Toyota Motor Corp, Heir Steers Carmaker Out of Crisis

IN1135
Toyota Motor Corp.:
Heir Steers Carmaker out of Crisis
01/2016-6189
This case was written by Morten Bennedsen, The André and Rosalie Hoffmann Chaired Professor of Family Enterprise
and Academic Director of the Wendel International Centre for Family Enterprise, INSEAD; Brian Henry, Research
Fellow, INSEAD; and Yupana Wiwattanakantang, Associate Professor at National University of Singapore Business
School [hereby acknowledging the grant she received from the Centre for Asset Management Research &
Investments (CAMRI)]. It is intended to be used as a basis for class discussion rather than to illustrate either effective
or ineffective handling of an administrative situation.
The case and teaching note were generously financed by the André and Rosalie Hoffmann Research Fund for Family
Enterprise.
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cases.insead.edu.
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This document is authorized for use only in Mgtr. Paola Soto's 2022; IIIT at Universidad Rafael Landivar (URL) from Aug 2022 to Feb 2023.
A Café Inside Union Station, Washington DC
It was a cold 24th February 2010. Akio Toyoda was sipping hot tea in a café overlooking the
train tracks at Union Station in Washington DC, not far from his next stop, Capitol Hill. He
paid little attention to the announcements over the loudspeakers. His mind was focused on the
Congressional hearings of the House Oversight and Government Reform Committee. He was
about to be asked a lot of tough questions. Needless to say, the thought of being dragged
through the mud was not exactly pleasing. Moreover, the fate of the company and its
employees, shareholders and suppliers would depend on his answers. As he gulped down the
last of the tea, he thought about his illustrious family history. He had been in the top job for
less than a year. Was this, he wondered, the end of the road for the Japanese family that had
founded and reigned over one of the most respected automakers in the world?
Why should it be otherwise? After all, the Toyoda family were now minority shareholders.
Did the company even need a family member to run it when it had been run more or less
successfully by professional managers for the previous 14 years? Admittedly the share price
had been going south for the last couple of years and needed a boost, and moreover the
previous professional manager had pushed aside quality in favour of top line growth.
His assistant pointed at his watch. It was time to go, to face some painful questioning by
elected members of Congress. Not a pleasant thought.
Congressional Hearings
When Akio Toyoda stepped into the waiting limousine in front of Union Station, he was
greeted by Yoshi Inaba, head of Toyota’s North American operations. They were both due to
appear before the House committee, in the Rayburn building. Toyoda realized that his poor
command of English was going to be made all the more apparent since Yoshi Inaba would not
need a translator. “It’s going to be OK. Don’t forget that we have a second meeting where
things are going to be very different,” said Inaba, referring to a gathering at Washington’s
National Press Club of Toyota dealers and employees later in the afternoon.
It was a tense moment for Akio Toyoda as he took his seat facing lawmakers in the meeting
room. He began by apologizing (see Exhibit 1 statement released prior to the hearings). “I am
deeply sorry for any accidents that Toyota drivers have experienced,” he said in English. He
also apologized to the millions of Toyota car owners whose defective vehicles had been and
were being recalled in the USA1and worldwide.2 Finally he apologized to surviving members
of the Saylor family, four of whom had died in an accident in August 2009. However, he
pointedly did not make the traditional Japanese bow that many were possibly expecting.
During the three-hour question and answer session, Rep. Dan Burton, a Republican from
Indiana, asked why an accelerator pedal made for Toyota in Japan looked different from a
pedal made for Toyota in the USA, pointing to photos on a large screen. Speaking through a
translator, Akio Toyoda replied, “As the Congressman knows, a car consists of some 20,000
1 Toyota Gas-Pedal Fix Clears Regulators, Kate Linebaugh, The Wall Street Journal, 17 January 2010
2 US/JAPAN: Politicians criticise Toyota ahead of Congress hearings, just-auto.com editorial team, 25
February 2010
1
to 30,000 parts, and I would like you to first of all know we work together with suppliers in
designing those parts.”3 Other questions followed in quick succession, making it hard for
Akio to keep up as the interpreter fed back to him through an earpiece in Japanese. Yoshi
Inaba stepped in to cover for his boss on a number of occasions.
In addition to his apology, Akio Toyoda announced the creation of an expert panel on quality,
as Toyota was not sure what was causing the sudden acceleration incidents. But, he insisted,
there was no problem with the design of the electronic throttle-control system.4 Furthermore,
he denied any cover-up and pledged to restore consumer trust in the company.
Perhaps his most revealing statement was when Akio Toyoda said, “My name is on every car.
You have my personal commitment that Toyota will work vigorously and unceasingly to
restore the trust of our customers.”5
Following the meeting, Akio Toyoda went to the National Press Club in Washington DC to
address the city’s dealers and employees. Standing tearful under a giant display bearing the
Toyota brand name, he said, “At the hearing, I was not alone. My colleagues in North
America and around the world were there with me.”6
The next day, Akio Toyoda went back to Capitol Hill for a 30-minute meeting with the
Transportation secretary and agreed to work together to enhance the safety of Toyota cars and
protect American consumers.7 The talks were described as “productive and focused on the
importance of safety and working cooperatively to protect consumers in the United States,”
by the Transportation department in a subsequent statement.
Background to the Congressional Hearings and the Toyota

