豐田汽車 (TM) 2018 Q4 法說會逐字稿

Now ladies and gentlemen, we would like to start the second part, so please take your seats, please.

Now ladies and gentlemen, let me introduce to you the members on TMC's side for the second part.

Akio Toyoda, President.

Good afternoon.

EVP, Koji Kobayashi.

Nice to meet you all.

EVP, Shigeki Terashi.

Good afternoon, ladies and gentlemen.

The Senior Managing Officer, Masayoshi Shirayanagi.

Good afternoon.

So first, President Toyoda is going to say a few words at the outset.

Thank for waiting.

I am Akio Toyoda.

First of all, thank you very much for taking the trouble to join us today.

And first of all, I would like to express my deep appreciation to each and every one of our customers who have chosen our vehicles around the world and to all our dealers and suppliers who have made tremendous efforts to provide ever-better cars.

I would also like to express my sincere gratitude to our shareholders and business partners around the world for their daily support of Toyota.

We have just announced our financial results for the fiscal year that ended March 2018.

Last year, while speaking on the same occasion and announcing our forecast for 2 straight years of declining operating income, I used a sporting analogy and mentioned that a losing streak is unacceptable.

The reality is that the notion of high operational costs have emerged as an issue to tackle.

And I believe that if we repeatedly ask why, why, pursue the root cause, take the right actions and continuously improve, we will, without a doubt, be able to move forward.

The Toyota Production System, or TPS, and our approach to cost reduction are Toyota's true values.

One of the basic principles of TPS is to reduce costs rather than operating on the cost basis.

This means that rather than setting prices by adding reasonable profit to cost, the only thing that we can do is to lower costs based on the key premise that sales prices are determined by the market, in other words, by our customers.

Keeping an eye on costs means keeping an eye on what we'll do.

Each and every person armed with an awareness of costs and the grasp of current market levels must thoroughly eliminate waste in their daily actions.

What used to be the norm had, somewhere along the way, ceased to be so.

Realizing this has led to a new start.

In all workplaces, there is a call to action to fundamental review fixed costs.

We have begun steadily -- steady cost-reduction efforts, in which each and every cost, whether it relates to daily task or large events or projects, is being scrutinized, with everyone thinking about what elements actually represent waste.

Especially in the field of technology, TNGA has now entered its second round.

While maintaining the better designs and enhanced performance achieved in the first round, we are now focusing on activities to lower costs.

In addition to ascertaining the specifications and performance that match the needs of our customers in each region and to thoroughly addressing costs, we have introduced the TPS principles of standardized work on the development side as part of our efforts of determining the necessary time and cost per unit of output to shorten development lead times.

With a strong determination to avoid a losing streak, I believe that the accumulated results of steady, earnest and thorough cost-reduction efforts involving everyone have begun to steadily become apparent in our financial results little by little.

As such, to sum up our latest financial results in my own words, I would like to suggest that they are results in which the true character of Toyota of endless continuous improvement is starting to be reflected.

As I have been saying on various occasions, the automotive industry is now hurtling into an era of profound transformation, the likes of which come only once every 100 years.

With even our rivals and the rules of competition also changing, a life-or-death battle has begun in the world of unknowns.

Technology companies, who are our new rivals, with speed many times greater than our own and backed by abundant funding, are continuing to aggressively invest in new technologies.

As we sharpen our cost-reduction capabilities and enhance our earnest -- earnings power, Toyota, too, is expanding its investment in new technology and in new fields, as mentioned earlier.

Additionally, we're strengthening our alliances not only within the Toyota Group but also with other companies inside and outside our industry.

Our alliances are not for expanding our scale to the capital but for aiming to achieve a better society of mobility through open collaboration with partners who also share our aspirations.

I believe that what is more important than being the first to introduce new technologies to the world is developing technologies that can most contribute to the realization of a society of mobility, in which all people can move freely, safely and enjoyably.

Based upon this thought, we have proceeded with many challenges for the future.

Please watch this video.

