, and the Nissan Sakura is the most popular model in Japan, followed by Mercedes and Hyundai (source). Toyota launched its first fully electric vehicle, the oddly named bZ4X, only in 2022…just to have it recalled immediately „due to the possibility that wheels could come loose„. It sold only 232 vehicles in Q1–Q3 2022 (Source: Kelly Blue Book Q3 2022 sales report), which is just pitiful. Worldwide best seller in 2022 was the Tesla Model Y with around 200 000 units. Toyota was ranked as #36 out of 42 fully electric models with a market share of 0.04%. The hydrogen-fueled Mirai is not selling well either, with only 1437 vehicles in Q1–Q3 2022. Toyota does, however, have an almost 50% market share on hybrids. Yet, by neglecting fully electric cars, Toyota is missing a major change in the industry, and this mistake will hurt Toyota a lot in the next few years. Long gone are the days of the Prius, when Toyota led the automotive industry.

Summary

It is hard to improve a corporate culture, and it is much easier to wear it down. In my opinion, Akio had and will continue to have a negative influence on the Toyota corporate culture. He is doing to Toyota what McDonnell Douglas did to Boeing. I do hope the new CEO, Koji Sato, can stop this trend, but the view at Toyota is that Sato will not change the decision-making style but instead continue as a protege of Akio. Even worse, with kind-of two bosses, „the decision-making structure will become complicated and the speed will slow down„ (source). With reference to the former US president, „Toyota and Mr. Akio Toyoda are beginning to ‚trump‘“ (source). I am a big fan of Toyota and its Toyota production system, but these developments worry me immensely. I am sure Akio also has his good sides (he is apparently a pretty good race car driver), and running a large company like Toyota is by no means easy. However, I have my doubts about him as a industry leader. Toyota is (was?) in my view one of the best managed companies in the world, but I fear it slipping down to merely average. Now, go out, improve and foster the culture at your workplace, and organize your industry!

Selected Sources

I used a lot of external sources for this article, many of which are in Japanese.

• 河村靖史: トヨタ“裸の王様”章男社長の独裁、社員が辟易…囁かれる息子の世襲、会社私物化批判も , Business Journal 14.03.2020 (Yasushi Kawamura: Employees are fed up with the dictatorship of Akio, the „Naked King“ of Toyota… His son has taken over the reins of the company, and there is criticism that he has privatized the company.)
• 河村靖史:トヨタ「異例」の社長交代　世界的EVシフトに対応　河村靖史, Weekly Economist Mainichi (Yasushi Kawamura: Toyota’s „unusual“ change of president Responding to the global EV shift Yasushi Kawamura)
• 井上 久男:トヨタが中国企業に「敗北」する日がやってくる…日本の基幹産業を襲う「悲劇的な結末」, Gendai Media, 24.01.2023 (Hisao Inoue: The day will come when Toyota will be „defeated“ by a Chinese company… „Tragic consequences“ to hit Japan’s key industry.)
• 井上 久男:トヨタが「世界一」から転落し、日本の自動車産業の「ヤバすぎる大崩壊」が始まる…！, Gendai Media, 24.01.2023 (Hisao Inoue:Toyota’s fall from „world number one“ marks the beginning of the „too-bad-to-be-true collapse“ of the Japanese auto industry…!)
• 井上 久男:これは「院政」の始まりか…トヨタ社長交代、95分の「トヨタイムズ」映像で見えた「決定的な異変」, Gendai Media, 30.01.2023 (Hisao Inoue: Is this the beginning of the „House of Representatives“ administration… Toyota’s presidential change, the „decisive change“ seen in the 95-minute „Toyotimes“ video.)
• Peter Johnson: Toyota ramping up bZ4X SUV production to compete in swelling EV market, but not anytime soon, Electrec Oct. 26 2022
• 豊田章男 (Japanese Wikipedia Article on Akio Toyoda)
• 【緊急生放送】豊田章男が次期社長 佐藤恒治に託した想い｜トヨタイムズ (【Emergency Live Broadcast] Akio Toyoda’s Thoughts on Koji Sato, President-Elect｜Toyotimes), Toyota Times Youtube announcement of change of CEO.