Vehicle Recalls 2009-10
The day before Akio Toyoda’s testimony, a former Toyota car owner had appeared before the
House Committee to tell the story of how her Toyota-made Lexus 350 ES sedan suddenly
accelerated to 100mph while she was driving on a highway. Luckily she lived to tell the story.
But not all Toyota drivers and their passengers were so fortunate. One of the most devastating
crashes involving sudden accelerators occurred on 28 August 2009, when four members of
the Saylor family were killed in a Lexus 350 ES sedan in horrific circumstances. The
vehicle’s accelerator pedal got stuck in the floor mat causing the car to accelerate to 125mph
just before the car went out of control and crashed. The driver was an off-duty California
Highway Patrol officer Mark Saylor, who could be expected to have experience of driving in
dangerous conditions. In December 2010, Toyota reached a settlement of $10 million with the
surviving members of the Saylor family.8
3 After stoic showing in Congress, Toyoda breaks into tears, Nobuhiro Kubo, Reuters, 25 February 2010
4 Japanese editorial excerpts, Kyodo News, 26 February 2010.
5 Meadville dealer attends Toyota hearings in Washington D.C., Jim Martin, Erie Times-News, 25 February
2010
6 After stoic showing in Congress, Toyoda breaks into tears, Nobuhiro Kubo, Reuters, 25 February 2010
7 Toyota chief, U.S, transport chief discuss safety issues, Kyodo News, 26 February 2010
8 Toyota settles suit over California crash for $10 million, Meri News, 4 December 2010
2
“It was the [Saylor] tragedy that forced Toyota, which had received more than 2,000
complaints of unintended acceleration, to step up its own inquiry, after multiple government
investigations since 2002.”9 With its reputation at stake, Akio Toyoda had to react to the
growing crisis. The company was repeatedly accused of:
x Underestimating the severity of the sudden acceleration problem
x Overestimating the popularity of its brands that were affected by the problem
x Announcing false diagnoses and insufficient fixes
x Contradicting the US National Highway Traffic Safety Administration
x Not projecting the cost of its recalls and lost sales
x Releasing statements that were misleading and inaccurate
x Treating the growing safety issue as a minor issue.
Crisis Management
On 20 January 2009, at the height of the recall crisis, Toyota’s supervisory board named Akio
Toyoda president of Toyota Motor Corp., replacing Katsuaki Watanabe (who would become a
vice-chairman). The management changes would become effective in June 2009, following
approval at the annual Toyota shareholders meeting.
At the time of his nomination, Akio Toyoda, 52, was executive vice president in charge of
purchasing, quality, product management, information technology and intelligent transport
services. A race-car driver, he was particularly fond of the Lexus luxury line of cars and had
led a press conference for the brand at the 2004 Beijing motor show. He was devastated by
the deaths of the Saylor family members in a Lexus, a model which had 14,900 recalls.10 But
the son of former CEO Shoichiro Toyoda was not prepared for the fallout from the recall
crisis:11
Shoichiro Toyoda12
9 Toyota’s Slow Awakening to a Deadly Problem, Bill Vlasic, the New York Times, 1 February 2010
10 Luxury Lexus LS next for recall; Quality issues continue as Toyota brand has steering problem, Woodyard,
C., USA Today. 20 May 2010.
11 Akio Toyoda deserves to be Toyota Motor Corp.'s next president, James B. Treece, Automotive News, 19
February 2007.
12 https://en.wikipedia.org/wiki/Shoichiro_Toyoda, accessed 22 October 2015.
3
“From January 2000 to January 2010, there were reports of 52 deaths linked to Toyota
vehicles with uncontrolled acceleration. This led to recalls in 2007 and in 2010 involving
approximately 7.5 million vehicles. At first, there was uncertainty regarding the cause of the
problem. Later, NASA engineers determined that the problem was corrected by Toyota and
that there were no electronic flaws in the pedal design.”13
One of the first appointments Akio Toyoda made as president was to bring back Yoshi Inaba
as head of US operations. A master of crisis management, Yoshi Inaba humbled himself
before the assembled reporters at the Detroit auto show in early January 2010, saying that the
recall crisis was “a hard lesson” for Toyota. Behind the scenes he worked non-stop to fix the
problems at the root of the crisis. He appointed a quality project team which eventually came
up with two solutions to the sticking pedal problem. For his part, Akio Toyoda had decided to
keep a low profile until he was taken by surprise by a Japanese TV crew at the World
Economic Forum in late January 2010, when he made his first brief apologetic statement (see
cover photo).14
Congressional Hearings
But although to some people he may have appeared aloof and not really interested in
resolving the recall crisis, the reality was completely different. The following steps were taken
by Akio Toyoda to manage the crisis:
x Appointing Yoshi Inaba as Toyota’s No. 1 point man in the USA
x Appearing at the Congressional hearings with Yoshi Inaba
x Apologizing to the Saylor family at the Congressional hearings
x Committing publicly to fixing the sticking pedal problem.
Toyota said the unintended accelerations were caused by either a sticking gas pedal or a
misplaced floor mat.15 The company then went about finding solutions to dealing with both
issues. For the first issue, it came up with the idea of installing shims or “selective spacers” in
the gas-pedal assembly to increase the tension within the pedal and prevent the accelerator
staying in a depressed position. Toyota announced measures to rectify the pedal issue that
included trimming the gas pedals and installing a new brake-override system. This was
designed to ensure that the brakes always took precedence over the accelerator when both
pedals were depressed.16 Each affected Toyota could be repaired in 30 minutes or less. In
addition, Toyota suspended production on some lines at five North American assembly
facilities for a week so that it could install new gas pedal assemblies and adjust production.
13 U.S. may require brakes that can override gas pedals in new cars. Manning, S., & Raum, T. USA Today,
http://usatoday30.usatoday.com/money/autos/2010-03-02-toyotadeaths N.htm, 2 March 2010, unable to
access on 23 June 2015.
15 Toyota Knoxville dealer doing 'whatever it takes' to recover trust, By Roger Harris, The Knoxville News-
Sentinel, 25 February 2010
16 Toyota Plans Aggressive Fix for Pedals --- Dealers Told Part Could Arrive This Week to Repair 2.3
Million Vehicles in In Sudden-Acceleration Recalls, Kate Linebaugh, The Wall Street Journal, 17 January
2010
4
Akio Toyoda may have not responded to the crisis as quickly as his critics would have liked,
but the US authorities likewise had failed to respond when complaints about runaway Toyotas
first emerged in 2002. The National Highway Traffic Safety Administration conducted six
separate investigations into consumer complaints of unintended acceleration, and none of
them found defects in Toyota cars other than unsecured floor mats.17 As a result, the agency
denied petitions for further investigative action because it did not see a pattern of defects.
However, with the publicity surrounding the Saylor tragedy in August 2009, both Toyota and
the US government decided enough was enough. The Congressional hearings were scheduled
and the company came up with solutions.
This was not the first recall crisis involving Toyota and a member of the Toyoda family. Forty
years earlier, in 1969, a recall crisis emanating from the USA had caught former president Eiji
Toyoda by surprise. His swift response and political connections helped the company deal
with the first recall crisis affecting the carmaker in an environment that had suddenly become
far more regulated than ever before (details are given later in the case).
In naming Akio Toyoda as President of Toyota in January 2009, the board of directors chose a
leader who could take the company forward at a time when oil prices were rising and the
global economic recession was just beginning (see Appendix 1). The board needed a leader
who could steer the company during a particularly difficult period and protect the brand’s
reputation from the fallout of the recall crisis.18 Said Akio Toyoda at a press conference in
Tokyo on the day of the announcement, “I am simply determined to do my utmost in being
handed this big role of steering Toyota as it faces what has been said to be its worst crisis in a
century,” adding that he wanted to be “a president who was close to the workers.”19
The Role of the Salaryman