(presentation)

My thinking is that the more we advance new technologies such as those related to electrification, automated operation and connectivity, the broader the potential of automobiles will become, and this will lead to an era in which Toyota's strength can be more fully employed.

What will be required in the era to come is anticipating customer needs and providing customers with more personal mobility in a more direct and timely manner.

In other words, it will be a world in which the services that are needed or provided when needed and only in the amount needed, and such is precisely a world of Just-in-Time as found in TPS.

To realize just-in-time services, simply linking automobiles to network is not enough.

It is necessary that all manufacturers, dealers and alliance partners that provide services are connected to each other through waste-free lean operations.

And now of course, our dealers included, we are taking up the challenge of greatly reducing lead times needed for providing services by introducing TPS-based operations at workplaces related to Toyota's mobility services.

As I have come to mention, Toyota's strengths are TPS and our approach to cost reduction.

They are what gives us a competitive edge, and thoroughly honing both of them which could be -- to be our specialties will not only allow us to survive the current era but are also important evermore so for surviving into the future.

Finally, I would like to share with you my resolve in embarking on our battles in the world of unknowns.

I have decided to redesign Toyota from a car-making company into a mobility company.

A mobility company is a company that provides services related to movement for people around the world.

The significance in this is that it represents the departure from our current path of adherence to convention for the choice of a future path created by our own hands.

I view this once in a century era of profound transformation, the likes of which come only so often as a major opportunity in a project, as an endeavor to create a new future ourselves with unprecedented speed and imagination.

Even until now, to flexibly respond to changes to our work environment and to grow sustainably, we have introduced new organizational structures, such as our in-house company system.

However, what has most invigorated me is the change we made to our executive lineup in January this year.

To illustrate, in the last 8 years since my appointment as President in June 2009, I have felt like racing on a circuit.

In other words, it was as if I alone had climbed into the driver's seat of a giant company called Toyota and relying on my own senses, tried to drive as fast as possible through a fixed course.

What I felt during that time was how difficult it is to innovate a giant company that has already seen success.

With the rules of competition as well as our rivals changing, I felt the necessity to change how Toyota is steered.

I expedited our revision to the executive lineup in January while we traditionally made revisions in April.

And I formed a management team centered on myself and 6 executive vice presidents.

Furthermore, we fortunately had assigned to us our executive in charge of Africa region from Toyota Tsusho and executive in charge of financing from Sumitomo Mitsui Banking Corporation.

Outside board members proposed by appointment include my -- Mr. Ikuro Sugawara, formerly in METI; and Sir Philip Craven, former the President of the International Paralympic Committee; and Mr. Teiko Kudo of Sumitomo Mitsui Banking Corporation.

It is my expectation that these people, regardless of age, professional affiliation, gender or nationality, will help pull us forward by contributing business knowledge cultivated in the various fields of expertise to Toyota management, along with their views of the gap between Toyota and society as seen from the outside, among others.

One might say that it is comparable to switching the way one drives on a circuit to the way one drives in a rally.

In a rally, a driver and co-driver, in full coordination, compete in how fast they can drive on the real roads full of changes.

Even if the driver cannot see beyond the bend in the road, they put complete faith in the pace notes read by the co-driver and go on the attack at full throttle.

The co-driver, employing previous experience and expertise, assess conditions from the driver's perspective and navigates.

Things won't work out unless both drivers have a relationship of mutual trust, in which they put their lives in each other's hands.

In other words, executive vice president, who have experience as President at in-house companies or Toyota Group companies; and outside board members, who are experts in various fields, are, while navigating from the President perspective, as my co-drivers, guide us in a direction that will help us reach our goals faster.

Since January this year, various activities involving our workplace centered on the executive vice president and other executives have already gotten underway.

Please expect much from Toyota's coming transformation.

I think circumstances today parallel those 80 years ago.

Kiichiro Toyoda took up the challenge of redesigning the Toyota Group from a corporate group making looms into a corporate group making automobiles.

