Toyota Motor Corp., the world's biggest automaker, is taking a bold step to become less Japanese and a lot more global. Its rivals should take note.
In an overdue move befitting Toyota's large international footprint, CEO Akio Toyoda is overhauling the company's management. Key improvements: naming the first outside board members, including former General Motors Vice President Mark Hogan, and naming non-Japanese executives to be regional CEOs in charge of North America, South America, Europe and Africa.
The shake-up allows Toyota to make the most of its deep global talent pool -- especially its ranks of highly trained and experienced engineers and executives from North America. More important, elevating non-Japanese to positions of power tackles the types of weaknesses exposed in recent years.
The first was the unchecked growth that saddled Toyota with a bloated cost structure when the global financial crisis hit. The result: Toyota booked a record loss.
Next came the product-development and quality-control issues exposed by the recall debacle, followed by the supply-chain miscues revealed by the March 2011 earthquake in Japan that derailed production for half a year. Meanwhile, the yen was spiraling higher against foreign currencies, squeezing Toyota's operations in Japan.
Toyoda recognizes that those problems were exacerbated by groupthink, overcentralization of control in Japan and a disconnect between headquarters and overseas offices. The new structure will help inject fresh opinions and should help Toyota anticipate future problems and react more quickly.
Toyota still trails many other automakers in diversity. Different nationalities are well-represented at European and U.S. brands, even at Japan's Nissan Motor Co. But the Toyota shake-up is a step in the right direction, befitting a company whose prize tenet is kaizen, or continuous improvement.
Compare Toyota with Honda Motor Co., considered one of Japan's most international brands. Despite its recent reorganization in North America, which elevated local executives, Honda still has no outside board member and keeps its non-Japanese executives further down the chain of command.
Indeed, in 2010, when a large Japanese retailer tried to reach out to global markets by adopting English as an internal working language, Honda CEO Takanobu Ito called the idea "stupid." Forcing Japanese engineers to speak English to one another is not a recipe for success. But being open to outsiders and outside ideas is crucial.
Wherever an automaker is based, there is no place in a global business for parochialism. Toyota will be stronger because of its foresight. Its competitors that don't heed the lesson will learn the hard way.