Toyota’s Watanabe: Moving Forward on Plans
October 29, 2007

By John O’Dell
Editor, Edmunds’ Green Car Advisor

TOKYO -- Toyota's vaunted quality is slipping, its once-unassailable environmental credentials are being criticized, and several key members of its U.S. management have been wooed away in recent weeks by restructuring rivals. Sales are slipping in its home base as the Japanese population ages, and the U.S. market -- its biggest -- has stalled.
   
But Toyota Motor Corp.'s top executive says that plans already in place are sufficient to stop the erosion and bolster its position as the globe's leading automaker. The company doesn't see a need to revamp its business structure, President Katsuaki Watanabe said in an interview in Tokyo last week.

Instead, it needs to move ahead with a set of initiatives aimed at restoring top quality and making Toyota a leader on issues of energy, environment and safety, he said.

Key among them are continuation of the automaker's $1-million-an hour research and development effort; expansion of its hybrid car technology; and development of a low-cost, low-emissions "world car" that could sell in developing nations for as little as $4,000.

In the wide-ranging interview, Watanabe hinted at potential factory expansions or even new plant-building activity in the U.S., called China the most important market for Toyota to penetrate, and promised that new manufacturing processes would improve quality scores for the company's cars over the next two years.

He dismissed suggestions that Toyota's falling initial quality scores and increasing number of recalls in the U.S. reflected a substandard workforce at Toyota's North American plants and said that a quality improvement plan that has been underway for more than a year now will start bearing fruit as new models are released.

Pursuing Lower Cost Cars

He said Toyota is actively pursuing plans for an inexpensive world car, but promised that Toyota would not shift into reverse on emissions, fuel economy or safety issues in development of the vehicle, which would be aimed at developing economies in Asia, Africa, eastern Europe and possibly South America.

"We are reexamining all components -- our engines, chassis, air conditioning and heating, parts and computers, everything, to see whether the underlying technologies can be done at lower cost, and we are 80 percent there," he said.

An early prototype of the $4,000 car was run on Toyota's internal test track this spring, said Watanabe, noting "it still must be enhanced."

Profit on such an inexpensive vehicle "will not be very high, but we will ensure that we won't lose money," he said.

Watanabe also said that Toyota is working to cut the cost of its hybrid system so it can be profitably used in a greater number of the company's vehicles — he wouldn't provide examples-- to help the company meet tougher future fuel economy requirements in various countries including the U.S, where a 40 percent hike in the fleet average fuel economy (to 35 miles-per-gallon) is being debated.

Management Defections: No Damage

Watanabe also bemoaned the losses this fall of Toyota North America President Jim Press and Lexus Marketing Chief Deborah Wahl Meyer -- both left to take higher positions at Chrysler -- and Lexus division manager Jim Farley, who now is head of global marketing at Ford Motor Co. 

Of Press, who had run Toyota's U.S. sales and marketing division for nearly a dozen years and help build the company into the juggernaut it has become, Watanabe said that he "is a friend and a good man. I have known him for 37 years, and I feel very sorry he left. But he made a judgment, and I would like to respect that."

While the defections hurt, they aren't going to damage Toyota, he said.

More important than the people who leave the company, he said, is that Toyota is able to "train people within the company" to move in and replace them.

As for the North American market, Watanabe said overall passenger vehicle sales aren't likely to grow much in the next few years.

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