And now we, too, are aiming to redesign our corporate group.

The battle is not being fought for our own sake.

It is a battle for building a future society of mobility and for putting smiles on people's faces in the future with a sense of determination that stems from the belief that successes have to be challenges, i.e.

to take up every challenge in which I see have merit without fear of failing.

Some things might not go well or, frankly, the things that do not go well might even outnumber the things that do go well.

But fear can't hold one back.

By all means, I humbly request your support as we take up new challenges.

Thank you very much.

Now ladies and gentlemen, we would like to entertain questions from the audience.

And if you have a question to ask, please raise your hand so that the microphone will be brought to you.

And we would like to give opportunity to as many people in the audience as possible, so may we ask you to restrict the questions to 2 per person.

In the second row from front, in the center part of the room, please.

Nikkei, Kudo is my name.

I have 2 major questions addressed to Mr. Toyoda.

Question number one, in the previous fiscal year, what is your assessment of the financial results?

When you had this financial result announcement 1 year ago, while the sales volume didn't increase, you have to invest for the future, which does not necessarily generate revenue right away and that you have to discontinue something so that you can continue investing.

What is your assessment of the financial results of the fiscal year ending in March 2018?

And what are some of the things you are going to discontinue so that you can continue to invest in [TI] and others?

And when are they going to generate concrete results?

Second question relates to the concept relating to the volume increase over a medium and long term.

Looking at the information materials, R&D expenses and CapEx combined increased by 30% compared with 5 years ago, I believe you -- the burden of investment has increased.

On the other hand, the global sales of the entire group for fiscal year ending in March 2019 is 1 -- 10.5 million units, so that it's more or less doubling up.

So what is your view of the volume over a medium and long term?

Your collaboration with Suzuki and other partners, what is your concept approach to this area with respect to the volume growth?

Allow me to answer your question -- respond to your question.

First of all, the assessment of the financial results.

When the third quarter results were announced, as this question with some people, when the financial announcements were made, as the Executive Vice President Kobayashi mentioned, that assessment was negative.

And I was watching his statement on TV, and I said, "Negative assessment?

That's new." I mean, what do you know about Toyota while you have spent many years in DENSO outside of Toyota, that's how I felt about that.

But starting in January, including Mr. Kobayashi, we now have these 6 new executive vice presidents.

This is the new management lineup.

And every day since we come to the camp every day, we started new activities and initiatives every day.

And when we have initiated those efforts, we came to realize that there are many challenges, and those were uncovered.

And I now realize that maybe the negative assessment may have been quite correct.

And as is pointed out earlier, for each quarter, the financial result guidance have been revised -- that was another question -- revised upward, and that was part of the questions.

In each quarter or in the case of a full year, we have been aiming at sustainable growth to be achieved.

And whenever those announcements were made, we shared with you the information which we thought was most correct at that point in time, and that result in the upward revision announced every quarter.

But as the way in which we conduct work is changing, and I hope you would understand the upward revision to reflect the change in our work style, and the result of the work style reform, we had to revise the guidance afterward every quarter.

So in that sense, we are made aware of those issues when we announced the financial results for fiscal year ending in March 2018.

From a longer-term perspective, this is my eighth year as President; and maybe the first 4 years, I had to receive the baton when the company booked losses.

And we encountered quality related.

And we were also hit by natural disasters, such as great East Japan earthquake or flooding in Thailand.

And so we really went through a lot of adversities.

And when we are going through those adverse circumstances, in a sense, and as I look back how I felt back then, because we encountered so many difficulties and adversities, that resulted in rallying power of the company, that is to say uniting power of the company.

And as I became a President from EVP, I was able to, in a sense, transform myself.

In other words, those adversity gave me the environment that facilitated myself, had to transform myself or mold myself into a good being.

So in a sense, the initial 4 years spent in adversity was a good, favorable, beneficial 4 years.

In the Global Vision, how we clearly stated that, even with the dollar being JPY 85 and regardless of the adversity, we would make sure that the company would sure to make positive profit even if the production and sales stands at 7.5 million units.

