Toyota scion Akio Toyoda reportedly lined up to replace CEO Watanabe

Could this week get any worse for Toyota CEO Katsuaki Watanabe? Yesterday, Watanabe took the unusual step of announcing a huge profits revision at a year-end press conference which is held every December in Nagoya. It was so unusual, in fact, that Toyota now projects it will make its first ever operating loss in the fiscal year ending March 2009. “The speed, breadth and depth of the downturn is beyond what we had imagined,” Watanabe told reporters.

Today, Japan’s Asahi Shimbun is reporting that Toyota will replace Watanabe, 66, with Akio Toyoda, the grandson of Toyota founder Kiichiro Toyoda in April.

According to the Asahi report, the appointment of a family member to the top job would help unify the company at a crucial time. If it was to happen, Toyoda, 52, would be the first family member to lead the company since Tatsuro Toyoda who stepped down in 1995. The newspaper calls the return of a family member “taisei hoken”—a reference to the restoration of imperial rule in Japan in 1868. Toyota denies the story and says nothing has been decided.

Changing CEO now would seem an odd decision. While Toyota is suffering, it is difficult to see how it could be handling the crisis differently or how a new chief could change things.

Toyota’s short term problems are to a large extent unavoidable. Yes, it could have stayed out of big trucks—it opened a Tundra plant in Texas in late 2006. But the collapse in auto sales makes it very difficult for any automaker to respond in a timely manner. Even Honda, which doesn’t have big exposure to the collapse in large SUV sales, slashed its forecasts last week.

And unlike European and U.S. automakers, Japanese carmakers and especially Toyota are suffering from the surging yen. For the year that ended in March, the yen averaged 114 to the dollar. In recent weeks the yen-dollar dipped below 90. Every one yen of change against the dollar costs Toyota $450 million in operating profits. The yen has appreciated even more against other currencies, including the euro. In some ways, it’s remarkable that Toyota only expects operating losses of $1.7 billion and still projects a small net profit.

Perhaps most important, though, is that it’s difficult to see what instant difference Toyoda would make. The Asahi’s suggestion that it would unify the company is vague to say the least. A Toyoda appointment wouldn’t make the yen weaken or car buyers enter showrooms. It’s not as if Watanabe has been a complacent leader. During the record earnings years of 2006 and 2007, Watanabe repeatedly warned that Toyota must redouble its cost cutting and other efforts. He has also voiced concerns that younger managers at Toyota have only ever known good times and worried how they would handle a crisis. Toyoda, 14 years Watanabe’s junior, might be better off biding his time.

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