Here’s Why Toyota is Shifting Focus to Emerging Markets and Hybrids

Toyota Motor (NYSE:TM) said it hopes to almost double profits and lift operating profit margins as part of a new long-term vision unveiled on Wednesday.

Eager to put the massive global of the last two years behind him, Toyota President Akio Toyoda said he is cutting the number of his board to 11 members from 27, a move that he said would speed up decision making at the world’s largest car maker.

“We aim to consistently achieve an annual operating return on sales of 5 percent, that would be operating income of about one trillion yen,” said Toyoda, who in a departure from past news conferences, sat alone to field questions during the 80-minute presentation.

He did not, however, say when Toyota would achieve those targets. At its peak, Toyota posted a profit margin of 10 percent in fiscal 2003 and an operating profit of 2.27 trillion yen in fiscal 2007.

Toyota said environmentally-friendly cars and emerging markets would be the two pillars of growth, adding that it plans to raise car sales in emerging markets to 50 percent of its global sales from the current 40 percent.

As part of that push, Toyota said it would sell some 10 more hybrid cars by 2015. Once a front-runner in clean technology with its signature Prius hybrid, it faces intensifying competition as more global carmakers start selling hybrids and others like Nissan pushing mass adoption of a pure electric car. The company will begin selling the first two variants of the Prius hybrid in late April.

Compared to domestic rivals Nissan Motor and Honda Motor (NYSE:HMC), Toyota relies more heavily on exports and hence suffers more when the yen rises. Analysts said they were disappointed that Toyota did not announce any concrete plans to address the disproportion at today’s announcement.

Instead, Toyota only said that any plans to build new assembly plants in the future would focus in emerging markets.

As expected, the announcement was short on financial targets. Instead Toyota, the founder’s grandson, tried to outline the changes he would implement to change Toyota’s corporate culture to “make our company even more transparent.”

At times during the recall crisis last year, Toyota had expressed his frustration that layers of management had prevented him from getting information from the field quickly. By cutting the number of board members, reducing one layer of decision marking, and reducing the number of executives, Toyota said he hoped to hasten decision making. In an unusual move, Toyota said he would also be directly overseeing the public relations department.

“In the past year or so, I have developed a keen awareness that I am the person 100 percent responsible for whatever Toyota does. So there should be a voice, and that should be me,” he said.

As part of the reshuffle, Toyota’s predecessor Katsuaki Watanabe who steered the company to record profits and market share will be resigning from his director post.

Toyota’s shares closed 0.4 percent higher at 3,715 yen on the Tokyo Stock Exchange before the announcement.

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