Q: You've had quite a first year on the job. Tell us about it.
A: The first year of my assignment as CEO is unforgettable. Someone teased me that Jim Lentz chose the best time to retire, and I have the worst timing to become CEO. But it's OK. Many things happened; COVID, of course, social unrest, the big winter storm here in Texas that led to shortages. But I am always saying to myself: We do what we can do, and we do not do what we cannot control. I have a very great team within Toyota, so I can be optimistic during this first year. That's my very frank feeling about this year.
Was Toyota prepared for this, and how did the organization adjust to the rapidly changing, very dynamic situation?
We have very close communication between peer to peer, so we do have the executive meeting weekly and then update what happens and then contact managers very quickly to make sure what we should do. The communication is very key, and that works very well. And of course, the remote working technology helps us.
What did you learn from what Toyota's gone through that you think will remain within the organization, maybe even become permanent?
I recognize the importance of the communications or listening to the others, including not only team members, but also the dealers, or customers, or suppliers and any other stakeholders. The bottom line is people matter, so that was the biggest learning through the year.
Looking at where the company is positioned, where are Toyota's biggest opportunities?
Right now, we are facing the supply shortage, but on the other side, the demand is fortunately quite strong. So, in the short term, we need to do more with very precise supply-and-demand management, to deliver the right product to the customer as quickly as possible.
The shortages with commodities such as semiconductors have hurt all automakers. How have they impacted Toyota?
It used to be that we had a "strike zone" that we maintained in terms of inventory levels, but now, those inventory levels have gone way down, so now we have had to [recalibrate] our strike zone to deal with that situation. It is working very well, and we are now creating a new style or standard procedure to the way we are working.
What kind of impact do you anticipate the chip issue having for the rest of this year?
It will have a tremendous impact. It's not temporary, like the COVID issue or weather issues; it's sort of a surprise structure issue. It's not only the automobile industry, but also [semiconductor] demand in other industries is skyrocketing as well.
The supply volume of microchips cannot meet that demand, so we need to do many countermeasures for that. The traditional structure in the industry is sort of a triangle or pyramid, with the OEM at the top of the pyramid and the tiered suppliers below.
However, with microchips in this structure, Tier 3 and Tier 4 are very, very key right now. This pyramid structure is changing rapidly to a more vertical or horizontal-type structure. In this sense, I'm thinking that communications should be closer across all types of suppliers, not just Tier 1.
Traditionally, we talk directly only with the Tier 1 suppliers. But with this microchip issue, we need to interface and communicate with Tier 3 and Tier 4 suppliers directly as well.
How difficult will it be to change that structure, to change the way Toyota interacts deeper into its supply network?
Difficult or not, we have to do that. Realistically, our purchasing team is already contacting those Tier 2, Tier 3 and Tier 4 suppliers every day to manage the situation.
Do you anticipate a change to the traditional approach to automaker-supplier relations as a result of these supply shortages?
Yes, I think so. But it's not just the microchip issue that will drive and promote that kind of structural change.
Toyota Motor North America is jumping back into the EV fray. Why is now the right time to bring two new EVs to North America?
That is a difficult question to answer. Our thinking is that we are now aiming at a broader and wider range of electrification and powertrains. Of course, we need to think about regulations, but finally, customers can choose the right product for their needs. So in this sense, we need to prepare a wider range of electrification products, not only leaning on BEVs.
What's Toyota's view of consumer acceptance of battery-electric vehicles?
I think they are ready to accept the trend. However, it depends on the region.
For example, in California, the gasoline price is so high, and the infrastructure is there promoting [EV use], and the regulation does also. In some other areas, however, the gas price is quite low and the [charging] infrastructure is not well prepared. So in this sense, it depends on the region or state.
Do you see Toyota following some of its competitors with an announcement about an all-EV lineup within a certain time frame?
We of course are talking with the Toyota Motor Corp. side right now about what is a good EV here in the States, but also in other regions. But the EV discussion is now getting hot inside.
Last year, you told Automotive News that improving or expanding Lexus' product offerings was a high priority. How is that project coming?
Lexus also needs electrification, including BEVs. But Lexus is head of technology. So that's why we are now trying many, many new technologies [at] Lexus, like autonomous or more advanced types of powertrains.
What has been your greatest learning about the North American market over the last year?
That demand is still so strong, and we have an opportunity to the future, including a new type of powertrain, such as electrification. So what I should do or Toyota should do is find the best balance between the needs of the current customer and then how we think about our future.