In Toyota’s corporate culture, a salaryman fulfils an important role for the controlling
family.20 When no Toyoda family member is available to run the company, a trusted non-
family executive is appointed in the interim. This was exactly what happened in the years
before Akio Toyoda was ready to take on the top job.
Behind the scenes, however, while the salaryman served as president, members of the Toyoda
family still firmly controlled the company. Shoichiro Toyoda, father of Akio Toyoda, was
chairman of the board until 1999, and then honorary chairman, a position he continues to
hold.21 Eiji Toyoda, the former president of Toyota and cousin of Akio, was chairman of the
board until 1994, and remained supreme advisor until his death in 2013.
In the 14 years between 1995 and Akio Toyoda’s appointment in 2009, three successive
salarymen held the CEO position (see Appendix 2 and the chart below). In 1995, Tatsuro
18 Toyota Appoints Founding Family Member As Next Pres, Dow Jones International News, 20 January 2009
19 Toyota returns to founding roots in choosing Toyoda as new president amid global slump, Yuri Kageyama,
Associated Press Newswires, 20 January 2009
20 The usage of the term salaryman has become demonized in popular Japanese culture to the extent that it has
come to be solely associated with negative connotations. In this business case, the term remains unique to
the Toyota culture and in particular to the succession planning process of the Toyoda family.
21 As of this writing, 9 November 2015.
5
Toyoda suffered a stroke and his short three-year term at the head was brought to a premature
end.22 At that time, his nephew, the 39-year-old Akio Toyoda, was still too young to be
considered for the top job, so a salaryman was brought in to run the company.23
The Epoch of the Salarymen (Toyota Motor, 1995 – 2009)24
The first salaryman to be named president of the company in 30 years, Hiroshi Okuda,
stepped in at a time when Toyota was losing market share and focus.25After only four years
running the company, he was replaced by another salaryman, Fujio Cho, who ran it for the
next six years from 1999 to 2005. One of the most trusted salaryman in this epoch, Fujio Cho
became a mentor to Akio Toyoda and was made honorary chairman of the board in 2013, a
post that had never been held by a salaryman before (and that he continues to hold).
Hiroshi Okuda26
22 Tatsuro Toyoda recovered and is the chairman of the board of Toyota Industries.
23 Toyota Founder’s Grandson Joins Board, Dow Jones International News, 31 October 2000
24 TMC Daily Share Prices, Nikkei 225 Index, Japanese Car Index, which consists of eight publicly traded
automotive companies on the Japanese Stock Exchange: Daihatsu Motor Co. Ltd., Hino Motors Ltd.,
Honda Motor Co., Ltd., Isuzu Motors Ltd., Mazda Motor Corporation, Mitsubishi Motors Corporation,
Nissan Motor Co. Ltd., and Suzuki Motor Corporation. All Japanese share prices are between 1 January
1995 and 1 January 2010. Source: S&Q Capital IQ.
25 Akio Toyoda makes name for himself, James B. Treece, Automotive News, 25 September 2000
26 https://en.wikipedia.org/wiki/Hiroshi_Okuda
6
Salaryman Katsuaki Watanabe took over from Fujio Cho in 2005 and held the position for the
next four years. Under his leadership, Toyota expanded its operations relentlessly, a move that
was at first rewarded by the financial markets. However, the recall crisis caught up with the
company towards the end of 2006, and its share price plummeted, losing half its value over
the next two years. It was time for a change at the top.
When Akio Toyoda’s was nominated president on 20 January 2009, Fujio Cho was at his side
at the press conference in Tokyo. Said Cho, Toyota “needs to be more than just a strong
company. It needs to be a good company. He is not another salaryman like me.”27 On the day
of the announcement, Toyota shares rose 2.3% to 3,100 yen in Tokyo.
Fujio Cho28
Upon assuming the role of CEO, Akio Toyoda indirectly blamed his predecessor for
frantically pursuing sales volume which had caused the automaker to lose touch with its
customers and overlook quality concerns. “Everyone knew Toyota was growing too fast. But
it was only Akio Toyoda, because of his family background, who could make hard decisions
and steer the company back to a normal condition,” said a former executive at that time.29
Indeed, the board’s nomination was designed to give the company the needed lift and ongoing
momentum that his predecessor lacked. To avoid embarrassment, Katsuaki Watanabe was
quietly shifted to a new vice chairmanship position without any power. However, no direct
criticism of salarymen was ever made, as the family had chosen to base its succession
planning on them regardless of the short-term outcome.
Between 1950 and 1967, the Toyota was led by two salarymen one after the other before the
54-year-old Eiji Toyoda was able to take on the top job. The 17-year wait was well worth it.
The legendary CEO probably did as much, if not more, than any other leading post-war
industrialist to take his company to profitability and worldwide prominence. When he died at
the age of 100 in 2013, tributes poured in from all over the globe. Yet without the two
salarymen, the family succession would never have been possible.
28 https://en.wikipedia.org/wiki/Fujio_Cho
29 Toyota: Rebirth of a brand, Kana Inagaki, Financial Times, 4 June 2015.
7
Akio Toyoda Takes the Lead
In a veiled reference to the Japanese royal family, Akio Toyoda was labelled a “prince” by the
Japanese press, as he was one of the youngest executives to join the Toyota board (in 2000)
and the youngest president in the company’s history. Said journalist Yuri Kageyama, “There’s
no doubt the clean-cut, bespectacled Toyoda is the rising star of his family and an emerging
candidate to head Toyota Motor Corp sometime down the road. His career highlights
questions about the influence still wielded by Toyota’s founding family at a time when this
nation, long dominated by lineage and seniority, is gradually turning to Western-style
promotion based on ability.”30
After earning an MBA from Babson College, Akio Toyoda served as vice president at New
United Motor Manufacturing Inc. (NUMMI), a Fremont, California-based joint venture
between Toyota and General Motors.31 This was Toyota’s first North American automotive
assembly plant, whose first president was Tatsuro Toyoda,32 the brother of Akio Toyoda’s
father.33 Toyota closed the NUMMI plant after GM pulled out of the joint venture as part of
its bankruptcy proceedings in July 2009 (more details below).
During this difficult period, Toyota exploited the Toyoda name to send a powerful signal to
the markets that with the family back in charge, the company was returning to its roots and
would restore the values, quality and reputation upon which the business was founded.34 By
2012, Toyota had become the largest automaker in terms of the number of vehicles sold
worldwide. Its share price tripled on the Tokyo Stock Exchange between 2012 and 2015.
Family Asset: Name and Network

When Akio Toyoda delivered his first speech as president-designate, he made it clear that the
company would stay competitive and build its human capital under his competent and
professional management. At a press conference on 20 January 2009, Akio Toyoda compared
his father Shoichiro to a flag around which the company rallied. “I am not yet that flag, but I
intend to do my best so that maybe 20 or 30 years from now, people may look back and refer
to me as a flag,” he said. Seen in a wider cultural context, the flag analogy reflected aspects of
the Japanese attachment to names and ancestors.
For Akio Toyoda’s comparison to resonate, the family lineage must live on through the CEO,
whose name would fly high at Toyota’s subsidiaries around the world. The name would be
seen by stakeholders as a key attribute, a guardian of the values that underpinned the
contributions made by family members over the past century. The importance attached to
names in Japan was nothing new; many companies carry the founder’s name (Mazda, for
example, derives from founder Jujiro Matsuda).35 Akio Toyoda’s nomination was also proof
30 Grandson of Toyota founder joins board, fuels speculation of higher ambitions, Yuri Kageyama,
Associated Press Newswires, 7 November 2000
32 Toyota, A History of the First 50 years, Toyota Motor Corp., 1988, p. 336.
33 Toyota Under Fire, Jeffrey K. Liker, Timothy N. Ogden, McGraw Hill, 2001, p. 19
34 The Family Business Map, Morten Bennedsen and Joseph P.H. Fan, Palgrave McMillan, 2014, p. 32
35 The History and Spirit of Mazda, page 1, from
8
that no discord had disturbed the family succession, based on the Japanese model whereby
only one son controls the firm. At Toyota, the top job has been held by an adopted son
(Risaburo), family heirs (Kiichiro, Eiji, Shoichiro, Akio) or in the event no family member is
available a salaryman.
In addition to name, the Toyoda family had built a powerful network of connections over the
generations. Having a well-crafted network gave the Toyoda family a competitive advantage.
It was connected via marriage ties to Shinzo Abe, Yasuhiro Nakasone and Yukio Hatoyama,
respectively the current and two former prime ministers of Japan, and seven top business
families, namely Mitsui (the biggest pre-war zaibatsu), Shimizu (a worldwide general
construction company), Kajima (a worldwide general construction company), Ishibashi
(Bridgestone), Uehara (Taisho Pharmaceutical Co.), Saito (Daishowa Paper Manufacturing
Co.), and Lida (Takashimaya Department Store).36
These connections went back to the founder of Toyota Motor Corp, Kiichiro Toyoda (1894-
1952), who inherited a love of engineering and creativity from his father Sakichi Toyoda
(1867-1930). Toyota Motor started out as a small department within the original loom-making
business started by Sakichi Toyoda, named Toyota Industries.37 In changing the name slightly,
the latter replaced the d with a t because he thought the Japanese way of writing the t would
give a more symmetric appearance to the company name. Like other business founders in
Japan, he adopted his son-in-law (husband of his daughter Aiko) to run the business. Risaburo
(1884-1952) promptly changed his surname to that of Toyoda, took over the management of
Toyota Industries, and helped develop the automotive department.
As Risaburo Toyoda was now considered the ‘eldest son’, Kiichiro Toyoda became the
‘second’ son in the family. “Adoption as a form of succession planning is a uniquely Japanese
practice and may differentiate its family businesses fundamentally from those elsewhere.”38
During the early 1930s, Kiichiro’s interest in automobiles was encouraged by his father even
though automobile production was considered a risky business. In the mid-1930s the car-
making department was spun off from Toyota Industries as an independent company named
Toyota Motor. Although Risaburo Toyoda was named president of Toyota Motor when it was
officially incorporated in 1937, Kiichiro Toyoda was appointed as president in 1941 and
stayed in the post until 1950. He died suddenly in 1952 at the age of 57. Risaburo Toyoda, 68,
died less than three months later.39
Eiji Toyota Takes the Helm

