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Toyota aims for a comeback, shuffles execs

Wed, 09 Mar 2011

Toyota, unveiling a new business plan to double operating profit by 2015, will remove its head of North America from a downsized board and promote Canada chief Ray Tanguay to be its highest non-Japanese executive.

Yoshi Inaba, 65, continues to lead Toyota North America and Toyota Motor Sales U.S.A. while becoming one of 18 directors to lose board seats. Tanguay, 61, who helped craft the plan outlined today, moves to a newly created position of senior managing officer on April 1.

The world's biggest automaker will also position North America as its global center of development for mid-sized vehicles such as the Camry sedan, in a new push to delegate more authority to regional operations and better tailor vehicles to local markets.

"In North America, our operations will attain even more autonomy and local integration," President Akio Toyota said here Wednesday while announcing the mid-term business plan.

"For the Camry and other vehicle series, we plan for North America to become a global center responsible for r&d and production as well as exports," he said.

The blueprint, dubbed the Toyota Global Vision, outlines Toyota's strategy to return to growth after being hammered first by the global financial meltdown and then its biggest recall crisis.

It is the first mid-term business plan floated by Toyoda since the grandson of the automaker's founder took over as president in 2009, with the company mired in losses.

Toyoda outlined the following goals to be achieved by 2015:

- Nearly double operating profit to at least 1 trillion yen ($12.2 billion).

- Boost annual sales of Toyota and Lexus vehicles to 9 million, from 7.53 million this year

- Deliver sustainable profit margins of 5 percent.

- Expand emerging market business to account for half of global sales, from 40 percent.

- Generate 15 percent of global sales from China, the world's largest auto market.

To get there, Toyota is streamlining its management system to strip out unnecessary layers of decision making and put high-level executives closer to more hands-on positions.

The shakeup is Toyota's biggest management overhaul in eight years.

"In terms of the management organization, we will be more agile and flexible in taking action," Toyoda said of the new, flatter structure.

Toyoda will slash the board to 11 members from the current 27, pending approval at the company's shareholder meeting, usually held in June. As expected, among those removed will be Inaba, whom Toyoda handpicked two years ago to fix the company's troubled U.S. operations.

Though he is leaving the board, Inaba will remain in his current position as chief officer of the North America Operations Group, COO of Toyota Motor North America Inc. and chairman of Toyota Motor Sales. He will continue to report to Executive Vice President Atsushi Niimi, who is in charge of North America, China and global production.

To raise the profile of North American operations and inject more globalization into the Japanese company, Toyoda also promoted Tanguay. He will be the highest ranked non-Japanese executive at the company.

Tanguay is currently a managing officer in charge of manufacturing in Canada.

Before his promotion, Tanguay was tapped to spearhead a group of global committees that generated the targets and priorities outlined in the Global Vision announced today.

Four other foreigners rank one rung below him: James Lentz, president of Toyota Motor Sales U.S.A.; Steve St. Angelo, chairman of Toyota's Kentucky and Mississippi plants; Didier Leroy, president of Toyota Motor Europe; and Johan van Zyl, president of South African operations.

Each is a managing officer and unaffected by the shuffle. Toyota hasn't had a non-Japanese board member since Jim Press, who left the company in 2007 to join Chrysler.

Toyota will also eliminate vice-chairman positions. Vice Chairmen Katsuaki Watanabe and Kazuo Okamoto will step down from the company's board.

Strategically, a big part of the mid-term plan is to penetrate booming markets such as China, India, Brazil and Russia, where Toyota is currently lagging behind global rivals.

"We will focus on emerging markets and environmental vehicles," Toyoda said. "We will decide when and how much to increase capacity in emerging markets if we need to."

Toyota has fallen behind rival Honda Motor Co. in terms of profit and operating margin. Toyota's earnings were initially hit by the worldwide financial crisis. But its reputation and sales were further battered by a spiraling quality crisis that has generated more than 20 million recalls since the fall of 2009, to address unintended acceleration and other problems.

Toyota's forecasts are based on exchange rates of 85 yen to the U.S. dollar and an annual sales volume of 7.5 million vehicles, Toyoda said. The automaker is planning a separate mid- to long-term management plan "soon," he said.

Toyota's 2015 operating profit target of $12.2 billion compares with a 550 billion yen ($6.67 billion) forecast for the current fiscal year ending March 31. That's still below the record 2.27 trillion yen ($27.5 billion) it earned in fiscal year 2007.

The 9 million-vehicle sales estimate is up from 7.53 million units forecast this fiscal year.

Fast-growing China, India and Brazil offer the biggest opportunities for Toyota.

The automaker relies on North America for about 60 percent of its operating profit, excluding exports, according to the company. As part of a new focus on emerging markets, Toyota added the Etios compact in India in December and is readying the car for sale in China, Thailand and Brazil.

"Toyota's plan to develop scenarios for expanding in Japan, U.S., and Europe and separate scenarios for emerging markets shows Toyota is finally shifting their focus to the emerging markets," said Takeshi Miyao, an analyst at consulting company Carnorama in Tokyo.

Toyota's slimmer board may help it adapt to challenges and changes in the global industry more quickly, according to analysts. Honda, Japan's third-largest automaker, also reorganized its management, last month cutting the number of company directors to 12 from 20.

Bloomberg and Reuters contributed to this report.

By Hans Greimel- Automotive News