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The Honolulu Advertiser
Posted on: Sunday, June 17, 2001

Toyota chairman Okuda pushing new ventures

Bloomberg News Service

TOKYO — When Japanese Prime Minister Junichiro Koizumi formed his first Cabinet last month, he asked Hiroshi Okuda, chairman of Toyota Motor Corp., to become finance minister to help restart the country's stalling economy.

The graying, 6-foot executive declined the offer after objections from Toyota and rival automakers wary of the power he would wield. That Okuda was being considered underscored his own standing in Japan and the company's clout.

Toyota, bigger in market value than General Motors Corp. and Ford Motor Co. combined, exhorts staff to "Beat Toyota," implying rivals aren't providing enough of a competitive spur. The third-biggest automaker, though, lags behind General Motors in generating profit from financial units, while some investors doubt Okuda's investments in new ventures will pay off.

Okuda's plans are "creating a sort of Toyota galaxy," said Hideo Ueki, a fund manager who oversees $10 billion in Japanese equities for UBS Asset Management (Japan) Ltd. "I'm skeptical."

'Space Cowboys'

Okuda improved his English running Toyota's Philippines operations and, later, the construction of plants in the United States.

That comes in handy as he still looks to American culture for leads. One recent movie favorite is "Space Cowboys," in which Clint Eastwood plays an aging astronaut who fixes an ailing satellite.

"I enjoyed watching it because Americans have this frontier spirit that encourages them to fight on, regardless of age," Okuda told a Japanese industry magazine.

At 68, Okuda shows few signs of slowing. He is chairman of the Japan Federation of Employers' Associations, or Nikkeiren, the most powerful business lobby. He also heads the Japan Automobile Manufacturers Association and has served on government policy panels since 1998, attracting the prime minister's interest along the way.

Those multiple roles keep Okuda busy. He typically makes only brief public statements before launching into questions and answers. He rarely attends Toyota briefings and has cut back on interviews about the company he has headed since 1999.

'Only winner'

As for the United States, Toyota crossed that frontier long ago and now sells more autos there than in Japan. In the past year, its Sequoia and Tundra light trucks have started eroding the last segment that General Motors, Ford Motor and DaimlerChrysler AG dominate, helping shore up profit as the overall market shrinks.

At home, Toyota's market share reached a record 43.2 percent in 2000, compared with 41.7 percent of the second-biggest auto market the previous year. All up, Toyota now boasts 56 plants in 25 countries, employing 210,000 staff.

Okuda now promotes "Beat Toyota" to motivate staff.

"Currently, Toyota is said to be the 'only winner,' but we shouldn't become intoxicated by it," Okuda said in his New Year's speech to employees. "To remain the winner, we shouldn't be satisfied with the status quo, but continue to change and progress."

Toyota has its worries. Aside from drooping U.S. demand, Toyota still loses money in Europe, while Honda Motor Co., Japan's No. 2 automaker, is grabbing market share at home. Nissan Motor Co., Japan's next biggest producer of cars, is re-emerging as a rival under the direction of controlling shareholder, Renault SA.

Deep into competition

Toyota's strength is that it's a competitor in almost every auto market and product.

Toyota notched up record global sales of about 5.5 million cars in the year to March. That tally excluded vehicles sold by subsidiaries Daihatsu Motor Co., the second-biggest minivehicle maker, and Hino Motors Ltd., Japan's biggest producer of trucks. It's also the biggest shareholder of Denso Corp., the biggest producer of parts, and the No. 2 shareholder of the second-biggest producer of motorcycles, Yamaha Motor Co.

"Chairman Okuda is one of the executives who have helped" spur the global expansion, said Managing Director Takashi Kamio. "We've seen many developments, including listing shares abroad (in September 1999), introducing the Vitz (compact) models, joining Formula One and investing in the Fuji Speedway."

Toyoda break

Okuda was handpicked as Toyota president in 1995 in part because of his outspokenness, becoming the first non-Toyoda family member to hold that post in three decades.

"I can talk to him about everything," said Toyota President Fujio Cho in an interview. Cho became president when Okuda took over as chairman in 1999, and shares the company's helm.

Analysts also comment on Okuda's frankness and his propensity to stick to serious business discussions long into private drinking sessions.

"There are few people as talented as Okuda around, and he's made a difference," said Nobuyoshi Yoshida, president of Automotive Business Practice Institute Inc., who has followed the auto industry for almost 50 years.

New frontiers

Okuda tapped some of Toyota's estimated $13 billion in cash to help set up what's become KDDI, the telecommunications company. He is now focusing on financial services to expand profit beyond making autos.

The plans include starting a new financial unit to sell auto finance, car insurance and a new credit card aimed at luring 5 million Japanese customers by 2005, while another new division will market mutual funds on the Internet.

Toyota's target is to triple operating profit from financial services to 100 billion yen by 2005. That still leaves it lagging behind General Motors, the largest automaker, which derives about 20 percent of operating profit from such services, while the ratio is about 40 percent at General Electric Co.

Investors want more proof of profit from the forays into new businesses. Yoshio Inamura, a fund manager who oversees 40 billion yen in equities at Tokyo-Mitsubishi Asset Management Ltd., though, thinks Okuda is on the right path.

"Automakers can't just rely on the car business in the long term," said Inamura, who will consider buying Toyota shares after today's results. "Under Okuda, Toyota has a great chance to be like what General Motors was back in the 1950s — and it wants to be a General Electric in the future."