And that is the statement we made in the Global Vision.

And we were able to achieve that in around 2012.

Now in the subsequent 4-years period, when we really had to face the crucial period, we talked about the intentional pause to strengthen our competitiveness.

Frankly speaking, I believe -- I thought we were able to make progress in improving our constitution, but the downsizing in the first 4 years was simply reduced the body weight, but we are not really successful in producing a muscular structure.

Only the fatty structure remains.

So in the fiscal years that follow from here on, we would -- must make sure that Toyota becomes a muscular company, a company with muscular structure, so that we can take up the challenge of a new competition.

And I think we've been able to transform such structure to be more muscular in this financial year that ended in March 2018.

So from here on, the period is going to be the competition, which we really have to regain the truly Toyota-like characteristics.

Now when I talk about Toyota characteristics or true characteristics of Toyota, I came to think that TPS and cost reduction represent the essence of the Toyota character.

Now the concept or approach to volume increase over a medium term, that is 5 to 10 years, I personally feel that even if there's sudden sharp increase in volume, if it comes down suddenly, the impact would be felt that much more because that's exactly what I went through when I became President in the early years.

And therefore, we would like to achieve sustainable growth, just as trees add annual growth ring every year steadily.

And I felt very strongly about the need and importance of attaining sustainable growth, just like a tree trunk.

So I have that strong intention of achieving that.

But at the same time, there are certain areas, such as China, that is growing much more rapidly than the sustainable growth.

And I'm attaching greater importance on that aspect as well.

So while we insist on achieving sustainable growth, just like annual growth rings of a tree trunk, and thus, what we have been doing over the past 8 years, so that resulted in us acquiring strong constitution and energy.

So going forward, in the areas and markets where the growth is going on very rapidly, how we would like to invest appropriately and the resources and the capital so that we can keep up with such markets so that we will not be lagging behind those markets.

The person in the back, the fourth person from the front seat, I think, please?

Thank you.

[Tojo] of Chunichi Shimbun newspaper.

I'm here.

Right here.

I'm from Chunichi Shimbun.

I have 2 parts of questions.

First question is that, as you mentioned and repeatedly mentioned, Toyota Production System, TPS, and cost reduction, these are 2 emphasis this year.

And at the new -- the newcomer, the message you emphasized that, too, once every 100 year type of a big transformation is facing us, so we have to go back to the starting point origin now?

So why?

What's the purpose of going back to that basics, the origin?

Could you please tell us again?

And the second part of my question is that, as you mentioned, because you used the analogy of the driving in the rally rather than the fixed course, new executives are assigned in the new system.

And then in June, you faced with the Shareholders' General Meeting.

So by a good expeditious start-up in January, maybe you have efficacy you can feel because of this good decision-making, or do you see any new challenges issues under this new organization and executives?

To respond to your first question, let me try to answer.

And then as to the second part of the question, maybe I'd like to turn to the other executives.

As to the first question, why?

I'm reemphasizing TPS and cost reduction.

In one word, it's the Toyota uniqueness must be restored.

It's a struggle to do that.

Every time I send this message, I keep fighting.

Why fight?

I used the word fighting because in the company, people asked me, too, "Against whom are you fighting?

You say, oh, let's fight, but you do not create any confrontation.

So against whom are you fighting?" That is a frequently asked question to me.

And then to this question, I wonder how to answer.

Against whom am I fighting?

So my conclusion is that Toyota uniqueness must be restored.

It's a fight to restore our original strength or uniqueness in the automotive industry.

Especially the company OEM like Toyota, B2C is our business.

B2C business means that we develop a state-of-the-art technology, advanced technology, but still, the car price is linked to the market price, and customers decide the price.

So we'd like to add the additional -- the margin.

Then even though we put the additional margin or proper margin, that cannot be accepted all the time by the customers, nor our market.

So that's the position of us in this B2C business model.

Therefore, cost reduction is crucial.

