PLANO, Texas -- Jim Lentz is a man on the move.
Toyota Motor Corp.'s North American CEO was among the first employees to relocate to the new corporate home in Texas last September, part of an expeditionary team for what eventually will be a 4,000-strong work force at the North American headquarters.
"We are affectionately known as the pioneers," Lentz said of the roughly 50 staffers who made the move from Torrance, Calif., to a temporary site just a few miles from the future Plano headquarters. The rest will come in waves, the bulk of them arriving from the Torrance location and Toyota's Erlanger, Ky., facility by the end of 2017.
With his own relocation behind him, Lentz has plenty on his plate. Toyota's Mirai hydrogen fuel cell car goes on sale in the U.S. this year, as will its new Tacoma pickup, two new Scion nameplates and the Lexus RX and GS F.
This fall, Toyota is expected to introduce the fourth-generation Prius, the first vehicle to use Toyota's new modular platform setup. A subcompact crossover also could debut under Scion. And last month, Toyota announced plans to open a plant in Mexico in 2019, where it will build the next Corolla.
Lentz, 59, spoke this month at his temporary office here with Staff Reporter David Undercoffler.
Q: What are some of the challenges Toyota is encountering with the move to Plano?
A: I think the real challenge is the organization structure. Just trying to forecast three years down the road: Exactly how many people do you need in communications, or exactly how many people do you need in legal?
The other tough part and still the unknown is we don't know exactly how many people are coming.
We will start to find that out as the job offers go out. And then it's just going to be adjusting based on who agrees to come and who wants to stay back.
Toyota has said 3,000 jobs will move from Torrance and 1,000 will move from Erlanger. How many jobs will be cut from Toyota's rosters as part of the relocation?
That's tough to say. We anticipate there will be about 4,000 positions here at the headquarters, roughly 1,000 coming from Erlanger and 3,000 coming from sales and the finance company [in Torrance]. But the reality is we've told everyone, if you want a job with us, you will have a job in Plano. So, there is no intent to use this to cut head count. Obviously, it's unrealistic to assume that everyone will come, and it is realistic to assume that as you bring everyone together, that there may be some redundancies and there will be some jobs that we shed, but it's not going to be through cutting people.
If someone's job becomes redundant in the move, what happens?
They won't come to a redundant job. They will know that before they come here. The org structure will be in place before they make the move. So, each individual will know exactly what their job is going to be in Plano before they make a decision to come or not. It could be a different job. You know, 100 percent of the people could decide to come, and if that's the case, then we'll have 100 percent of the jobs that we had before. But that's highly unlikely.
What's Toyota's position on the Trans-Pacific Partnership that President Barack Obama is pushing through Congress?
Obviously, we're free-traders. We have plants in, I believe, 27 countries around the world. That's about 50 some plants. We were supporters of the Korean Free Trade Agreement, and as a result of that, the car of the year in Korea in 2013 was a Toyota Camry made in the United States. And, I believe, 70 percent of the Toyotas sold in Korea are made in the U.S. Including our exports to Canada, there are about 160,000 vehicles that we export to other markets made in the United States. I think it's 40 some countries. So we are very much a believer in free trade.
So the TPP would be something Toyota would support?
Could the TPP mean Toyota makes jobs available overseas that might otherwise have been in North America?
I don't really see that happening. As an example, once we felt that our forward sales plans exceeded our capacity, we decided to build another plant in North America, not bring more cars in from Thailand or Japan or somewhere else. Mexico ended up being that place. I don't think that that's going to necessarily change my decisions on where we build plants in the U.S.
The recent announcements of plants in Mexico and China ended a self-imposed three-year moratorium on new plants. What was the point of that pause?
We spent a lot of time in those three years making sure that we had the human resources, the human capital, to be able to expand. It allowed us to move people into new positions to gain experience, and I think that's really, really important. I think it allowed the production and engineering side to take three years to look at new techniques and new ways of manufacturing that, once we opened the curtain again, we would be able to install some of that into our plants. And I think you'll see that in Mexico as well. Mexico is going to be the first ground-up [Toyota New Global Architecture] plant in the world.