When Kiichiro Toyoda resigned as president in 1950, no member of the Toyoda family was
available to take over as president so the first salaryman was appointed, Taizo Ishida, who ran
http://www2.mazda.com/en/csr/download/pdf/2005/e200503.pdf , accessed 21 Oct 2015

37 Toyota: Looking for Growth in China, Rajan Shah, Case study, Reference no 307-043-1, ICFAI Business
School Ahmedabad
38 $GRSWLYH H[SHFWDWLRQV 5LVLQJ VRQV LQ -DSDQHVH IDPLO\ ¿UPV, Vikas Mehrotra, Randall Morck, Jungwook
Shim, Yupana Wiwattanakantang, Journal of Financial Economics 108 (2013) 840–854, p. 843
39 http://www.toyota-
global.com/company/history_of_toyota/75years/text/taking_on_the_automotive_business/chapter2/section7
/item3_e.html, accessed 6 November 2015
9
the company for 11 years. In 1961, a second salaryman, Fukio Nakagawa, was appointed to
run the firm until, in 1967 Eiji Toyoda (1913-2013), the nephew of Kiichiro Toyoda, became
the third member of the Toyoda family, age 54, to run the car company.
Eiji Toyoda40
Revered as a world-class visionary, Eiji Toyoda served as CEO of Toyota Motor for 15 years,
longer than any president before or since. Under his leadership, Toyota “set up at least 10 new
factories, began exporting to dozens of countries, established just-in-time production and built
a reputation for manufacturing excellence. The Corolla became the best-selling car of all time.
He stressed the importance of manufacturing concepts that became central to Toyota’s
production methods, such as kaizen or continuous improvement, just-in-time supply chain
management, and jidoka or the use of machines that shut down when irregularities are
detected. His greatest achievement may have been laying the foundation for the company to
apply its manufacturing expertise overseas, which led to the formation of Toyota’s first
venture in the U.S. in 1983, a year after he passed the presidency to his cousin, Shoichiro.”41
Toyota First Recall Crisis

In 1969, Eiji Toyoda was confronted with the company’s first recall crisis that had its origins
in a wave of consumer activism in the USA. It would be the beginning of an institutional
‘crackdown’, whereby all sorts of regulations were created that affected carmakers and tire
makers, including CO² emissions, mechanical defects and myriad safety issues. In 1969,
Toyota was asked to recall Coronas to address a mechanical problem in its brake-fluid tubes42
(see Exhibit 2). To avoid tarnishing the reputation of Toyota Motor, Eiji Toyoda in June 1969
delivered a speech to the entire company, asking employees to revisit Toyota’s basic
philosophy on quality.43 More than six months later, a new Inspection Division was
established for each car plant. As a result of these and other initiatives Toyota was the first
recipient of the Japan Quality Medal in 1970, perhaps a sign that Eiji Toyoda’s connections
with the Japanese establishment ran deep.
40 http://www.bloomberg.com/news/articles/2013-09-17/eiji-toyoda-who-turned-toyota-into-export-giant-
dies-at-100, accessed 22 June 2015.
41 Ibid.
global.com/company/history_of_toyota/75years/text/entering_the_automotive_business/chapter2/section1/i
tem1.htm, accessed 9 November 2015.
43 Ibid.
10
Japan Quality Medal44
A Perfect Storm Hits the Auto Industry 2008-09

When Akio Toyoda took the reins in 2009, the automotive industry was at the centre of a
perfect storm that caught him and many other carmakers by surprise. Although 2008 had
looked like another record year for Toyota (see Appendices 3 and 4) the dark clouds of crisis
were gathering on the horizon. Oil prices, which had been steadily rising over the previous 12
months, span out of control by the spring of 2008, hitting a peak in July 2008.
The immediate effect of the spike in oil prices was the collapse of sales in global markets for
large vehicles, including Toyota’s popular SUVs and trucks. Its overseas operations,
including those in the USA, accounted for a third of Toyota’s worldwide revenue, but the
USA was its most profitable market. In large part because of the huge growth of its American
market, the most profitable five years in the company’s history were those leading up to
2008.45 Ironically, Toyota got a foothold in the North American market during the 1973 oil
embargo, thanks to its smaller cars, that appealed to consumers who demanded energy-saving
vehicles.
But 15 years later, Toyota had become a major player in every product line. Its North
American plants had huge success with the Tundra full-size truck and a range of SUVs,
including the Sequoia, Highlander and RAV4. In 2008, the Camry, a medium-size vehicle,
was the best-selling car in the USA, and the Lexus the best-selling luxury brand.46 Toyota
Motor was at the top of its game, largely because of a huge expansion of its manufacturing
capacity driven by salaryman Katsuaki Watanabe.
Katsuaki Watanabe
global.com/company/history_of_toyota/75years/text/entering_the_automotive_business/chapter2/section1/i
tem3.html, accessed 6 November 2015.
46 Ibid.
11
Toyota Shaken by Profit Loss
The spike in oil prices was followed almost immediately by the 2008 global financial crisis,
which had a devastating effect on the automobile sector. Car loans were impossible to get
given the collapse of the credit markets. This was an unprecedented challenge for the
industry, as most people financed their cars with loans. Even sales of small vehicles collapsed.
With the global financial crisis causing US currency investors to flee for safe havens
elsewhere, the US dollar started to weaken against the Japanese yen in October 2008, which
translated into a loss of $540 million in operating income for Toyota in fiscal year 2009. It
was not until four years later when the dollar started its upward climb and by May 2015, the
dollar was at its highest level against the yen since July 2007 (see chart below).47
Source: S&P Capital IQ, Accessed 21 December 2015
“The combined impact of plummeting sales and the currency adjustment led to Toyota’s first
loss as a company since 1950, a loss of more than $4 billion for fiscal year 2009 on global
sales of 7.6 million units, a drop of 1.3 million units from 2008.”48 It was its first operating
loss in 70 years.49 In the North American market, Toyota suffered a 40% drop in sales in the
fiscal year ending 31 March 2009.
Of course it was not the only major automotive maker to suffer. GM went bankrupt in July
2009, having $172.81 billion in debt but only $82.29 billion in assets.50 If GM were not
granted loans by the US government under the T.A.R.P. legislation funding provisions that
year, the company would probably not exist today. It was as a direct result of GM’s
reorganization that Toyota a few months later was forced to shutter its first North American
automotive assembly plant (NUMMI) in California, its 50-50 joint-venture with GM where
Akio Toyoda had served as vice-president from 1998. “When GM declared bankruptcy and
walked away from its obligations to the venture and its workers,” Toyota had little choice but
to close the venture. Unlike GM, Toyota did not abandon its employees: the Japanese
company paid out $250 million in severance to NUMMI employees and provided job
47 http://www.marketwatch.com/story/euro-drops-on-greek-debt-fears-dollar-nears-year-high-versus-yen-
2015-05-26, accessed 21 December 2015
49 Toyota: Family scion will attempt revival, Hans Greimel, Automotive News, 26 January 2009
50 GM Files For Bankruptcy, Dan Strumpf and Kimberly S. Johnson, Huff Post, 2 July 2009
12
placement services, earning it the respect of its workforce, some of whom were later rehired
by Tesla Motors in 2010.51
Board Appointment of Akio Toyoda