And then there's a philosophy of a cost reduction.

And Just-in-Time is linked to that, too.

So these have been said repeatedly many, many times in our history.

But still, these 2 are crucial factors to restore Toyota unique strength.

These are 2 essential factors.

That's why I dared to reuse this word and send this message out to inside as well to outside, to reduce costs.

I'm already 62 years old.

And initially, then that the President was like the -- or the father, but maybe 8, 9 years ago, I felt I was a big brother rather than a father to everyone.

But at the age of 62, I might become a full-fledged father to a lot of people.

So employees are like the children.

The hard-working employees are like my sons and children.

So those children, and they meant to say, "Oh, father, I want this.

Could you please buy me this?" And how can I respond to this as a father?

They've asked me to buy.

But the fathers don't listen to all the requests of the sons.

Why do you want this product and why?

And what did you do to express such a request?

Normal fathers would ask such a question when the demand comes from the sons.

So now I feel sort of the -- I'm not saying that all the employees are demanding like that, but they seem to give me demands all the time sort of easily.

That seems to be a trend.

They want more budget, and they would like to do everything they want.

And if a conference and a meeting gives approval, they can do everything.

But that's not so easy.

It's not the normal way.

That's why I'm emphasizing the cost reduction.

So if they really want something and want their budget allocated, then they should tell me, "Oh, I drove this path, and I earned this much, so could you please add the additional budget to the other area, and I return the profit to you back?" So even between the employees and President, or the sons and the fathers, you need to have that kind of communication.

And the gist of that is cost reduction.

Well, TPS, as Toyota members, well, Toyota Production System is something that we are supposed to understand everything about this.

But what about the reality that the son of the white-collar workers, administrative workers, they don't fully understand the TPS in their own work.

Toyota Production System is linked to the production plant.

And people say, "Oh, it's only related to the production site, the factory." That might have been the part of a mentality even among the Toyota employees.

And I reflect upon that, and we have to change it.

So as long as you work for Toyota -- Toyota Just-in-Time, what is it?

And automation and autonomy, what is it?

So at least we have to really go back to this and fully understand this principle.

We need to fully understand that again from the basics.

So we use the same words, but the way we understand that, the depth of understanding, it might be totally different now.

So the second question -- as to the second question, there's a lot of demands coming from the sons and employees.

The former -- the Chief Cabinet Secretary said that you can say some example.

So maybe Mr. Terashi knows very well about the situation before the end of the last year.

But Mr. Kobayashi, I thought you were supposed to answer.

But anyway, let me answer.

Well, in the last several years, we've been emphasizing increasing alliance with different partners.

What's the efficacy of the alliance?

Well, to me, after implementing alliance, what was the major result?

Well, you get to know what's the situation in the market, the way we spend the resources of management and through the alliance.

And compared to the alliance partners, our understanding of the market, the value was a bit different.

So after comparing with the partners, we got a more realistic understanding.

And the gist of it, conclusion is that let us eliminate more waste, ways or practices, which is linked to the TPS and cost reduction.

That is going back to the original starting point principles of Toyota, and that's very important for us.

That's the lessons we learned through the alliance.

And Mr. Kobayashi will give us many other points, but we wanted to reorganize different meetings and conferences, organizations.

We have to think it again from scratch.

So like Mr. Kobayashi and others, they have outside views and suggestions.

And then we came to a totally new understanding about the whole situation.

So we realize that some of our conventional thoughts was wrong, so that's a merit of working with those partners.

And decision-making might have been another input in here.

For 15 years, I worked for DENSO.

So as I listen to the other people's views, things have changed drastically.

Speed and output is a crucial work.

And as Mr. Toyoda mentioned, too, that Toyota has changed.

The -- amongst the President of the group companies who used to have the piles of huge materials, we had all the assumed question-and-answer session and then President comes is almost like an analogy of parliament session.

But now a new method, no -- there are redundant materials -- no material, and especially for those meetings, and then -- and maybe just full lines of the key messages and talking points are listed.

