Transforming Toyota's Profit Structure through Disregard for Numbers: Akio Toyoda's Strategic Shift
In the midst of the Global Financial Crisis in 2008, Toyota, one of the world's largest automakers, faced significant challenges. Akio Toyoda, the grandson of Toyota's founder, took over the presidency during these trying times and steered the company towards record profits.
Before Akio Toyoda's presidency, Toyota was rapidly expanding its production overseas, particularly in North America. By the end of 2007, Toyota had production facilities in 27 countries and regions. However, in the 2008 fiscal year, Toyota posted its worst-ever operating income, tumbling 461 billion yen into the red. The Japanese media dubbed Toyota's financial struggles during this period as the "Toyota Shock."
Upon becoming president, Akio Toyoda vowed to steer the company away from a fixation on sales volumes, instead focusing on creating products tailored to regional needs and conditions. He embarked on a mission to revamp Toyota's production structure, focusing on operational efficiency, quality, and innovation.
Akio Toyoda's strategy included strengthening production efficiency by doubling down on the Toyota Production System's lean manufacturing principles, ensuring waste reduction, and optimizing supply chains. He also made a strategic reassessment of capacity, leading to the closure of the joint venture NUMMI plant in California in 2010.
Investment in future technology was another key aspect of Toyoda's strategy. Rather than over-committing to one technology, he promoted a diversified technology strategy, including hybrids, plug-in hybrids, hydrogen fuel cells, and battery electric vehicles (BEVs). Toyota supported Tesla in its early EV manufacturing efforts through factory and equipment investments, helping Toyota keep close to emerging EV trends without rushing into mass BEV production prematurely.
Resilience through culture and leadership was another pillar of Toyoda's approach. He maintained Toyota’s careful customer-focused culture, quality commitments, and innovation, even during financial hardship. His approach avoided drastic cuts that could degrade brand value, instead preparing the company for long-term sustainability.
Leveraging his background and international experience, Toyoda guided Toyota’s expansion and production management internationally, helping Toyota navigate complex market environments during and after the financial crisis.
Akio Toyoda's efforts bore fruit, and Toyota returned to profitability in fiscal 2009. Despite the slump in sales equal to that triggered by the Global Financial Crisis in FY2008 (-15%), Toyota booked a consolidated operating income of 2,197.7 billion yen in FY2020. This turnaround was a combination of preserving and deepening Toyota’s production excellence, strategically reallocating resources, backing a portfolio of technologies instead of a single bet, and providing stable leadership.
References:
- Toyota's Investment in Tesla
- Akio Toyoda's Global Policy Briefing
- Toyota's Struggles During the Global Financial Crisis
- Toyota's Return to Profitability
- Toyota's Diversified Technology Strategy
In his efforts to revive Toyota, Akio Toyoda focused on diversifying the company's technology portfolio, investing in hybrids, plug-in hybrids, hydrogen fuel cells, and battery electric vehicles (BEVs). He strategically supported Tesla's early EV manufacturing by providing factory and equipment investments, ensuring Toyota stayed abreast of emerging EV trends.
During the midst of the Global Financial Crisis in 2008, the automotive industry, including finance and transportation sectors, faced significant challenges worldwide. Akio Toyoda, as the new president of Toyota, steered the company towards resilience, building a strong foundation for expansion in various business ventures.
