Toyota Is Not Talking about "Numbers"

By Takehiro Yamada : Reporter of Toyokeizai
April 02,2015
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It was the first time for Mr. Akio Toyoda, Toyota's president, to attend the meeting for individual investors.

Punctuated with grand gestures and body language, what President Akio Toyoda of Toyota Motor Corporation talked of to shareholders was not concrete numbers.  Instaed, he talked about the company's philosopy. 

"I believe a steadfast approach which has as its pillars the making of good cars and the development of human capital, is something that comes to be linked with business indices such as ROE, profits from operations, increases in sales, and the number of vehicles sold," Mr. Toyoda said to about 3500 people gathered at the meeting held in Nagoya. 

A temporary lull with intention?

This was the first presentation meeting for individual investors attended by the company's top. As for having such a meeting, the company says "while growing greater in scope, Toyota has become difficult to understand. We wanted to speak to our individual investors so that we might receive their backing the long term."

Toyota is expected to post record profit for the year 2014 ending on March 3.  It is also expected to be the first company to ever reach three trillion yen profit line.  It is pretty obvious that the company is in excellent condition. Why, then, is Toyota worried that it has become "difficult to understand."?  The answer might has something to do with the message Mr. Toyoda has delivered a while ago. 

At the earnings conference on May 8, 2014, Mr. Toyoda said "We are experiencing a temporary lull with intetion."  He made this remark despite posting its highest recorded profits since the recession following the Lehman Brothers bankruptcy.  It was clear the company has not dropped its stance of thorough caution toward future outlooks.

Toyota accelerated its strategies for growth from the second half of the 1990s. Building factories across the globe, the company's annual vehicle production grew to 500,000 from 2000 to 2007.

However, at the last years' earnings conference Mr. Toyoda said "Although the company has experienced rapid growth, the development of human capital hasn't kept pase with our speed of grwoth. Yet, we've forced expansion after expansion dependent on the hard work of our employees and affiliates. Our descent into the red after the Lehman Brothers bankruptcy and our problems with large-scale recalls (in the US), as well, occurred while we were doing this."

Expanded way too fast

At the meeting for the individual investors he explained about the"intentional temporary lull" saying "The leveling won't be in vehicle sales or profits; instead, for the sake of sustainable growth, a leveling-off is needed as a period for us to greatly reevaluate how we work, to change the consciousness of all of us working here at Toyota."

Without making reference to matters like concrete profit goals, he spoke of Toyota's current involvement in development and production reforms and about his feelings toward management and human capital development.

Mr. Toyoda even spoken of his adolescence during the meeting.

Perhaps because it was the first "face-to-face" meeting he'd had with private investors, Mr. Toyoda even presented photos from his younger years as a self-introduction. He reflected on the days where he entered Toyota after working at an American investment bank. "My life in the company was spent fighting against preconceptions (related to being the scion of the founding family) and continually asking myself who and what I was."

Taking responsibility for a variety of departments domestic and international, he was appointed to the head of the company in June 2009. In March of the same year, Toyota had fallen to a nadir at an absolute low of 400 billion yen in the red, directly struck by shocks from the Lehman Brothers bankruptcy.

Furthermore, owing to the sudden unintended acceleration recall issue, he had to appear before an American congressional hearing in February 2010. In the meeting with indiviual investors, he touched on that matter with the US, saying, "My resolve as the person who takes full responsibility for Toyota grew stronger."

Mr. Toyoda's hidden struggle

A replica of one of the Toyota's classic cars, Toyoda Model AA which was sold in 1936, was displayed at the meeting. The price of the car at that time was 3350 yen.

This may be from his experience: he's made his way through the hidden struggles of the everyday and forged himself in countless battlefields of business since rising to Toyota's top.

Individual investors make up only 12% of Toyota's current stakeholders. Naturally, there's also a need to be aware of the gaze of other stakeholders.

For example, the traditional dividend payout ratio is 30%, with the payout having grown larger over the years together with the expansion of profits. One point of attention in the midst of expected record profits is whether the dividend rate of 30% will be raised or not.

During the meeting, Mr. Toyoda stated, "As the person responsible for leading Toyota globally, I want to build a new relationship backed with trust and confidence with you, the investors and enterprises." 

Just as there are investors who become long-term stable stakeholders, empathizing with a company's principles, there are those who fiercely demand short-term profits, as well.  In the midst of the drawing together of many different expectations, the concrete results of "intentional temporary lull"will be carefully watched.