Mission for new Lexus chief: Change

TOKYO — Koji Sato was given very clear marching orders when he took over as president of Lexus International on Jan. 1. His boss Akio Toyoda instructed him: Make change.

The Lexus chief is not yet revealing exactly how he will shake things up.

But Sato, speaking to Automotive News here this month, said the "new Lexus" will focus on emotion, electrification and automated driving. And in the critical U.S. market, where sales have slid for two of the last four years, another priority will be animating its staid and stodgy brand image.

Toyoda, who in addition to running Toyota Motor Corp. also serves as the chief branding officer for Lexus, had all that in mind in issuing his concise command.

"It was just one simple thing: Make some change," Sato recalled of his briefing with the boss.

Toyoda is convinced Sato has what it takes for change because of the 50-year-old engineer's improbable success in saving two products that were bound for the scrapheap.

The first was the Lexus GS sedan. The second is the Lexus LC sporty coupe. Toyoda famously wanted to kill the GS during its latest redesign because the driving dynamics were lackluster for a nameplate crowding Lexus' other sedans. But Sato, as assistant chief engineer, helped lead the team that reworked the GS and made it pass muster.

Sato was rewarded with the job of chief engineer for the LC, a new nameplate bound to be one the sexiest in the Lexus lineup, with svelte looks inherited straight from legendary LFA supercar.

The problem was, the LC concept that debuted in 2012 in Detroit was a little too sexy. Sato dismissed it as pure fantasy. He had crunched the computer data: Engineers could never make a production LC anywhere near as beautiful as the concept. And he told Toyoda as much.

"I suggested to the boss, it's impossible, so please reconsider this project," Sato said. "But Akio's answer was very simple. He said, 'I know it's impossible. That's the reason we are doing this kind of project. If you want to make this car, the first step is you have to change yourself.' "

Sato says he was bowled over. So, he buckled down and delivered. When it entered production five years later, the street-legal LC miraculously stayed true to almost every curve of the concept.

Sato's challenge now will be channeling that same audacious spirit into future projects.

"Lexus is a symbol of the challenging spirit of corporate Toyota," Sato said. "Toyota is a big organization. But Lexus is a very small company and more flexible. Akio's expectation for Lexus is to change something or take on some challenge."

Lexus sales are on a roll. Deliveries rose 9.6 percent to an all-time high of 765,330 vehicles worldwide in 2019, with annual records in Japan, Europe, Asia, Oceania and Latin America.

But in North America, by far the brand's biggest market, momentum has petered out. North American volume inched ahead just 0.4 percent to 323,654 vehicles in 2019, after declining each of the three previous years. Lexus' best year there was 2015, with sales of 367,734.

But Sato isn't worried about plateauing in North America. He says that is normal for a mature market. And in any case, he said, Lexus still expects steady, incremental growth long term.

The U.S. launch of the LC 500 Convertible this summer, for example, will help drive sales, he noted.

The bigger mission, he said, is generating more excitement around a brand known more for its bulletproof quality and silky-smooth drive than pulse-pumping performance.

Yoshihiro Sawa, Sato's predecessor as president of Lexus International, said at last fall's Tokyo Motor Show that he was unsatisfied with the premium marque's positioning as a small player on the world stage and one shackled to an aging customer base in the critical U.S. battleground.

Sato conceded that injecting more emotion is a big challenge, especially in an era of crossover craze.

One fix will be leveraging the F and F Sport performance lines, he said. He would like to extend F treatment to other nameplates. An F Sport grade is currently offered on everything but the LX SUV, but the top-shelf F designation is offered only on the RC coupe and GS sedan.

"We will enhance F model activities in the future," Sato said. "F will take the lead. Every other model gets some shower effect."

But for real change, Lexus will finally dive into electrification and autonomous driving, fields in which it has been considered somewhat of a latecomer. "Two change points are coming," Sato said. "One is electrification. The other is automated drive. These two elements are a big opportunity for us to express ourselves."

Although Lexus has big success selling hybrids, it has yet to offer a pure electric. That changes in the second half of 2020 when Lexus introduces an all-electric version of its compact UX crossover, the UX 300e. It will be sold in Europe, China and Japan, but not the U.S.

A dedicated EV platform will follow in the early 2020s on the way to Lexus offering an electrified version of every nameplate in its lineup by 2025. Lexus also will be looking at hydrogen fuel cells.

Lexus won't belabor the electric technology's low-emission environmental benefits, Sato said. Instead, the message will be about driving dynamics, comfort, quietude, luxury and response.

"If the question is eco or emotion, I choose emotion," Sato said.

"But emotion doesn't mean like a racing car — emotion means being aligned with your feeling. The car responds as you intend."

Lexus' other new arena will be automated driving.

That push also begins this year when Lexus introduces its first Level 2 automated vehicle. That vehicle will get a lidar-quipped system developed with supplier Denso Corp.

That technology, called Highway Teammate, will enable the Lexus to automatically change lanes, follow lanes and pass vehicles in highway driving. Lexus hasn't said what nameplate will get the new automated abilities. But it has been testing the technology in a modified LS sedan.

"We are very focused on how to create something unique," Sato said. "We have to redefine the brand signature. My priority is on that."