Toyota Makes Woven a Wholly Owned Subsidiary: Why Chairman Toyoda gave up his shares

2023.10.24

Toyota announced that Woven by Toyota, in which Chairman Toyoda had personally invested, would become a wholly owned subsidiary. What is the company's goal, and why did he part with his shares?

Why is Chairman Toyoda giving up his shares?

Now to the second question: why did Chairman Toyoda relinquish his WbT shareholdings?

The reason was concern over potential conflicts of interest* brought about by the new arrangement between Toyota and WbT, with Chairman Toyoda being both a representative director of the company outsourcing development (Toyota) and a shareholder of the firm undertaking the work (WbT).
*An action that benefits one party while being detrimental to the other side. In this case, Chairman Toyoda, the shareholder, would benefit by WbT receiving business from Toyota Motor Corporation, of which he is the chairman.

Toyota proposed buying out Chairman Toyoda’s shares for 5.1 billion yen (vs. initial investment of 5 billion yen), based on a third-party stock valuation.

For his part, Chairman Toyoda had intended to keep investing in the company, but the change in business arrangements obliged him to give up his stake before the fruits of those development efforts could see the light of day.

In spite of the decision, Chairman Toyoda says, “My feelings toward WbT, which I consider like my own child, have not changed.”

Why did he own the shares privately?

So, how did Chairman Toyoda come to privately hold those shares in the first place?

In July 2020, the Toyota Research Institute-Advanced Development (TRI-AD), a WbT forerunner, was expanded to form the Woven Planet Group. When unveiling the decision, then-President Toyoda gave the following response to an employee question.

Chairman Toyoda

(I made a personal investment) because there are no clear answers to creating a new future.

Within a company, you have organizations where you make decisions based on logical discussions, “investing this much to gain such and such a level of return.” However, in this uncharted era, not everything can be considered using such logical mechanisms.

I have been president of Toyota Motor Corporation for 11 years now, but it has been a struggle with such a large organization.

Large organizations try to think things through logically based on successful past experiences. But I do things differently. Instead, I imagine the kind of world that would put smiles on more people’s faces.

Toyota once experienced a full model change, from being an auto loom manufacturer to becoming an automobile manufacturer. Now is the time for our next model change.

In such times, more than being the company president, I wanted to contribute my personal thoughts and passions, imagining the type of world that would be interesting and make people smile. That is why I personally decided to invest.

Kiichiro (Toyoda, the company’s founder) dared to take advantage of what he inherited from his father, Sakichi (Toyoda, inventor of the automatic loom), to establish Toyota Motor Corporation.

A board bearing the names of Kiichiro and Toyota’s founding members displayed at the ceremony, marking Kiichiro’s induction into the Automotive Hall of Fame in America.

As the third generation, I questioned whether it was right to rely on the value of the current Toyota.

I felt that I should utilize the family assets to invest in the future and show my commitment by undertaking a full model change of my assets.

In the past, Japan had capitalists who would follow their passions, investing their own money to establish new companies with a mission.

Today, however, founding capitalists have a diminished presence in most companies.

As a result, the passion that such capitalists poured into starting their companies seems to be fading, with the character and vision of these companies becoming less and less visible.

To take on the challenges of this uncharted era, I believe we need the commitment of such individuals.

Seeking to change the future, Kiichiro took a massive gamble that, after countless hardships, established Japan’s auto industry. This entrepreneurial spirit inspired Chairman Toyoda to personally invest a vast sum from his private funds.

In the same way, Chairman Toyoda funds ROOKIE Racing out of his own pocket. We also see his strong personal ambition for the future: rather than let motorsports die out, he wants to make this essential driver of auto industry growth more sustainable.

As an investor with a powerful ambition for the future, he helped to launch WbT. Though his involvement as a shareholder may have evolved, this will always remain the business on which he staked Toyota’s model change.

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