Current Term Forecast Shows President Akio Toyoda's Resolve -- Kagawa Holds Remote Interview Following Financial Results

2020.05.23

Asking Akio why he felt compelled to issue a forecast for the current term

Kagawa
Now I am connected with the president, and would like to proceed to speak with him.
Nice to see you again – and nice job on that press conference!

Akio
It was my first press conference where we only used the Internet without any audience here.

Kagawa
To prepare for today, I read through your prior announcements, back to 2010. This year was the first time I was able to see it live.
It’s hard to believe it has already been 11 years since the global financial crisis and when you were appointed as president.

Akio
It’s already been 11 years…it was fast

Kagawa
It feels short, was it?

Akio
As I think about it, 11 years is pretty short though.

Kagawa
Yes.

Akio
If you’re asking me if I want to do it all over again – no thank you!

Kagawa
Well, I guess what really surprised me…

Akio
Yes?

Kagawa
Was the forecast guidance that was provided for this current running term, ending in March 2021. You did provide that guidance, right?

Akio
Yes.

Kagawa
Well, it’s just that many companies have opted to forego making a forecast – so why did Toyota decide to proceed with their guidance for this term?

Akio
During the global financial crisis, global new vehicle sales fell by 15 percent deep into the red. This time, we anticipate and are planning for a 20 percent drop – bigger than the global financial crisis.

Kagawa
Yes, you mentioned that.

Akio
So the reason we proceeded to offer guidance is because automobiles are such a far-reaching industry where we can’t do anything without support from our suppliers and other various parties. Under those conditions, as the final point of departure, if we as OEMs don’t have some kind of plan, the rest are unable to move. With a plan, our 1st, 2nd, and even 3rd tier suppliers will also be able to have some sort of plan. Within those plans, there will be a precondition, and once they achieve that precondition, the gap between their achievement and the plan will become clear. With that, we can find and correct any abnormalities, or what we at Toyota call “bringing problems to the surface” or the “visualization process.” We have to understand what the ideal or proper situation is so we can clearly see the difference or we won’t be able to manage the problems.

If we didn’t use the last 11 years the way we did, the forecast would be for a loss

Akio
There is a break-even point in vehicle volume. If we didn’t use the last 11 years the way we did, the forecast would be for a loss, such as was the case in the global financial crisis where we weren’t at that break-even point in volume.

Kagawa
I’m following you.

Akio
The fact that we are forecasting a profit, shows the result of the steady, repeated effort that has been made to lower the break-even point in vehicle volume over the past 11 years.

Kagawa
That may be true, but, president, normally if you are aiming for profit as the priority, wouldn’t it make more sense to do something like reduce production in Japan or reduce or cut other things to protect the numbers? You’ve said that you will protect production in Japan at all costs. To the level of 3 million units per year, I believe.

Akio
It isn’t that I’m particularly stuck on the number of 3 million…

Kagawa
So it’s not just about the number of units produced? Can you clarify?

Akio
To maintain a production base to manufacture 3 million vehicles, it means that there is space for work.

Kagawa
Yes.

Akio
It is a place where the people that work there are able to learn the skills, acquire more capabilities and general progress individually.
To use an anecdote, think of the current mask production situation. The priority had been on how to make the masks as cheaply as possible, but then it came to the point that it was nearly impossible to procure them in Japan.
However, in a place where real manufacturing is done and where there are a lot of manufacturers, by immediately providing the facilities and training the staff, masks can be produced quickly, and, in this case, we are able to make efforts to be self-sufficient in our supply of masks. On the point of making things as they are needed and having the ability to do so, you also need to have some degree of scale or you can’t provide appropriate facilities. If you can’t provide a place for the work to be done, people simply won’t have the chance to learn and acquire the skills needed to become a professional.

Kagawa
So that’s why you are defending the 3 million units of domestic Japanese production. So as for the decision about what should change and what shouldn’t, the line you are drawing appears to be very sensible, and I clearly understand.

What Akio learned from Ichiro Suzuki (the baseball player)

Akio
It isn’t something that I am excessively deliberating on over and over, but it is something that I will always be concerned about.

Kagawa
That is understandable.

Akio
To clarify, as I explained at the beginning, I am a sore loser. I don’t like it when people say things like “There’s no way you can do that.” Also, I don’t like it when people say things like “You can’t make a decision on that anyway.” Consequently, I have often been cornered and pressured to make decisions about things regardless of whether the necessary conditions have been gathered or not.
Very recently, we abolished the position of “Executive Vice President.”

Kagawa
Yes, I saw that.

Akio
Well, let me tell you what happened because of that – the working environment changed to allow freedom for more honesty, more consultations about the work. That’s great, but if you were to ask me if those were the outcomes I expected by abolishing the position of executive vice president, I didn’t have that expectation.

Kagawa
Didn’t have that expectation, to be sure.

Akio
Just because you change something, that doesn’t guarantee that you’ll get the positive result you want. This is something that I learned from Ichiro Suzuki (the baseball player).