And then -- and in 1 hour, decision is made.

And even in that afternoon, the things are implemented.

And then the executive meeting, they now know huge documents, and then just talking points are summarized.

So only we focus on necessary things, necessary agenda, rather than the huge documents.

So people became quite serious to sort out what is needed, what needs to be discussed; especially the subordinates, members do not have to prepare unnecessary redundant documents.

So they can now dedicate themselves for core work.

As Mr. Terashi mentioned, the cost analysis has been changed as well, a big difference of decision-making.

Toyota technical standards, when the claims were filed, they put additional standards, and then they became so severe and rigorous.

But now we'd like to go back to each vehicle, to rescrutinize the technical standards.

So there are lots of elements groomed to further reduce costs for each vehicle and technology.

And then ever-better cars should be built.

And then the price should be the good affordable level, willing-to-pay level for the customers.

So customers are so willing to pay the price.

So we have to really look at and scrutinize the costs incurred.

So the decision making became more expedited as well.

Since January this year, with executive vice presidents and myself and taking the avenue, so to speak, we all have 7 people, and we call ourselves 7 samurais within the company.

The executive vice presidents in the past, since our organization was based upon different functions, so executive vice president was a representative of certain functions, so to speak.

If I may use an analogy of an elephant, Toyota Motor Corporation being one elephant, one executive vice president was in charge of a leg of a elephant; one person looking at the foot; or another person, trunk; and another EVP, the tail.

And the entire elephant was operated and managed by a President.

We wanted to have a smaller elephant, and we make up with the idea of having in-house companies.

But even with those reorganization, the development of the capabilities in the past had been conducted on the function-based approach.

And therefore, we were not able to come up with the tendency of mentality to look at elephant in its entirety.

We're not able to reset the level.

But since January this year, for each function, 2 executive vice presidents and the board would be responsible for that; or with the only executive vice president, started having meetings for thorough discussions without any materials prepared for that purpose.

And at least once a week, we discuss with each other issues that are most in -- that are in need of our most immediate attention.

So in a sense, that could be referred to as a strategy meeting.

In the past, I alone was operating or managing the entire element.

But we now have 7 people training and operating an elephant.

And I earlier used the term of co-driver.

Now co-driver, in a sense, must be able to convey to the driver the area beyond the bend that the driver himself cannot see.

So the driver is behind the wheels operating both the accelerator and a decelerator pedal.

And the co-driver must make sure that the driver can take the appropriate action even if the -- it is not visible beyond the bend.

And that coordinating activities pursued jointly by a driver and coordinator represents the most important change that we now see.

We only have a very limited time, but we would like to give opportunity to as many people as possible, so may I ask you to limit your question to 1 per person.

So first -- fourth row from the front on that side of the room, please?

We received various questions from a journalist, but I am from Tokio Marine Holdings.

My name is Nagano.

And from a different perspective, I have been owning your company's share from a long-term perspective.

So from that perspective, allow me to ask a question.

Earlier, Mr. Toyoda mentioned that steering a big company is very difficult.

I fully agree with you.

My company is probably not as huge as yours, but we have the history of 139 years this year.

And we are a very traditional, conservative company, and operating such a traditional, conservative company is really tough.

You're a President of this company for 8 years.

You restored the profit of JPY 3 trillion.

And I think you doubled the market capitalization in that mean time.

So as one of the shareholders owning your shares for a long term, I'm indeed appreciative the way in which you steer the company.

So I'd like to ask the question, if possible, from the management or long-term perspective, and my question more or less related to the culture of a company.

And to me, the culture of a company leads to developing human beings, which, in turn, leads to the development of the organization.

And of course, that leads to the strategy and product development.

And therefore, in the end analysis, for the company to be chosen by the market, culture is the essence and the foundation for that.

In the very tough environment, even if a culture served you well in the past, it may no longer do so in the period ahead.

So as someone in charge of a corporate management, what should be defended, preserved and valued, and what need to be transformed or changed rapidly is something that really troubles me a long time.