Having joined Toyota in 1984 at the age of 28, only two years after earning his MBA, Akio
Toyoda worked his way up the organizational ladder for the next 25 years before becoming
president.52 Between 1995 and 2009, the three salarymen who ran Toyota ensured that the up-
and-coming family member was getting sufficient experience in a variety of different roles
throughout the company. By the time he joined Toyota’s board of directors in 2000, Akio
Toyoda had adequately prepared himself for the transition to the leadership role he would
inherit. Having established his own professional identity, Akio Toyoda developed a great deal
of international experience, especially in the USA, which was highly regarded by non-family
members of the executive committee. Thus the successful transfer of power between
generations and from salarymen back to family members ensured that the entrepreneurial
spirit of the Toyoda family lived on.
Long before the recall crisis, Toyota’s board of directors had been planning a management
transition. For them, it was just a matter of time before Akio Toyoda acquired sufficient
experience in the company. The governance structure ensured that the company would always
be managed by a Toyoda, as it had a supervisory board that was entirely composed of lifetime
Toyota executives.
In the period leading up Akio Toyoda’s ascension to the presidency, the board was controlled
by Shoichiro Toyoda, who helped groomed his son to take power. The two salarymen Hiroshi
Okuda and Fujio Cho were also members of Toyota’s internal board during this period (see
Appendix 5). The board had to be certain that Akio Toyoda had the ability, experience and
motivation to run Toyota; his family name was not the only consideration.53
Compared to the typical corporate board in American and European companies, which are
made up primarily of independent outside directors, the Toyota board was different. Its
structure and governance ensured that the traditions and values of the Toyoda family were
enshrined in the culture and organization of Toyota.54
Suppliers the Toyoda Family Knows Well

Toyota Industries and Denso Corp. had long been the first-tier suppliers of Toyota Motor in a
close-knit relationship where all three companies shared the risks and rewards of doing
business together. Toyota Industries supplied automotive engines to Toyota Motor while
Denso supplied auto parts. In growing the carmaker in size from one generation to the next,
the Toyoda family kept management control of the firm through its network of bespoke
51 Toyota Under Fire, Jeffrey K. Liker, Timothy N. Ogden, McGraw Hill, 2001, pages 34 – 36.
52 Like many Japanese firms, Toyota employs the term President, which is similar to CEO, the term used by
anglophone firms.
53 Toyota founder’s grandson joins board – but is he future president?, Yuri Kageyama, Associated Press
Newswires, 31 October 2000
13
suppliers. This innovative approach to ownership solved the dilemma facing the fast-growing
family firm: how to keep control while attracting new shareholders to invest significantly in
the long-term growth of the company.
Toyota Motor sat at the top of the Toyota Group of 13 core companies which included Toyota
Industries and Denso Corp. The three leading companies—Toyota Motor, Toyota Industries
and Denso—owned significant shareholdings in each other for a number of reasons, the first
to achieve good shareholder value, the second as a countermeasure against hostile merger and
acquisition attempts, and the third being the means by which the Toyoda family controlled
Toyota Motor (see Appendices 6-8). A former subsidiary of Toyota Motor, Denso became an
independent company. As of the end of fiscal year 2014, Toyota Motor and Toyota Industries
owned a 22.31% stake and a 7.85% stake in Denso respectively, giving them the single largest
block of votes.55 Likewise in the cross shareholding, Denso owned a 9.10% stake in Toyota
Industries and a 2.03% stake in Toyota Motor.56
Toyota Industries has been an independent company since 1933, known for its robust engines
that are sold to companies in the automotive, materials handling, electronics, logistics and
textile machinery sectors. In 2014, Toyota Motor and Denso owned a 23.51% stake and a
9.10% stake in Toyota Industries respectively, giving them the single largest block of votes.57
Likewise, Toyota Industries owned a 7.85% stake in Denso and a 6.57% stake in Toyota
Motor.58
Like most cross shareholdings, the Toyoda family benefited from a cross-board structure
where family members sat on all three boards of Denso, Toyota Industries and Toyota Motor.
In addition to Toyota Motor and Toyota Industries, the Toyoda family have played a
dominant role in the governance of Denso. Shoichiro Toyoda sat on the Denso board until his
resignation in April 2015.59 Tatsuya Toyoda, Akio Toyoda’s first cousin, was a Denso
executive director until his resignation was announced in April 2015, but two months later
Denso issued a statement that Tatsuya Toyoda had been appointed as Executive Vice
President of Denso Sales Japan Corp. Salaryman Fujio Cho, currently honorary chairman of
Toyota Motor, also resigned as a member of the Denso audit and supervisory board in April
2015.
In addition, the three companies shared executives. Fujio Cho’s position at Denso was taken
over by an executive named Moritaka Yoshida, who was a senior manager at Toyota Motor
and a member of the board of Toyota Industries. Tetsuro Toyoda, the father of Tatsuya
Toyoda, was the chairman of the board of Toyota Industries, while Susumu Toyoda, the
grandnephew of the founder, was a managing officer.60 These intricate cross-management
roles were and continue to be typical of family-run Toyota and its suppliers.
55 Orbis at bvdinfo.com, accessed on 21 October 2015.

56 Ibid.
58 Ibid.
59 http://www.globaldenso.com/en/news/2015/20150428-04.html, accessed 22 July 2015
60 The authors were not able to learn any details about the place of Susumu Toyoda in the Toyoda family tree,
although it is assumed he is part of the family. More research is required in this area.
14
Ownership
Having created a network of suppliers, the Toyoda family has been able to create value across
generations and sustain the firm’s competitive advantage over time.61 It has maintained
control over Toyota Motor through a group of firms that own major shareholdings in the
company. By controlling the key assets—networks of suppliers, employees, shareholders and
even patents—the family maintains control. The fact that Akio Toyoda steered the carmaker
out of the recall crisis while keeping its long-term stakeholders loyal is a key measure of
success for the innovative way the family keeps control of the company.
In addition to Toyota Motor, Toyota Industries and Denso, the family controls about 11 other
companies which make up the Toyota Group. All of these firms own major shareholdings in
Toyota Motor, such as Towa Real Estate, Toyota Tsusho, a trading company, and Aisin Seiki,
an automotive components company. The family maintains a nucleus of stable long-term
shareholders, including banks and insurance companies such as the following:
x Japan Trustee Service Bank
x Master Trust Bank of Japan
x Mitsui Sumitomo Insurance Group Holdings
x Nippon Life Insurance
x Daiwa Bank
x Sanwa Bank
x Tokai Bank.
Share Buybacks
Like many publicly traded companies, Toyota Motor, Toyota Industries and Denso all buy
back their own shares for a number of different reasons. In fiscal year 2014, Denso owned
9.82% of its outstanding shares, Toyota Motor owned 7.18% of its own shares, while Toyota
Industries owned 3.63%.62 By repurchasing their own shares, the publicly traded companies
on the Tokyo Stock Exchange can reduce the shares held by the trading public. This means
that even if profits remained the same for fiscal year 2014, earnings per share would have
increased. Moreover, repurchasing their own shares benefits the stable companies owned by
the Toyoda family and friends who have retained their shareholdings over the long-term,
while it extracts value from short-term shareholders who have sold their shares.
Ford Dodges Bankruptcy in Epoch of Crisis