Kagawa
That makes sense.

Akio
Did you know that Ichiro changed his batting form every single year?

Kagawa
So I’ve heard.

Akio
Well, just because something changed it doesn’t mean that you will have the result you want. However, they say that if you don’t change anything, the one thing that is for certain is that your skill, such as batting in this example, will decline.

Kagawa
Yes, I understand.

Akio
I want to take that mentality in my own work in the area of executive management and truly challenge things. Nowadays, even if I take on a challenge and the results are not good, I will take the responsibility for it.
That’s why I can consequently encourage us to challenge ourselves; the result of more people following me in this mentality as given me an increased opportunity to say “thank you” to them now.

Not to become a strong company, but a company that others want to support

Kagawa
This is very true.
So let me recap: we started off by talking about the numbers, but we have now shifted to talk about your heartfelt desire to say “thank you” to others.

Akio
The point is that the financial results announcement is actually the result of the hard work that has been put in by our employees, our dealers, and, of course, our suppliers around the world over the past year.

Accordingly, when you look at the numbers of the results, the process that created those numbers was created by people. That and the climate of the economy, which goes up and down. But you have to remember that even if it goes up or down, even in the case where we are reporting a loss, we should do our best to show our appreciation to all those that we are obliged to, including our stakeholders and shareholders.

Among our stakeholders are of course shareholders, but it also includes our customers, employees, regional communities, etc. That said, even today I don’t have the intention of making Toyota a “strong company”; I want this company to be the kind that people anticipate things from, a company that has an engaged base of fans.

If that were the case and you were to ask me who I would want to have as our fans, I would say that I want them to be the employees that work for us, customers that love our products, the regional communities that provide the sites for work. I hope that they would feel happy and thankful that we are there. Lastly, I would also include our shareholders, because all these other activities would help them expect us to deliver corporate value which would tie back to the profitability of our shares. This is in alignment with my way of thinking about the potential of sustainability in the world, which is almost the same as our sustainable development goals (SDGs). This is, I believe, part of what I have been saying throughout the fight to restore the Toyota-like values we have.
All that I have been saying, you know, has just been expressing the Five Main Principles of Toyoda, the philosophy of the founder of Toyota and the Toyota Group.

Kagawa
Yes, indeed.

Akio
And one more thing that I said at today’s results briefing was one thing that I feel sums up Toyota in one word when you think about what kind of company we are: “we mass produce happiness”.

We are not the type of company that produces only one prototype vehicle; if we are going to make it, we are going to mass produce it. We can deliver happiness through those products.
And we aim to put smiles on everyone’s faces.

This is something, something that won’t change with the passage of time, and will stand as the axle that won’t break, the vision that I hope is able to always endure.

“Only humans are running about in confusion”

Kagawa
Also, today you shared a letter that you had received during Golden Week, right? It said, “While the turtles and fish are going about as normal, only humans are running about in confusion.” This is something that I, I mean really, this is something that I have been thinking about this entire time. The insects are all going about as usual, even now.

They don’t complain, they just go about living, connected. The insects put up with everything, so it seems like it should only be natural for humans to do it as well, but this was something that you provided an example of, and is something I can say that I feel the same about.

Akio
Just what I would expect from the bug doctor!

Kagawa
No, but really, more than anything, the first thing is our health. Kenko Daiichi!

Akio
I agree.

Kagawa
Because our health comes first.

Akio
Healthy health.

Kagawa
Healthy health? Are you ok?

Kagawa/Akio together
Kenko Daiichi! Toyota Times!

Kagawa
Thank you very much!

It is “Toyota’s strong spirit” that lies beneath the results

Kagawa

I just had an earnest interview covering Toyota’s financial results. As I finished, I glanced at the news on the Internet and see headlines about an “80 percent drop in profit” following the financial results announcement. On the surface it might sound negative, but if you take the time to examine the contents, you’ll see that it is actually a very positive outlook, one that is encouraging.

The sales volume will go down, some. But to forecast a profit – to forecast a profit even during these conditions is something that needs to be told to everyone. And it shows they have a plan. What was really surprising, however, was that the reason that they went to the effort of making the forecast was so that the various parts manufacturers and other related companies could also have enough information to make their own plans, to make the criteria for others to follow. For other companies to be able to do this, first Toyota needed to provide its guidance! You can feel Toyota’s fighting spirit, its courage. By them taking this important step, other companies will also be saved. Toyota published its forecast – was it ok for them to do that? Deciding to put that guidance out was the first step, so they needed to put it out there. Someone has to make the first step or a path is never made.
Toyota has forecasted a profit. We all thought the forecast would be worse than that of the global financial crisis, but I hope that this forecast brings some energy back into this country. The desire to help restore energy to Japan and other countries could definitely be felt through this announcement. This is truly remarkable, and it has also helped me feel energized too.

“Kenko Daiichi!” and Toyota Times!

But seriously, financial results are something else!
They aren’t just about the numbers!

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