So wanting to have a long-term relationship with Toyota as President of Toyota, what element of Toyota's culture are you going to preserve?

And what aspect of the culture you want to change or transform as quickly as possible?

Could you share with us your views on that?

Thank you very much for joining us for the first time.

I really appreciate your presence.

And a month from now, when we hold the General Shareholders' Meeting, we should be responding to your question.

I'm having such a forum for discussion.

But in such a meeting today, that we've been able to have a direct communication with a shareholder is indeed -- presents a great privilege and honor for us.

So I'm indeed grateful for your participation here today.

Thank you so very much.

Change the corporate culture is indeed a very tough and very difficult challenge, and I also had to rack my brains in the past 8 years.

But the greatest resistance was the fact that company really had seen success in the past.

We were successful in the past, and that experience served as the resistance.

As the road around us continue to change, the experience of success in the past somehow serves as a resistance.

Because we have known success in the past, we tend to believe that why do we have to change?

What's wrong with what we have been doing?

So that's where you tend to start when you try to change your own culture.

With respect to what we have been doing in the past, there's nothing wrong with what we have done.

But as the world changes for the future and in the road beyond from here on, are you really ready to step into that new road?

The timing of the communication, the way in which some communication is to be held was something that I really had to think very hard and rack my brains.

I still have -- do not have a clear answer to that.

As Mr. Nagano mentioned in his question, moving into the new era, what do we have to preserve, and what do we have to change?

As I said, the automotive industry is now in the midst of a profound transformation.

The autonomy, the electrification, the connectivity, in many areas, we are faced with the transformation that could happen only once in a century.

And in this new area, the past experience may no longer serve us well.

So in that context, what are we going to defend and preserve, and what do we want to change?

Honestly speaking, I don't have any solution to share with you, but there are certain points that I feel very strongly about.

Take autonomy, for example, or other areas.

The competitors are those companies, including technology companies, who has not had any experience of building cars.

But because we come from the automotive industry, even if the vehicle become autonomous or even if it is electrified or even if sharing becomes more prevalent amongst many industrial products, I would like to make sure that vehicles and our products can continue to earn emotional attachment by the users.

And that's the point I feel very strongly about.

And also, the Toyota Motor Corporation is supported by many stakeholders.

And in any age and in any form, I want Toyota Motor Company to be selected or chosen by those stakeholders.

And so these 2 points are the points that I feel very strongly about and the points that I would preserve going forward.

So these 2 points are the most important aspect for myself.

Thank you.

Well, we're sorry.

The time has running short, but we can only nominate 2 more, I think, questions and persons -- to entertain 2 more questions.

The third row from the right side.

I'm from [TV TOKYO.] My name is [Takeshita.] So Mr. Toyoda mentioned now that the success experienced is versus the change in transformation.

You say the sense of a crisis is important, and you emphasized that sense of crisis.

But it's difficult to permeate that and shared by the employees.

And you might feel frustrated that the people don't understand that.

So once every 100 years, transformation is now the challenge.

And toward the future, the way automobiles might be totally changed inside Toyota versus outside.

How do you intend to convey your message and your intention?

Could you please repeat that again?

Mr. Terashi, engineer, could comment on this.

Well, it was dedicated to Mr. Toyoda, but I was a bit too relaxed.

But anyway, I was not trying to be.

The success experienced in the last 10 to 15 years have been that we achieved 3 million, 4 million to 5 million, and now reaching almost 10 million units.

As I talked to press, beyond 6 million units, operation has become more and more difficult for us.

And that's quite true, that things have become more difficult above that threshold.

We continue to grow.

And then the conventional operation was okay.

So the variables were rather limited because of -- based upon the conventional formula.

But now we have additional variables, we reach 10 million units.

But the -- maybe we thought that the conventional equation or formula could solve this problem, but that's not the case.

People said, "Oh, the conventional way to solve, but the words surrounding it has totally changed, and we cannot solve this equation anymore based upon the past method.