The global economic crisis also affected other automakers. Family-run Ford, based in
Dearborn, Michigan, lost $15 billion in 2008, although the company had already lost $30
61 Founder’s grandson new boss of Toyota, The Detroit News, 24 June 2009
15
billion in the three years since 2006, the year it reported the largest annual loss in its history,
of $12.7 billion.63
Ten years earlier, William Clay Ford Jr. became the first member of the Ford family to head
the company since the retirement of his uncle, Henry Ford II in 1982. The great-grandson of
Henry Ford, William Clay Ford Jr. was appointed executive chairman in 1998 and became
CEO in 2001. He currently holds positions as executive chairman and chairman of the finance
committee.64 Thanks to his leadership, Ford did not go bankrupt during this period. It was
reported that William Clay Ford Jr. said “bankruptcy was not an option” in 2006 at the
beginning of the crisis.65
He remained CEO for five years before naming a non-family member, Alan Mulally, as
President and CEO in 2006. Another non-family member, Mark Fields, is the current CEO.
By placing non-family professionals in key leadership roles, William Clay Ford Jr.
acknowledged the limitations of family ownership. If Ford family members are not available
to take over these positions, the company chooses external candidates on a short-term or long-
term basis. In other ways to keep control, the Ford family has a dual-class share structure,
whereby the family owns a separate class of stock that controls 40% of the voting rights at
Ford Motor Co.66
Fiat Founding Family Agnelli Stay in Control

For Fiat, the global crisis triggered a sea change in the way the founding Agnelli family had
traditionally controlled the company – with a fiercely guarded sense of independence. Fiat
suffered from the crisis but not nearly as badly as some of its competitors in the USA, largely
thanks to the Italian automaker’s robust sales of farm equipment.67
With a 30% shareholding in Fiat, the Agnelli family listened carefully when the non-family
CEO Sergio Marchionne suggested that Fiat form a strategic alliance with Chrysler in 2008.
“In a consolidation scenario, finding the right partner and the right combination would be the
priority,” said John Elkann, the great-great-grandson of Fiat’s founder and chairman of the
Agnelli family holding company, Ifil SpA. “The level of the shareholding would be secondary
to the competitive position and the value any new combination would produce.”
Part of the reason why the Agnelli family listened to Marchionne was that Fiat, which was
one of Europe’s smallest players, was under more pressure than other car companies to find a
partner that could provide economies of scale. Sales of Fiat vehicles were plunging in 2008,
even in Italy, the company’s biggest single market. In November 2008, Fiat car sales in Italy
fell 29.5% to 138,352 vehicles, their lowest level since 1993.
63 Ford: Biggest loss ever, Chris Isidore, CNN Money, 25 January 2007. Retrieved 3 July 2015
64 S&P Capital IQ
65 Ford CEO: ‘Honesty’ Best Weapon Against Bankruptcy, Greg Levine, Forbes. 5 April 2006). Accessed 3
July 2015.
67 Fiat Seeks Ally Before Pickings Get Slim, Stacy Meichtry, The Wall Street Journal, 9 December 2008.
16
Six months later, when Chrysler emerged from bankruptcy protection, Fiat Group took a 20%
stake in the company, with Marchionne taking over as CEO.68 In 2011, Fiat’s stake in
Chrysler increased to 53.5%, and in 2014 Fiat and Chrysler merged to become Fiat Chrysler
Automobiles (FCA), the seventh largest automaker in the world. Fiat’s founding Agnelli
family maintained a 30% shareholding in FCA.69
After Emissions Scandal, VW Enters a Period of Succession

Uncertainty
In late September 2015, VW was hit by one of the biggest blows in its history, the diesel
emissions scandal. While the fallout from the scandal is only just beginning to take its toll,
one of the unlikely heroes might have been Ferdinand Piëch, who resigned as chairman of the
supervisory board of VW in April 2015 after failing in his efforts to fire the then CEO Martin
Winterkorn and replace him with Matthias Müller, the then CEO of Porsche. However, since
Winterkorn was replaced by Müller in the wake of the emissions scandal, there is speculation
about the future role of Ferdinand Piëch at VW.
From a financial point of view, the families that control the VW Group—Porsche and Piëch
who own a 16% shareholding—have lost vast sums of money. Said Richard Milne, an FT
journalist, “Ferdinand Piëch, as a member of one of the two families that control VW by
holding a majority of its voting shares via Porsche Holdings SE, is a big loser from the
carmaker’s stock price decline since the scandal.”70
While the glory years of Ferdinand Piëch may be behind him, the fourth generation members
of the Porsche and Piëch families have been making inroads into the management structure of
the auto companies they own. For example, Julia Kuhn-Piëch, age 34, and her cousin Louise
Kiesling, have replaced Ferdinand Piëch, 78, and Ursula Piëch on VW’s supervisory board.
Many other fourth-generation members of the Porsche family are set to play big roles in VW
Group, including Ferdinand Oliver Porsche and Daniell Porsche, who could eventually
become the largest single shareholder of Porsche Holdings SE, through which the family
controls VW. The families are also represented on the boards of Skoda, Seat, Audi and the
commercial vehicle brands MAN and Scania, among others within VW Group.71
While many companies in the automotive industry are dominated by families, the differences
between them are often more apparent than the similarities. Certainly the assets of the Toyoda
family have almost nothing in common with the assets of the Porsche and Piëch families –the
name and reputation of Ferdinand Piëch are completely at odds with those of Akio Toyoda,
68 BREAKING: Marchionne confirmed as post-bankruptcy Chrysler CEO, Noah Joseph, Autoblog.com.

Accessed 3 July 2015
69 Fiat Chrysler to spin off Ferrari, issue $2.5 billion convertible bond. Agnieszka Flak, Reuters, Accessed 3
July 2015.
70 http://www.ft.com/intl/cms/s/0/fe07b240-7645-11e5-933d-efcdc3c11c89.html#axzz3pCvAHLcU, accessed
21 October 2015.
71 VW SUCCESSION: The Man Who Would be King, Martin Murphy, Christian Schnell, Markus Fasse,
Handelsblatt Global Edition, 27 July 2015
17
for example. Nevertheless both men have played a larger-than-life role in the respective
corporate cultures and continue to do so.72
Turnaround Story
By 2011, Toyota Motor eventually regained the public’s confidence in the quality of its
vehicles, with revenues moving sharply upward. But in the depths of the recall crisis, when
the reputation of the company was at stake, Akio Toyoda used to tell visitors to his offices in
Tokyo a story about his grandfather Kiichiro Toyoda. The story goes that the founder stopped
to help someone on the side of the road fixing his Toyota truck. He got under the truck and
tried to make the repairs himself. Arriving at his office, he went directly to the engineering
department where he called together his engineers to discuss the causes of the truck’s
problems.
His attention to rooting out problems became known as kaizen (continuous improvement). For
the grandson, the morale of the story was less about the origins of kaizen and more the idea
that any problem affecting a Toyota vehicle was seen as a direct challenge to the family name
behind the vehicle.73
Having put the recall crisis behind the company, Akio Toyoda focused on turning the
company around. Few would have predicted just how well he would succeed. In 2015, Toyota
posted record sales and profits of nearly $400 billion and $18 billion, respectively. However,
his approach had been a cautious one, having stopped construction of all new facilities for
three years while streamlining the company’s existing operations. In 2015, Toyota Motor
announced plans to spend more than $1.4 billion on new plants in Mexico and China, the
world’s largest car market.
In a move that could upset its relationship with Denso, Toyota launched a strategic vision, the
Toyota New Global Architecture, aimed at building vehicles that share common platforms
and parts with the goal of reducing parts costs by $1,000 per vehicle. In so doing, Toyota
Motor put Denso and all parts suppliers on notice that Toyota would be sourcing parts that
were globally competitive at lower costs.
Time for Reflection

