Toyota Motor Corp. is considering a major reorganization of its U.S. operations, bringing sales and manufacturing under one powerful executive, in an effort to keep closer tabs on its American business, which traditionally has been Toyota’s biggest source of profit but is now losing money.
The Japanese automaker’s top managers are expected to decide how to structure the U.S. operations this month, say people familiar with the situation. A decision would be formalized in June, at the same time that Toyota will anoint a new president in Japan, Akio Toyoda, the grandson of the company’s founder.
The prospect that Toyota may install an executive in the United States with over-arching powers appears likely now that the management in Japan has taken the unusual step of rehiring a former top executive with U.S. experience. Yoshimi Inaba, who retired abruptly in 2007, is returning to take a position with Toyota in the United States.
Toyota officials would not comment on possible changes in the North American operations because discussions are ongoing.
Toyota’s main North American operations — its sales subsidiary based in Torrance, Calif., and its manufacturing arm in Erlanger, Ky., now report to sales and manufacturing managers in Japan.
Toyota was prompted to consider a far-reaching reorganization by the collapse of the U.S. auto market that led to the first losses in nearly 60 years at Japan’s — and now the world’s — largest automaker, according to people familiar with the situation.
Traditionally, Toyota has generated half or more of its profit in the United States. “Toyota in the U.S. has known nothing but success,” said Daniel Gorrell, president of AutoStratagem in Tustin, Calif.
The move to rehire Inaba suggests that top managers are prepared to take exceptional measures to reinforce the ranks at a tricky time for the company.
The new CEO, a member of the founding Toyoda family, will be surrounded by seasoned advisers, but he has not been tested the way a career executive would have been, financial analysts say. A Tokyo-based analyst, who spoke on condition of anonymity, said the ascent of a family member had provoked “a quiet unease” among investors.
While all automakers are struggling in this environment, Toyota’s share price has fallen slightly more than stock in its closest competitor, Honda Motor Co.
Japan’s second-largest automaker, Honda has expanded more cautiously than Toyota, and resisted pressure to build more large engines and vehicles, settling for a quirky, car-based pickup, the Ridgeline, at the top of its U.S. model range.
By contrast, Toyota’s ill-timed assault on the U.S. full-size pickup segment, including the construction of a plant in Texas dedicated to building trucks only, has been very costly. The plant was idled for three months last year. This year, Tundra pickup sales are running about 40 percent of the levels originally forecast.
Its disappointing launch strained relations between U.S.-based managers and executives in Toyota City who were reluctant to make such a big pickup.
People familiar with the situation say managers in Japan feel the U.S.-based executives were overly optimistic in their sales forecasts. On the other hand, U.S.-based managers and dealers complained that some bosses in Toyota City were equipping vehicles too richly for the U.S. market, making them too expensive.
Quibbling turned to finger-pointing as Toyota’s results deteriorated dramatically. The company has forecast a $3.5 billion loss for the fiscal year ended on March 31 — a stunning $20 billion swing from the previous year’s record result.
“Clearly there needs to be close coordination between sales and manufacturing, especially today when the market’s moving so fast,” said George Peterson, president of consultancy AutoPacific Inc. “You’ve gone from being able to sell every Prius you could build last summer to not being able to give them away.”
By installing someone like Inaba, who knows the U.S. market and speaks perfect English, Toyota executives expect to get a better reading of this key region.
To be fair, says CSM Worldwide Vice President Michael Robinet, “the rapidity of the decline caught everyone by surprise.”
Although Toyota has tried to reduce its reliance on the U.S. market in recent years, “North America is still a very important market. Assigning Inaba there speaks volumes about his experience and his knowledge,” said Alberto Lapuz, Tokyo-based vice president of J.D. Power and Associates’ Asia Pacific branch.
Irv Miller, a spokesman for Toyota’s U.S. sales subsidiary in Torrance, said he could not say what Inaba would do.
“What his role and function will be has yet to be determined,” he said. “I know there will be a management change, but I have no idea how the organization will be structured at this point in time.”
One option for Inaba: heading the automaker’s holding company in New York City, Toyota Motor North America. That job traditionally has been ceremonial — which is why Jim Press left it two years ago to join Chrysler LLC. But it could be turned into a powerful position.