First it was the global recession. Then a safety crisis. Now Toyota is battling back from Japan's earthquake and tsunami. Leading the company's recovery in the United States is Yoshi Inaba, brought back in 2009 for his second tour as head of U.S. operations. Inaba's last time in North America was during Toyota's growth years of the late 1990s and early 2000s when it seemed nothing could go wrong.
Today, Inaba, 65, is leading the company into a new era and taking more local control over quality and product development as Toyota tries to regain consumer trust.
Inaba spoke with Staff Reporter Mark Rechtin on May 25 at Toyota's U.S. headquarters in Torrance, Calif.
Q: The advisory panel that investigated the unintended acceleration crisis suggested a massive effort to change Toyota's corporate culture. Will Toyota adopt the panel's recommendations?
A: Even without the recall crisis, [Toyota CEO] Akio [Toyoda] has his own way to manage a global corporation the size of Toyota. A lot of recommendations have been somewhat in our mind, and therefore we are doing some work already. One of the most important elements is to regionalize the operation, delegating power to the region closer to the market, rather than the highly centralized organization Toyota has been. That is in line with the report.
Has there been a change in Toyota's U.S. operating structure as a result?
The low-hanging fruit is to develop the product and make decisions on product of North American production. The Avalon is pretty much that, Tundra and Tacoma. There is an option of exporting them, but they are very much North American products. We are going to implement the process from designing, to preparation for production, to development, cost planning, identifying and selecting suppliers. All these processes are going to be 100 percent done here without going back to Japan for approval.
What are the advantages?
That is going to be a powerful improvement in timing and design. We will appoint more American chief engineers. We will keep [Japan] informed, but they are not part of the decision process. We have been doing it with Sienna and Venza, but not for the whole process, especially with pricing and profit/loss. We have to make sure the North American operation is profitable and healthy.
When it comes to being really detailed, and getting Toyota Motor Sales U.S.A. involved in every process of product development, our desires have not been reflected. If you look at the model changeover, it can take four or five years to get that. Once we send our desires to Japan during the design phase we have had little contact in updating them, in terms of specifications and varieties. They are in a black box. Then we get close to launch, and we think, "We should have done this or that." This will make us more responsive to the market, and market change, during that time.
In February, NASA and the National Highway Traffic Safety Administration found no electronic causes for unintended acceleration. But Toyota will still have to work to earn Americans' trust again. How long will that take?
We earned that position over so many years. You have to keep doing the same thing over and over again and proving it. The third-party research and accolades are working for us now. But just like we've been doing for 20 to 30 years, it's a slow process.
How is the supply chain's recovery since the earthquake?
It's a ramping-up period of damaged companies returning to 100 percent. I see no concerns now. As the Japanese factories become more normal, it will be more balanced production. My larger concern is our nuclear plant situation and whether we are able to operate during the summer. JAMA [Japan Automobile Manufacturers Association] announced that we will work weekends and take weekdays off to ease the situation. I am cautiously optimistic, because we have few major factories in that area. Japan is trying to reopen some old natural gas plants to help. It's just a matter of time. Every time we hear the news, the situation gets better. We are still holding the line for November or December for being entirely back to normal.
With forecasts showing a return to 16 million sales in the United States in the coming years, is Toyota considering adding plants or expanding its factories in Texas or Woodstock, Ontario?
We are always talking about this. If we go back to a normal business curve and market size and reasonable share, we will need more plants. But that is not on my desk at this time. We have to recover from the crisis and the earthquake first.
Given that all trim levels of the Hyundai Elantra hit 40 mpg, is that the new benchmark for the Corolla when it is redesigned?
The Corolla is the market leader in the segment. But it is not only about 40 mpg on the highway. It's the combined mileage which gives the benefit. It has to be good or better all around. Fuel economy is important, but it's not the whole story. You need to have better styling, interior, fuel economy and cost of ownership. That's what determines the sales.
What is the key change you see for the upcoming redesigned Camry?
We are going to put more emphasis on interior quality that we can show the customer, and also fuel economy.
Why is the Tundra having only limited success against Detroit's full-sized pickups?
Let's face it. Tundra competes in a subsegment of full-sized pickups. It does pretty good. The simple situation is with the market collapsing and fuel prices going up, it hinders us from being more aggressive and not reaching the volume where we bounce from there. We are not disappointed. We are not 100 percent happy, but we are not discouraged.
Akio Toyoda says Toyota is going to build more sporty cars, but all you have to show for it is the unattainable Lexus LF-A and the niche Scion FR-S.
It's not so much the exotic product like the LF-A, but it's anything -- even Corolla or Camry -- that has to carry much more excitement, in terms of design or agility of driving. That's what he's talking about. Akio has given a big, "No! It's not good enough," in terms of design or agility of some cars. That has really changed the attitude of engineers and the mood of the company. I am not a driving specialist, but when I drive the new things, I get very excited about that.
How big will Prius volume become?
If the customer sees more value and the car is more suited to their needs, let it be. I am not confined to Camry holding the crown as the No. 1 passenger car. The Prius sedan cannot be the No. 1 seller, but if we combined all the Prius [versions], it's OK. That's not discounting the Camry, but it all depends on customer choice. We have to be very careful listening to them.
This year's circumstances aside, will it be important for Lexus to regain the best-selling luxury crown in 2012?
The title is always important to confirm what you are doing is right, though not for the sake of volume. Mercedes and BMW are going down-market, where we can cover pretty well with the Toyota lineup. This is something where we can't avoid losing the title. But that's fine. We ought to be best in our class in the segments in which we compete, not only in terms of quality but also value, customer experience. If you do that, volume will follow. But if there is a different, lower segment where we don't compete, let them gain. But their reputation will follow.
What is Toyota learning from the market share gains of the Koreans?
Their learning process is much quicker getting into uncharted territory. When they set a benchmark they have been faster at catching up in terms of quality and design. It's a period of time that they are in the zone, really motivated to do better. But Toyota has its moments too. From now on, the challenge starts for them. Maybe their exchange rate is not going to be as favorable as today. There is a sign of it. And productwise, once they think they've reached Toyota, what's next? And they have much less resources. They will have this inherent issue they face. They are very impressive, but at the same time, they will have issues.