Akio Toyoda took a quick detour to visit the Toyota Museum in Nagakute-cho, where he
loved to look at some of his grandfather’s creations. What an inventive man, he thought.
Wondering what Kiichiro Toyoda would have done in his shoes, Akio Toyoda asked himself
the following questions:
1. Why are you (assume the role of Akio Toyoda) the right person to run the firm built up by
your ancestors?
2. What has been the contribution of Toyoda family to the firm?
72 More research needs to be done on the family assets of the Porsche and Piëch families.
18
3. What are the challenges the Toyoda family will face in the future?
4. The global car industry has been dominated by families historically - Why?
5. Do you think that families will continue to dominate the auto industry?
19
Exhibit 1
Statement by Akio Toyoda to the US congressional committee on Oversight and
Government Reform Prior to His Testimony on Capitol Hill on 24 February 201074
Thank you Chairman Towns. I am Akio Toyoda of Toyota Motor Corporation. I would first like to
state that I love cars as much as anyone, and I love Toyota as much as anyone. I take the utmost
pleasure in offering vehicles that our customers love, and I know that Toyota's 200,000 team members,
dealers, and suppliers across America feel the same way. However, in the past few months, our
customers have started to feel uncertain about the safety of Toyota's vehicles, and I take full
responsibility for that.
Today, I would like to explain to the American people, as well as our customers in the US and around
the world, how seriously Toyota takes the quality and safety of its vehicles. I would like to express my
appreciation to Chairman Towns and Ranking Member Issa, as well as the members of the House
Oversight and Government Reform Committee, for giving me this opportunity to express my thoughts
today.
I would like to focus my comments on three topics – Toyota's basic philosophy regarding quality
control, the cause of the recalls, and how we will manage quality control going forward. First, I want
to discuss the philosophy of Toyota’s quality control. I myself, as well as Toyota, am not perfect. At
times, we do find defects. But in such situations, we always stop, strive to understand the problem, and
make changes to improve further. In the name of the company, its long-standing tradition and pride,
we never run away from our problems or pretend we don't notice them. By making continuous
improvements, we aim to continue offering even better products for society. That is the core value we
have kept closest to our hearts since the founding days of the company.
At Toyota, we believe the key to making quality products is to develop quality people. Each employee
thinks about what he or she should do, continuously making improvements, and by doing so, makes
even better cars. We have been actively engaged in developing people who share and can execute on
this core value. It has been over 50 years since we began selling in this great country, and over 25
years since we started production here. And in the process, we have been able to share this core value
with the 200,000 people at Toyota operations, dealers, and suppliers in this country. That is what I am
most proud of.
Second, I would like to discuss what caused the recall issues we are facing now. Toyota has, for the
past few years, been expanding its business rapidly. Quite frankly, I fear the pace at which we have
grown may have been too quick. I would like to point out here that Toyota’s priority has traditionally
been the following: First; Safety, Second; Quality, and Third; Volume. These priorities became
confused, and we were not able to stop, think, and make improvements as much as we were able to
before, and our basic stance to listen to customers' voices to make better products has weakened
somewhat. We pursued growth over the speed at which we were able to develop our people and our
organization, and we should sincerely be mindful of that. I regret that this has resulted in the safety
issues described in the recalls we face today, and I am deeply sorry for any accidents that Toyota
drivers have experienced.
Especially, I would like to extend my condolences to the members of the Saylor family, for the
accident in San Diego. I would like to send my prayers again, and I will do everything in my power to
ensure that such a tragedy never happens again.
Since last June, when I first took office, I have personally placed the highest priority on improving
quality over quantity, and I have shared that direction with our stakeholders. As you well know, I am
the grandson of the founder, and all the Toyota vehicles bear my name. For me, when the cars are
damaged, it is as though I am as well. I, more than anyone, wish for Toyota’s cars to be safe, and for
74 The Guardian, 24 February 2010
20
our customers to feel safe when they use our vehicles. Under my leadership, I would like to reaffirm
our values of placing safety and quality the highest on our list of priorities, which we have held to
firmly from the time we were founded. I will also strive to devise a system in which we can surely
execute what we value.
Third, I would like to discuss how we plan to manage quality control as we go forward. Up to now,
any decisions on conducting recalls have been made by the Customer Quality Engineering Division at
Toyota Motor Corporation in Japan. This division confirms whether there are technical problems and
makes a decision on the necessity of a recall.
However, reflecting on the issues today, what we lacked was the customers’ perspective.
To make improvements on this, we will make the following changes to the recall decision-making
process. When recall decisions are made, a step will be added in the process to ensure that
management will make a responsible decision from the perspective of “customer safety first.” To do
that, we will devise a system in which customers' voices around the world will reach our management
in a timely manner, and also a system in which each region will be able to make decisions as
necessary. Further, we will form a quality advisory group composed of respected outside experts from
North America and around the world to ensure that we do not make a misguided decision.
Finally, we will invest heavily in quality in the US, through the establishment of an Automotive
Center of Quality Excellence, the introduction of a new position – Product Safety Executive, and the
sharing of more information and responsibility within the company for product quality decisions,
including defects and recalls.
Even more importantly, I will ensure that members of the management team actually drive the cars,
and that they check for themselves where the problem lies as well as its severity. I myself am a trained
test driver. As a professional, I am able to check on problems in a car, and can understand how severe
the safety concern is in a car. I drove the vehicles in the accelerator pedal recall as well as the Prius,
comparing the vehicles before and after the remedy in various environmental settings. I believe that
only by examining the problems on-site, can one make decisions from the customer perspective. One
cannot rely on reports or data in a meeting room.
Through the measures I have just discussed, and with whatever results we obtain from the
investigations we are conducting in cooperation with NHTSA, I intend to further improve on the
quality of Toyota vehicles and fulfil our principle of putting the customer first.
My name is on every car. You have my personal commitment that Toyota will work vigorously and
unceasingly to restore the trust of our customers.
Thank you.
21
Exhibit 2
Published Speech by Eiji Toyoda
To All Toyota Employees: Take a Valuable Lesson from the Recall Problems.
I apologize for the intense concern the recall problems have caused all of you, our hardworking
employees.
I will not delve into what the media is saying, or our own account of the matter, as you already know
those details fully well. However, there are two key points I would like to reiterate. The first is that we
have adhered to the founding philosophy of Toyota to make cars available for everyone, and to this
day put the customer first in all things. And the second is that we have worked day and night to deliver
ever-higher quality and ever-lower prices in accordance with our motto, Good Thinking, Good
Products.
Toyota’s technologies have grown to the point where they now surpass global standards. This is
stunning progress when you consider how we started. I am not saying, however, that we should be
complacent. Cars are used today by countless people in a myriad of environments, and we must
endeavour to create even safer, more complete cars.
In that sense, the recent recall problems can be considered a valuable lesson. I would like everyone to
think seriously about how to address these problems and how we can benefit from them.
I want everyone to make the most of this valuable experience in their own position and capacity. That
is to say, I want managers to take full consideration of quality cost, supervisors to once again review
key aspects of work tasks, and individual employees to be aware of the fact that your work is closely
connected to the world. With great courage and confidence and the carefulness required to leave not a
single screw untightened, I want us all to move forward and aspire to become Global Toyota.
Source: Toyota Shimbun (an in-house Japanese-language publication), No. 814 (July 5, 1969)
22
Appendix 1
Toyota Share Price vs. Japanese Automotive Index, Nikkei Index, S&P Brent Crude Oil
Index (January 2005-July 2015)
Source: S&P Capital IQ, indices, accessed 28 July 2015; Japanese Car Index consists of eight publicly traded
automotive companies on the Japanese Stock Exchange: Daihatsu Motor Co. Ltd., Hino Motors Ltd., Honda
Motor Co., Ltd., Isuzu Motors Ltd., Mazda Motor Corporation, Mitsubishi Motors Corporation, Nissan Motor
Co. Ltd., and Suzuki Motor Corporation.
Appendix 2
Toyoda Family Tree75
75 https://en.wikipedia.org/wiki/Akio_Toyoda, accessed 23 November 2015
23
Appendix 3
Toyota Motor Financial Data (2001-2015)
Cash and Market

