Toyota Motor Corp. President Akio Toyoda restructured the company's management this year to give more authority and autonomy to local regions. Nowhere was this more evident than in North America, where Jim Lentz, CEO of Toyota Motor Sales U.S.A., was placed in charge of all Toyota sales and manufacturing for the region.
Lentz, 57, now reports straight to company headquarters in Nagoya, Japan, rather than through a Japanese executive in California. And he now carries three titles: CEO of the North America region, president and CEO of Toyota Motor North America Inc. and senior managing officer of Toyota Motor Corp.
Lentz spoke with Staff Reporter Mark Rechtin.
Q: How are the early days of Toyota's restructuring? Is there an example of how the new structure has benefited North America?
A: The changes officially didn't take place until April 1. The new executive vice president positions [in Japan] won't take place until after the board meeting [June 14]. It's a bit early for specifics, with the exception of moving [Lexus] ES production to America. That was something we had been working on for some time. But the formal proposal started about 30 days ago. We went to the board with our proposal, they gave us some homework and we went back in mid-April to get final approval. That's light speed to make this kind of decision at Toyota, and the result of the new structure.
How has the restructuring added to your duties? Who do you report to directly?
[Satoshi] Ozawa oversees North America in Japan. [Mitsuhisa] Kato is the head of r&d and Toyota's New Global Architecture, and I report to him as well, on the Toyota Technical Center side of the business. I meet with Mr. Ozawa every time I go to Japan, and then Mr. Kato every other time. I am more involved with cost planning and product planning than I was in the past. Before, there were design evaluation meetings, but now we are peeling the onion back more on the cost side of things.
The decision-making has been streamlined from what it was before. We still have a North American executive committee, but getting one voice within North America is much faster.
Honda builds 90 percent of the vehicles it sells in the United States in North America. Can Toyota reach that level?
Honda keeps it simple. They keep it narrower. It's a competitive advantage for us to have a broader product lineup. I don't think we'll ever be 90 percent in North America. It wouldn't make good business sense.
We were at 55 percent, and now we're at 70 percent in North America. We've announced $2 billion in investment in the U.S. and 4,200 additional U.S. jobs, so that number will go up to 75 percent.
There have been comments made that, as a result of the weakening yen, Japanese manufacturers will start moving projects back to Japan. But if you look at the past 17 months, that is not the case with Toyota.
When can we expect Prius production in North America?
In the U.S., all our volume models are made in North America with exception of Prius. And if you look at global supply and demand for Prius, and the forecast for future demand, they are in equilibrium where it wouldn't make sense for Prius to be built here because there is no incremental demand. At the point demand exceeds supply, we will raise our hands to bring Prius to the U.S. But we are nowhere near close to that at this time.
What about building other Lexus vehicles here?
Nothing else has significant volume to bring to North America. If you look at the volume models we produce, the RX and ES are the top two volume Lexuses, which represent two-thirds of our volume. The next highest is the IS, and it doesn't make sense to bring it here. We have more flexibility in Japan to build five or six Lexus models for 20 different countries.
Is the unintended acceleration situation over?
We've turned the page on the multidistrict litigation. Obviously, we still have product liability suits that will go on for some time. We've addressed the issues, taken corrective action, especially on the floor mat side. We have to be vigilant. There still are issues raised by customers, and our SMART [Swift Market Analysis Response] team is in contact with customers within 24 hours. We are much stronger about listening to customer concerns.
After an expected 2.2 million-plus U.S. sales this year, what is Toyota's medium-term U.S. volume target?
We don't give longer-term projections. We'll see where the industry heads long term. There is some pent-up demand, historically low interest rates and lukewarm consumer confidence. Looking five years into the marketplace, there is a cost for better safety in cars, better emissions, higher mpg. It is going to have the effect of raising the overall transaction price. So you have to ask, at what point does that start to stunt the overall growth of the industry?
For the next three or four years, pent-up demand will still drive business. Whether it's 16 million, 16.5 or 17, I can't tell you what that top volume will be. It's driven by cost. As we get later into this decade, 2018 to 2020, we're going to start seeing an impact on that.
How much fleet business is necessary, or too much?
Fleet is not a four-letter word. You have to do it in moderation. Overall, our fleet will not exceed 10 percent. And it's unlikely any series will be more than 15 percent. There's more demand for fleet business than we supply. Those Prius and Prius V taxis in New York? Those are all bought retail. There is no fleet program on those.
How much can Tundra sales grow? Does Toyota need to sell 200,000 or more to challenge the Detroit 3?
I look at the overall truck market in terms of what can we offer a pickup truck buyer from Tacoma through Tundra. There are consumers who are going to buy a small truck. There are consumers who are going to buy full-sized pickup trucks. But there's a group in the middle who could go either way.
Tacoma is so strong in the marketplace -- some months it has over 60 percent share. We build 200,000 Tacomas and Tundras in Texas, and 50,000 or 60,000 Tacomas in Mexico. So, 250,000 or 260,000 is a good place for us to be. We're never going to challenge the Big 3 in terms of volumes. Truck is just one facet of our full-line manufacturing.
What was the thinking behind borrowing the Mazda2 to make the next Yaris?
To be competitive in that B-car segment, cost plays a major role. When we had a very strong yen, it became problematic for us bringing vehicles made in Japan. We don't produce a B-platform car in North America. It made the most sense to find a partner to be able to do that. Mazda was planning a large operation in Mexico.
We helped Mazda get more volume to help offset their overall cost position, and for us to be able to get a great product for North America at a lower cost than bringing it in from Japan.
We'll bring in about 50,000 vehicles starting in summer 2015.
Do you need Lexus to be the No. 1 volume luxury brand again?
From a battle cry perspective at a dealer meeting we're all competitive, so being No. 1 is an important consideration. But when you take a deep breath and ask what's really important to the consumer, I don't think being No. 1 is important. It's about the best product and the best customer experience. If you do a great job at doing that, and add it up at the end of the year, if you are No. 1, that's great.
At the New York auto show in March, you said Toyota was studying whether Scion should evolve into a near-luxury player. What is the status of that study?
We have to decide how big the premium small car market is going to be. Is it really an entry- or near-luxury car? Or are these luxury nameplates coming down well below where the luxury market has been? I call it a premium small car because it's outside the realm of traditional luxury. And that's why I don't want Lexus to play in that game. I think Lexus needs to be a luxury nameplate in a luxury segment.
I think it's going to be a viable segment. So we are studying how big it is going to be, if we want to play in it, and if so what brand we use to play in it. I don't think it's a place Lexus should be.