For Toyota, more Akio Toyoda would be a good thing

Japan Times

3 days ago

Akio Toyoda, the scion of Toyota Motor's founding family and former chief executive officer, generally seems to prefer being behind the wheel of a car than being in the spotlight.
But with the $33 billion buyout of Toyota Industries announced Tuesday, along with his personal investment, he might be making a corporate comeback. That would be a good thing, regardless of what the critics say.
Opinion is divided on whether the takeover represents a step forward or back for corporate governance in Japan. Investors and officials have long sought the dissolution of parent-child listings like Toyota Industries, in which the larger automaker holds a controlling stake; the lack of independent oversight has been blamed for past safety lapses.
But many suspect the take-private is actually about Akio Toyoda (for the sake of simplicity, hereafter referred to as Akio) reasserting control over the company he ran until 2023. He is staking just ¥1 billion ($7 million) of his own cash in the deal, but it's a complex structure that also involves the unlisted real estate firm Toyota Fudosan — which Akio chairs — taking over Industries. That firm was first set up by Sakichi Toyoda, his great-grandfather, to make automatic looms in the 1920s. From this company, Toyota Motor, a division founded by Sakichi's son Kiichiro, was spun off in 1937.
It's unclear how much control Akio, who has been reported to be behind the bid, would exert after the deal is complete. But not everyone would be happy with a return. "Akio Toyoda ran Toyota for 14 years. Some fear he still does,' said the New York Times last year. Fully two-thirds of foreign institutional investors opposed his re-election as a director at 2024's annual general meeting.
Proxy advisers Glass Lewis and Institutional Shareholder Services both urged the AGM to vote against him, citing governance issues and a supposed scandal around cutting corners during safety tests. His overall support rate among shareholders of 72% was the lowest of any director in Toyota's history. "I'm being told 'no' by foreign investors,' he said at the time. "At this pace, I can't be a director next year.'
This opposition is nonsensical. Akio turned Toyota into the biggest automaker in the world during a period of intense industry change. Under his leadership, it recorded the single best-ever quarter of profit by a Japanese company, and became the country's largest-ever business by market capitalization, surpassing a 37-year bubble-era record. The returns for shareholders over his time in office dwarf those of his peers at other automakers, many of whom are paid far more.
As I wrote last year, the safety "scandal' for which investors were willing to vote him out was a nothingburger that had zilch in common with the management-led fraud of Volkswagen's Dieselgate. The issue was little more than corners being cut and once retested, all vehicles passed with flying colors. This was a safety scandal that not only didn't involve a single fatality, but didn't even involve a single accident. Contrast with, say, U.S. authorities' probe of Tesla's automated driving feature.
Another concern is informal family control of public companies, common in Japan while raising eyebrows elsewhere. But investors should relax: From Capcom (with the stock price having risen by 14 times since Haruhiro Tsujimoto, son of founder Kenzo, took over as president in 2007) to Sanrio (up 12 times since 2020, when Tomokuni Tsuji took over from his grandfather), there's plenty of evidence to show it can work.
In past years, investors were also unhappy with the pace of Toyota's plans to electrify. Akio became a convenient lightning rod for all kinds of opposition, with the likes of Greenpeace piling on to dismiss its efforts to decarbonize. But this COVID-19-era obsession with full electrification at all costs seems now as quaint as the same period's nonfungible tokens boom.
Today, competitors have been forced to retreat from their grandiose plans to abandon internal combustion engines, while Toyota has gone from strength to strength due to its hybrids and unwillingness to bow to the tyranny of the majority. Indeed, through his promotion of hybrid technologies, Akio may well have done more for emissions than any single executive on earth, with Toyota estimating its vehicles have reduced global emissions of carbon dioxide by nearly 200 million tons.
In other realms, it's understood that executives shouldn't let perfect be the enemy of good. Yet Akio rarely gets afforded this leeway. There are few hagiographies from the business press or gushing profiles like his erstwhile peer at Japanese automaker Nissan Motor, Carlos Ghosn, enjoyed both before and after his trouble with the law.
Akio doesn't feature in glowing portraits in New York magazines, nor is he the type of executive profiled in business books, a privilege these days often reserved for crypto frauds. He doesn't feature on lists of world's greatest executives, and, indeed, he is perhaps still best known for his appearance before the U.S. Congress in 2010 during the unintended acceleration scandal — another incident that may have been grossly exaggerated.
Akio may choose to continue in the background or even retreat further once this deal is done. But if anything, investors should be handing him the keys.
Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and the Koreas.