Toyota Lost Touch, Executive Says

Toyota Motor Corp. got "a little bit lost" in its North American strategy and fell out of touch with customers and the market, its new North American chief, Yoshimi Inaba, said Monday.

After years of growth and profits at Toyota, Mr. Inaba said, elements of complacency and arrogance infiltrated the company, which prides itself on being efficient and customer-oriented as well as constantly improving. To address this, Mr. Inaba plans an overhaul of Toyota's North American operations.

"Our sense has been always that we listen to the market, we listen to customers, we listen to the dealer. That element is a little bit lost," Mr. Inaba told a group of reporters. He added that he is conducting an "overall replanning of our North American operation."

Bloomberg News

Toyota's new head of North American operations, Yoshimi Inaba, shown at a 2006 car introduction, needs to contend with excess plant capacity.

As the global vehicle market sunk last year, Toyota posted its first loss in 58 years and projects to record another loss for this fiscal year. In the first six months of this calendar year, the company's U.S. sales fell 38%, more than the overall market's 35% decline.

Last month, Akio Toyoda, great-grandson of the company's founder, took over as president as Toyota seeks to return to profitability. Mr. Toyoda is emphasizing swifter decision-making by local executives and seeking to add more "passion" to the company's products, Mr. Inaba said.

Mr. Inaba -- who was dispatched by Mr. Toyoda to fix its biggest market -- says Toyota's North American operations could return to profitability in the next fiscal year as he seeks to reassess the company's business. He said he expects U.S. light-vehicle sales to grow to about 12 million next year, though it will take time to return to the 2007 level of 16 million. He expects sales this year to be about 10 million.

In the short term, Toyota has "to figure what to do with idle capacity," said Aaron Bragman, an analyst at IHS Global Insight. "Toyota is used to weathering ups and downs. They don't necessarily react on a short-term scale. They don't lay people off and shutter all the factories."

Toyota grew rapidly this decade, adding factories and expanding its product line in North America, home to seven of its assembly plants. It opened a new plant in Canada at the end of last year.

But in the wake of plunging sales, many of its plants aren't operating at capacity and the company is faced with deciding the fate of a 25-year-old plant in California that is a joint-venture with General Motors Co.

Mr. Inaba disagreed with the contention that Toyota expanded too fast in North America. "We were having a tough time catching up with demand," he said. He stressed that the U.S. auto market "remains the most important market for Toyota."

Struggling to cope with overcapacity, Mr. Inaba said the company hopes to decide what to do with its California joint-venture plant "as quickly as possible." GM said it was exiting the partnership as part of its bankruptcy reorganization.

As part of the overall replanning process, Mr. Inaba said he is evaluating what to do with a partially built plant in Mississippi where Toyota planned to produce its Prius hybrid.

That factory was indefinitely postponed last year. Restarting work on it depends on how strong demand is for the Prius and how the company reshuffles production to address overcapacity. Prius sales have fallen after soaring last year amid then-high gasoline prices.

To assemble the Prius in the U.S. Toyota would seek to produce some of the vehicle's parts locally, he said.

Mr. Inaba also said Toyota wants to grab market share that GM and Chrysler Group LLC lose through their restructurings, though he conceded that Ford Motor Co. is best positioned to benefit from the downsizing. "We certainly want a good chunk of it," he said. "As the dust settles down a little bit we would also like to go after any incremental volume." link.....