Fiscal Total Net
Short-Term Total Assets Total Debt Total Equity Capitalization (in
Year Revenues Income
Investments Japanese Yen)
2001 16 528 137 367 17 624 57 122 15 550 689.42 106 030 5 447
2002 17 094 144 884 22 396 54 515 12 738 491.25 107 443 4 177
2003 18 743 167 662 25 946 59 243 10 527 433.82 128 965 6 247
2004 21 258 208 537 31 358 77 383 14 687 374.10 163 637 10 995
2005 19 466 226 604 32 896 84 225 12 876 231.02 172 749 10 907
2006 19 193 244 587 40 495 89 899 18 899 446.03 179 083 11 681
2007 20 013 275 941 49 686 100 263 24 496 195.06 202 864 13 927
2008 23 012 323 968 62 163 118 470 16 250 284.04 262 394 17 146
2009 30 386 295 857 64 311 102 425 11 352 041.17 208 995 (4 448)
2010 43 380 324 939 58 865 117 029 9 831 345.40 202 901 2 243
2011 42 412 360 297 71 917 131 948 10 300 770.19 229 503 4 932
2012 35 682 371 933 72 361 134 286 9 753 774.04 225 502 3 441
2013 34 735 376 841 72 153 135 651 18 218 300.97 234 327 10 218
2014 41 447 402 384 75 553 147 786 18 895 218.47 249 484 17 704
2015 43 481 397 881 74 721 147 110 26 593 015.25 227 030 18 117
All figures except for Market Capitalization are in millions of US$. Market Capitalization is in millions of
Japanese Yen.
Source: S&P Capital IQ. Accessed 6 November 2015
Appendix 4
Toyota Motor Financial Data (2001-2015)
Fiscal Return Return Dividend Per

Year on Assets on Equity Share (in Yen)
2001 2.7% 8.8% 25.00
2002 3.6% 7.4% 28.00
2003 4.2% 10.7% 36.00
2004 4.9% 15.9% 45.00
2005 4.7% 13.5% 65.00
2006 4.2% 13.5% 90.00
2007 4.6% 14.3% 120.00
2008 4.7% 15.5% 140.00
2009 (0.9%) (4.0%) 100.00
2010 0.3% 2.3% 45.00
2011 2.7% 4.5% 50.00
2012 3.6% 3.4% 50.00
2013 4.2% 8.5% 90.00
2014 4.9% 13.6% 165.00
2015 3.6% 13.0% 200.00
Dividends are in Japanese Yen
Source: S&P Capital IQ, accessed 6 November 2015
24
Appendix 5
Toyota Motor Executives (1937-Present)
Name President/CEO Chairman Honorary Chairman Note

Risaburo Toyoda 1937 – 1941 1941 – 1949 Adopted-son-in-law and
the Patriarch
Kiichiro Toyoda 1941 – 1950 Died in 1952; younger
brother of Risaburo
Toyoda
Taizo Ishida 1950 – 1961 1961 – 1971 Salaryman
Fukio Nakagawa 1961 – 1967 Salaryman
Eiji Toyoda 1967 – 1981 1981 – 1994 1994 – 1999; and Nephew of Kiichiro
supreme advisor until Toyoda
2013
Shoichiro Toyoda 1982 – 1992 1992 – 1999 1999 – The first son of Kiichiro
Toyoda
Tatsuro Toyoda 1992 – 1995 Younger brother of
Shoichiro Toyoda
Hiroshi Okuda 1995 – 1999 1999 – 2006 Salaryman
Fujio Cho 1999 – 2005 2006 – 2013 2013 – Present Salaryman
Katsuaki Watanabe 2005 – 2009 Salaryman
Akio Toyoda 2009 – Present First son of Shoichiro
Toyoda
Note: Salaryman are listed in red
25
Appendix 6
Toyota Motor Major Shareholders (1962-2015)
Source: Osiris for data 2000, 2010, 2015; Adoptive expectations paper for all data before 2000.76
26
Appendix 7
Toyota Industries Major Shareholders (1952-2015)
Source: Osiris for data for years 2000, 2010, 2015; Adoptive expectations paper for all data before 2000.77
77 Adoptive expectaWLRQV 5LVLQJ VRQV LQ -DSDQHVH IDPLO\ ¿UPV, Vikas Mehrotra, Randall Morck, Jungwook
27
Appendix 8
Denso Major Shareholders (1952-2015)
Source: Osiris for data for years 2000, 2010, 2015; Adoptive expectations paper for all data before 2000.78
28

Toyota Motor Corp, Heir Steers Carmaker Out of Crisis

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Toyota Motor Corp, Heir Steers Carmaker Out of Crisis

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Toyota Motor Corp.:

Heir Steers Carmaker out of Crisis

Background to the Congressional Hearings and the Toyota

The Role of the Salaryman

The Epoch of the Salarymen (Toyota Motor, 1995 – 2009)24

Family Asset: Name and Network

Eiji Toyota Takes the Helm

http://www2.mazda.com/en/csr/download/pdf/2005/e200503.pdf , accessed 21 Oct 2015

Toyota First Recall Crisis

A Perfect Storm Hits the Auto Industry 2008-09

Source: S&P Capital IQ, Accessed 21 December 2015

Board Appointment of Akio Toyoda

Suppliers the Toyoda Family Knows Well

55 Orbis at bvdinfo.com, accessed on 21 October 2015.

Ford Dodges Bankruptcy in Epoch of Crisis

Fiat Founding Family Agnelli Stay in Control

After Emissions Scandal, VW Enters a Period of Succession

68 BREAKING: Marchionne confirmed as post-bankruptcy Chrysler CEO, Noah Joseph, Autoblog.com.

Time for Reflection

74 The Guardian, 24 February 2010

75 https://en.wikipedia.org/wiki/Akio_Toyoda, accessed 23 November 2015

Cash and Market

Fiscal Return Return Dividend Per

Name President/CEO Chairman Honorary Chairman Note

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