Toyota faces challenge of retaining its top executives

RP news wires, Noria Corporation
Tags: talent management

In just the past three months, three senior executives in Toyota's North American business abruptly left for rivals. The high-profile defections underline a new danger looming for the Japanese automaker — the lure of U.S. companies wooing the best in its ranks.


The executive exodus signals Toyota Motor Corporation's growing pains overseas. It now sells three-quarters of its vehicles outside Japan and runs more than 50 manufacturing plants abroad, including five vehicle-assembly plants in the U.S.


Having its top talent poached by rivals would have been unimaginable for Toyota even a decade ago, when the Japanese automakers still were playing catch-up with U.S. companies. Now, Japan's traditions of lifetime employment and employee loyalty are growing obsolete as globalization introduces new career issues — the rewards of bigger money and the lack of promotion opportunities for outsiders.


''This is a new challenge for Toyota in overseas management: How to make its best people stay,'' said Yasuaki Iwamoto, auto analyst with Okasan Securities Co.


The most stunning job hop came from Jim Press, 61, the former head of Toyota's North American operations, who left in September to become president and vice chairman of Chrysler LLC. Press' promotion as the first non-Japanese board member at Toyota had been approved with fanfare just three months earlier.


Another was Jim Farley, 45, a 17-year veteran and group vice president and general manager of Toyota's Lexus luxury division in the U.S. He is joining Ford Motor Co. in November as group vice president of global marketing and communications.


Deborah Wahl Meyer also jumped to Chrysler to become vice president and chief marketing officer. Meyer, 44, had spent the past six years at Toyota, most recently as vice president of marketing for Lexus.


Executive vice president Mitsuo Kinoshita, who oversees personnel and corporate planning at Toyota, acknowledged he was disappointed to see them go, especially Press.


''We were expecting so much from him in the years ahead,'' he told The Associated Press in Tokyo recently. ''He worked for 37 years for Toyota, but I hear changing jobs is common in the U.S. and so maybe it couldn't have been helped.''


Japanese companies have long been reticent about promoting foreigners. Two exceptions are Sony Corp., which named Howard Stringer, a Welsh-born American citizen, as its chief executive in 2005 and Brazilian-born Frenchman Carlos Ghosn, the chief executive at Nissan Motor Co. following a 1999 management takeover by Renault SA of France. Other major companies, including Honda Motor Co., still have no foreigners on their boards.


Besides questions about the openness of Japanese corporate culture to foreigners, speculation also has been rife the Toyota defectors were wooed with big money. Toyota does not disclose executive pay, but Japanese executives are believed to make just a fraction of what their U.S. counterparts make.


General Motors Corp. chairman and chief executive Rick Wagoner, for example, received $9.57 million in compensation last year, including salary and stock options. By comparison, the nine board members at Nissan received a combined $21.8 million, averaging $2.4 million each.


Chrysler hasn't commented on Press' compensation, but said it will be tied to the automaker's turnaround performance.


Toyota executive vice president Akio Toyoda said the company needs to look into the resignations and investigate whether any problems lay with Toyota.


But he pointedly asserted that nationalities don't matter at Toyota.


''When they were at Toyota, they won high assessment as Toyota people,'' Toyoda said of the departing executives.


Toyoda, the grandson of the company founder, is widely believed to be the heir apparent for the top spot. While the family does not have voting control over the company, the Toyodas, like the Ford family in the U.S., retain influence.


Shigeru Hayakawa, a managing officer who replaced Press, also played down the recent departures.


''This sort of thing happens every day in the U.S.,'' he said.


Toyota has plenty of talent in its massive North American operation, with about 40,000 workers, he added.


A number of Americans are candidates for a spot in the all-Japanese board, including Jim Lentz, executive vice president of Toyota Motor Sales in the U.S., Hayakawa said. But Toyota will not appoint a foreigner simply to tout diversity in management, he said.


''We are not the kind of company that makes personnel moves based on public relations purposes,'' Hayakawa said.


Press has denied his departure reflected unhappiness with Toyota. Instead, he has said the choice to accept Chrysler's offer was agonizing.


''It was a great challenge and a great opportunity and I couldn't say no,'' he told The Associated Press in a recent interview.


It looks like Press was drawn by the challenge of fixing an American icon like Chrysler, said Tsuyoshi Mochimaru, analyst at Lehman Brothers. Chrysler, which split from DaimlerChrysler AG in August after a buyout by Cerberus Capital Management LP, has been trying to revive its business.


''To blame Toyota for that isn't really fair,'' Mochimaru said. ''If anything, it's just a sign of how Toyota and Japanese companies are being recognized on the international stage.''

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