"Transforming Toyota's Profit Model by Ignoring Numbers: Insights from Akio Toyoda"
In 2009, Akio Toyoda, the 11th president of Toyota, took the helm of the company during one of its most challenging periods - the Global Financial Crisis. As he stepped into the role, he vowed to steer the company away from a fixation on sales volumes and instead focus on creating products tailored to regional needs and conditions.
Prior to Toyoda's presidency, Toyota was rapidly expanding its production overseas, particularly in North America. This expansion, however, burdened the company with onerous fixed costs. The continued expansion of plants and facilities, coupled with the financial crisis, resulted in Toyota's consolidated sales plunging 15% compared to the previous year, from 8.91 million vehicles to 7.56 million. In the 2008 fiscal year, Toyota posted its worst-ever operating income, tumbling 461 billion yen into the red. The Japanese media dubbed Toyota's financial struggles during this period as the "Toyota Shock."
Despite the bleak outlook, Toyota revised its performance downward three times between November 2008 and February 2009, forecasting losses for the full term. However, Akio Toyoda managed to return Toyota to profitability in fiscal 2009.
Akio Toyoda's global policy briefing marked a shift in Toyota's focus from sales volumes to product customization. This shift, combined with decisive leadership, accountability, and strategic adjustments, helped Toyota recover from its severe deficit.
Toyoda's transparent leadership and likely internal restructuring helped stabilize the company. While specific operational strategies during the turnaround are not detailed, it is understood from the context that Toyota addressed the crisis with a mix of cost management, recalibrating market focus, and perhaps slowing the rapid push towards all-electric vehicles in favor of a broader technology strategy. These moves were part of an effort to protect Toyota’s profit structure amidst fierce market and financial pressures.
The strong yen further worsened Toyota's financial situation during the crisis. Nevertheless, Toyota's consolidated operating income surpassed 1 trillion yen in fiscal 2001 and 2 trillion yen in fiscal 2006, despite the Global Financial Crisis. By the end of 2020, Toyota booked a consolidated operating income of 2,197.7 billion yen, despite a slump in sales equal to that triggered by the Global Financial Crisis in FY2008 (-15%).
In summary, Akio Toyoda’s handling of Toyota’s crisis involved public accountability, strategic market and product recalibration, and likely internal cost and operational management changes that collectively helped Toyota recover from its severe deficit during the Global Financial Crisis.
- Akio Toyoda's emphasis on creating products tailored to regional needs and conditions, as he steered Toyota away from a focus on sales volumes, was a key strategy in the company's recovery from the Global Financial Crisis.
- Toyota's global policy briefing, under Akio Toyoda's leadership, marked a shift towards a broader technology strategy, cost management, and recalibrating market focus, which collectively protected Toyota’s profit structure amidst fierce market and financial pressures.