Toyota bills the switch to the TNGA as widely beneficial because it increases the amount of shared parts. But this also opens an automaker up to larger recalls if those parts are found to be defective. How do you prevent that?
Two things. I think you audit more often. You make sure that the processes are in place so you make sure you reduce the risk of that happening. No. 2 is you have to have better traceability so that in the event something goes wrong with a part, you can identify it much more quickly and reduce the number of vehicles that it could be in -- the ability to know exactly which vehicles that part went on.
If you know that a given part has a failure, you can isolate it to those parts that were produced on Tuesdays and Wednesdays, and you know on Tuesdays and Wednesdays where they were shipped to and what cars they were on. You can minimize the number of vehicles you have to recall.
The new Prius will be the first vehicle on that new modular platform. But the marketplace for hybrids is considerably more crowded now than when the third-generation Prius came out in 2009. How does Toyota stay ahead of the pack?
It's a much more crowded segment, but it's still a segment that we have over 60 percent share. There are a couple million Priuses on the road burning gas today. It's a relatively loyal buyer base.
I think what's important for us is Prius still remains a Prius. It's still high mileage. But at the same time, it needs to get more aggressive in styling, and it needs to become a little bit more fun to drive. And I think we will achieve both of those goals, partially through TNGA as we end up with platforms that have a lower center of gravity. I've driven this car, and it's quite strong. My wife is on her third Prius, so I have a pretty good sense of what Prius feels like and drives like, and this is quite strong.
Now, this won't be a hot rod; it's not going to do 0 to 60 in three seconds, but it still is fun to drive. When you talk to non-Prius owners, it's difficult for them to understand how a Prius can be fun to drive. But when you talk to Prius owners, they feel that their cars are fun to drive even today. It's not G-force; it's not 0-to-60 acceleration. It's just a different fun.
There are a few holes in the Toyota lineup, the most obvious of which is a subcompact cross-over, which many rival brands are introducing. Is Toyota considering one?
I think everybody looks at the strength of the small SUV today. It's a segment that's up 13 to 14 percent. There are about 25 entries in the segment now, so it's become a fairly crowded segment. But the size of the vehicles has grown quite a bit over time. So, some of them, from the consumer's point of view, are kind of bordering into even midsize SUVs today. So, I think it opens up an opportunity for a new segment to emerge underneath it.
Obviously, we've seen other competitors that have shown product, and it's a segment that will develop over time. It's probably a Gen Y play, so it's something we're taking a real hard look at.
If Toyota did introduce one, would it be under Scion?
If we were to do something like that, we'd have to study which brand it makes the most sense to do it under. But I think one could make an argument either way that it would fit under either [Scion or Toyota].
With the hydrogen fuel cell Mirai coming out this year in the U.S., what do you say to Tesla CEO Elon Musk's claims that the technology is b.s.?
When we launched the Prius, I think gas was about a buck a gallon. The general public was not screaming for a vehicle that got 40 mpg. But our view of the future was that we needed something to help stretch gasoline and reduce CO2. In the short to midterm, that would be hybrids, probably followed by plug-in hybrids, but the long-term play was going to be a new fuel source, and we believed it would be hydrogen.
Now, if my business was solely battery electrics, I'd probably say that these were bulls---, too. But we are a company with the resources and the profitability to continue to put resources against the portfolio approach. So, I can continue to improve internal combustion engines; I can continue to advance hybrids; I can continue to advance batteries that go into plug-in hybrids; and I can continue to push a future fuel like fuel cell. You know, it's tough if you're not making much money to be able to have a portfolio approach.
We may be a little bit of the tip of the spear with this one, as we were with hybrids. But long term, we hope that we can help advance this notion of a hydrogen society, starting off with hydrogen cars.