Toyota: This Isn't Your Simple Flat Tire

Toyota's Okuda may leave behind big problems

He has won a reputation as a blunt talker--a no-nonsense executive who would push his company to new triumphs. But at a hastily called news conference on Jan. 11, Toyota President Hiroshi Okuda was about as opaque as he could be in explaining why he agreed to run Nikkeiren, a management organization that studies labor issues. Okuda said he wanted to help revolutionize the workplace. Yet immediately rumors started that Okuda would soon quit as president of Toyota Motor Corp. to escape growing friction with the founding Toyoda family.

Since then, neither Toyota nor Okuda has come up with a clear explanation of what is going on. The mystery has agitated Japan's auto industry just when it is bracing for a possible takeover of Nissan Motor Co. by Renault or DaimlerChrysler. It's true that Okuda has had setbacks, especially in Japan, where the company has not recaptured its traditional 40% share. But most employees expected Okuda, 66, to stay for two more years. Most don't want to see him go, since he was pushing the company to reinvent itself. Instead, Toyota may be headed for a turbulent transition just when Japan's car makers launch a major restructuring.

There is a possibility Okuda will hang around, even though he is expected to step down as president. The board may create a holding company, which would make it easier to restructure Toyota's far-flung businesses. Some speculate that Okuda could reappear as chairman of Toyota Motor or president of the holding company. But Toyota has not confirmed that speculation. It won't even say if Okuda is going to keep or quit his current job. "It's very confusing," says Koji Endo, automotive analyst at Schroders Japan Ltd. "No one can tell what is the reality."

One thing is for sure: No one can think of a replacement who is as driven as Okuda. Yet if Okuda quits, Toyota will need a replacement to run the company day to day. Most employees are rooting for soft-spoken Executive Vice-President Fujio Cho, 61, who directs corporate planning. Cho exudes a fatherly charm and is known for delegating responsibility, and making people feel like equals. One employee tells a story about how some Toyota men were touring a factory in Tianjin, China. Most of them brushed by a security guard to the plant, but Cho courteously thought to tip his hat to the man. Cho laid the groundwork for Toyota's Kentucky plant and later became a vice-president at Toyota Motor Manufacturing there in 1987. He was one of the first officials to admit to Toyota's problems developing cars that young people like.

RUNNER-UP. The only other executive vice-president mentioned so far as Okuda's successor is Iwao Okijima, 64, who handles finance and accounting. But he seems to lag Cho in the race. The popular theory is that Cho will take over for two years, then hand over the wheel to a younger executive--possibly Akio Toyoda, 42, a member of the Toyoda family now stationed at NUMMI, Toyota's joint venture with General Motors Corp. in California. Another Toyoda in the running is Shuhei Toyoda, 51, chief engineer of the new Vitz compact car, known as the Yaris in Europe.

The other options after Cho are Akihiko Saito, 58, a senior managing director, and managing director Katsuaki Watanabe, 56. Saito is the son of former Toyota Chairman Shoichi Saito and has developed several generations of Corollas. Watanabe has worn many hats, working in corporate planning, administration, and production control. He's seen as a younger version of Okuda: not a motorhead, but more of a generalist with a broader view of where Toyota should go.

A big factor in this runoff is the Toyoda family. After a stint running Keidanren, the top industry organization, Chairman Shoichiro Toyoda, 73, has been far more active in Toyota's day to day operations than expected. Rumors are also flying that Okuda clashed with Honorary Chairman Eiji Toyoda, 85, over everything from stock options to extending financial aid to companies linked to Toyota. There is a growing concern that the family wants a more pliable president. If so, the biggest fear is that the company's worst tendencies--its stodginess, its inability to move aggressively--will resurface. If Okuda goes, he will be leaving a job half done. That's a risky situation for any company.