Q&A: Toyota President Fujio Cho

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Fujio ChoA lawyer by training, Fujio Cho capped a 45-year career when he was named president of Toyota Motor Co. in 1999. In the Japanese system, that put him in charge of the country’s largest automaker — and a manufacturer some say is poised to knock down the industry’s global king-of-the-hill General Motors. At 67, Cho is only the second “outsider” to head Toyota Motor Co. since the members of the founding Toyoda family stepped aside a decade ago.

It has been a period of unprecedented growth, both in sales, profits, and prestige, with Toyota increasingly perceived as an unstoppable juggernaut. Yet during an interview with TheCarConnection.com Publisher TCC Team, earlier this month, Cho was not ready to claim victory. “Many things change in the industry, but one thing is constant: the heart of the industry stays here” in the Motor City , he insisted. To back that up, Toyota has been increasing its presence in metropolitan Detroit, with new design and engineering facilities, a large technical center and test track in the planning stage, and rumors flying about a possible Michigan assembly plant.

Cho has been a strong advocate of environmentally-friendly automotive technology, such as the hybrid-electric Prius. Indeed, the subject dominated the far-reaching conversation.

TCC: Sales of your Prius hybrid soared last year, as U.S. oil prices hit record levels. But will demand continue as fuel prices come back down?

CHO: As far as our company is concerned, we continue to believe hybrids will be a core technology into the future. Even fuel cell vehicles will use this technology someday. Without a doubt, hybrid technology is a true and viable technology.

TCC: Your newest hybrids, such as the Lexus RX400h, are putting an emphasis on acceleration, as well as mileage. Why?

CHO: The emphasis is also placed on driving performance. I am confident we will be able to further upgrade hybrids in that direction.

TCC: Yet there has been some criticism, even from normally friendly sources like Consumer Reports magazine, noting that hybrids like the Prius deliver significantly lower mileage than their official rating.

CHO: When a hybrid is used under different conditions (than that used for the test to rate mileage) fuel economy figures may not be realized.

TCC: Apparently, customers don’t seem that upset, and you reportedly have waiting lists as long as eight months. What will you do about that?

CHO: We are now making our customers wait a very long time. That problem will be solved (due to a third production capacity increase) and we’ll be able to fill those backorders in this year. Within 2005, we will be able to eliminate all backorders.

TCC: Considering this is your largest hybrid market, will you build one here in the U.S.?

CHO: That has not been determined and is the subject of heated discussions. By the middle of this year, we’d like to reach some conclusion.

TCC: Let’s turn to other topics. You’re on a path to outsell Chrysler, if not the entire DaimlerChrysler organization, in the U.S. And many analysts think you could soon top General Motors to become the world’s largest automaker. Do you agree?

CHO: That is a very difficult question to answer. We’re in a position, internally…however we have never disclosed our targets outside to the public. How many units we should sell is not a part of our strategy. The outcome could depend on emerging markets, (where only a small share of the population currently can afford cars). So competition will become much more serious in these nations.

TCC: One of those emerging markets, South Korea , has also produced some very aggressive manufacturers.

CHO: The Koreans are significant competitors and we should never be complacent about them. We do extensive research about the Koreans and that is reflected in our decision making.

TCC: Considering the current U.S. trade deficit, are you worried about the possibility of new trade restraints targeting Japanese automakers?

CHO: Trade friction has largely gone away since 1996…and we do not expect to experience the political pressure we experienced in the past. We still have to make continuing efforts to become a true citizen of North America. Local production and local content must (still) be increased, and we have to add more jobs. We would like to become a 100-percent American company and never stop making efforts in that direction.

TCC: Perhaps, but American manufacturers are not happy, and they have suggested that Toyota is unfairly pressuring the Japanese government to keep the yen weak, giving you a marketing advantage here.

CHO: We have never done anything like that, ever. We have never asked the Japanese government to keep the yen low. The fair value (of the yen) is difficult to be pinpointed. We used to think 105 would be the assumed rate (but now) we assume to dollar to be 107 yen. We are making every effort to reduce costs so profits will not be below last year’s because of the appreciation of the yen.

TCC: You and your colleagues insist Toyota wants to eliminate the negative environmental impact of the automobile. So why did you decide to join in the lawsuit aimed at blocking new California regulations meant to reduce CO2 emissions (which critics contend is actually a rule meant to force increased mileage)?

CHO: The regulation itself should best be handled by the federal government and not state government. We’re not trying to avoid the regulation, but it should be handled by the federal government if determined necessary.

TCC: And if the courts let California regulators proceed?

CHO: We would have to reduce substantially the number of models and range of options…and prices would have to be increased substantially should it (the regulation) be put in place.

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