Toyota is ‘grasping for salvation’ as losses continue, chief says

Akio Toyoda

TOKYO — Toyota Motor Corp. President Akio Toyoda said his money-losing automaker is “grasping for salvation” as it struggles to return to profit.

The world’s largest car company was once targeting annual sales of 10 million vehicles but now expects sales of 7.3 million this year, down from 8.97 million in 2008, Toyoda said today at a news conference here.

Citing the five stages of corporate decline outlined by Jim Collins, author of How the Mighty Fall, the Toyota chief warned that his company has slumped to stage four, which Collins calls “grasping for salvation.”

“We are grasping for salvation,” Toyoda said, adding that the company already has spiraled through the first three stages: (1) hubris born of success, (2) undisciplined pursuit of more and (3) denial of risk and peril. His self-admonitions echoed the apologies commonly made by Japanese executives who take responsibility for financial turmoil or corporate scandal.

Grim assessment

While Toyota is far from entering the fifth stage — capitulation to irrelevance or death — Toyoda’s grim assessment was clearly meant to underscore the challenges he faces after only three months as president. They also seemed aimed at ensuring customers that he grasped the severity of the situation and was committed to reversing Toyota’s malaise.

“Toyota has become too big and distant from its customers,” the grandson of the automaker’s founder said as he prepares for a second-straight year of substantial financial and unit-sale decreases.

In the United States, Toyota’s sales fell 13 percent in September from a year earlier as the market suffered a sharp letdown after the government-funded cash-for-clunkers program ran out. Total U.S. sales tumbled 23 percent. Toyota is down 28 percent for the year.

Separately, Toyoda called the current dollar-yen rate “very tough,” saying the weak U.S. currency made it difficult to return to profit on an unconsolidated level.

“When you get to this level, it makes it difficult to return to profit on sales growth alone,” he said.

Toyoda repeated Toyota’s aim to return to profit at the parent level “as soon as possible,” even as it expects global sales to fall 18 percent from 2008 to 7.34 million vehicles this year. That would leave about 30 percent of the company’s production capacity unused.

Toyoda took the helm in June as the world’s biggest automaker faced one of its biggest crises in history amid a global credit crunch and an industrywide sales slump that forced General Motors and Chrysler into bankruptcy.

For the financial year to March, Toyota has projected a consolidated operating loss of ¥750 billion ($8.4 billion), assuming a dollar rate of ¥92. It has forecast a parent-only operating loss of ¥600 billion.

Recall regret

Presenting a further challenge, Toyota said this week it would recall 3.8 million Toyota and Lexus models in the United States — its largest-ever recall — because of a risk that a loose floor mat could force down the accelerator. The problem is suspected of causing at least one crash that killed four people.

“We would like to pay our deepest condolences for the loss of four precious lives,” Toyoda said. But because an investigation into the problem is still under way, he said, he could offer no further details about plans to address the issue.

“Customers who chose Toyota and Lexus cars because those brands are safe and secure are now beset with anxiety. I regret and apologize for this development,” said Toyoda, who took office in June.

The Prius has helped fuel sales growth at Toyota especially in Japan, where the government is offering two sets of incentives to promote more fuel-efficient cars.

Toyoda said he would welcome an unlikely extension of Japan’s cash-for-clunkers program beyond March, while adding it would not be prudent to keep depending on the government for help.