We have to identify new solution, new formula to solve this new challenge.

So there's no one fixed solution, so that we were wondering.

And then it continues -- we continue to use the conventional method to solve the challenge or problem.

But in the polygons and so on, and then you are drawing the lines, and then if it's a triangle, there's no lines in the middle.

But in the square, there are 2 lines in the middle in the polygon.

But If it's the hexagon or something, that I think you need more lines to connect this -- the corners, so you need more communication, more coordination.

And I think the efficiency has to be changed as well.

So you cannot find a solution based upon the extension of conventional ways.

You have to identify the totally different solution, so that's a way we tried to communicate the message to outside and inside as well.

Another message is that the sense of crisis is something I urge, and I feel the sense of crisis as well.

It's not that mentality of the sense of crisis per se, but I personally am trying to take actions, that as I listen to your voices, right after I became President, I faced a big challenge of the quality problem.

And that was the major problem, quality-related issues.

In the U.S., there was a public hearing where I had to attend.

I attended, and then at that time, as a person responsible for this company, the past, present and the future, I had to make a statement on that, the entire stages.

And I was a top executive of the OEM, but on behalf of the dealers and suppliers and all others, I had to make a statement to the customers who suffered from some of the quality problems.

I had to apologize as well.

So in that sense, based upon that experience, I was exposed to such a challenge and situation, and that's why I got the sense of crisis that I keenly felt.

But the other employees inside did not share that sense of crisis as keenly as myself, so there was a gap.

But in January, we started the new 7-warrior system of the new executive vice presidents.

And they shared the same level of sense of crisis as me starting in January of this year.

In the past, I was having differences, sort of abnormal sense, and I was exposed to that intense situation at the public hearing.

I felt that I was the only one that was feeling that.

But in January this year, I now have a frequent opportunity to exchange views with the 7 others -- 6 others.

So I wasn't feeling that sense of crisis all by myself; all the other people also shared.

What about (inaudible) the chief officers and others?

Well, they -- Mr. Shirayanagi and I, of course, do not feel any gap in the feeling, but there's a little gap between here, but there as well.

But you see this gap there, but there could be maybe a bigger gap between the chief executive officers and the 7 executive vice presidents.

So I would like to try to minimize such differences of feelings.

So we, 7 warriors, EVP should really have a close contact with the field, the genba, to try to improve the system or the way people work in the field or the direction that the company should head for, or maybe the cruising speed should be modified and changed and so on.

Only the top executive, top management can change that.

So with a sense of the crisis, all the 7 of us should share that same common sense.

And I would like to create a big trend, a big momentum within the company so that the entire Toyota can change together as the united Toyota.

And I hope you can look forward to that as well.

Thank you very much.

I'm sure there may be other people wanting to ask questions.

But since we passed the scheduled ending time, well, I would like to invite the lady in the second row from the front.

[Yagi, Nikkei] (inaudible) from the -- you are going to transform -- redesign yourself from the automotive company to a mobility company.

But in redesigning your company, what is going to be a major challenge for us, in your view?

That's a difficult question.

It's a good question in English.

And I can't answer that in one word or in simple statements.

But mobility company, as referred to by President, reflects the fact that vehicles will no longer be the same as in the past, and the cars will become more and more like people.

The exchanging information within the company or information communication between vehicles, and so the obtaining information is done by human beings, and vehicles will become more and more like people, like the human beings.

And that is what is meant by mobility.

Now you talk about challenges.

There are many challenges that are not yet revealed.

If we know the challenge, we'll come up with the answer.

But take autonomy or connectivity, there is a possibility of totally new concept being introduced, and therefore, including competitors or potential partners, our President always talks about the possibility of finding partners, be it electronic companies or technologies, and try to study and try to learn from others in many opportunities.

So 1 plus 1 -- if I can answer that 1 plus 1 will become 3, but it's not like that.

Probably I should ask President to answer that.

Take 5 years or 10 years from before.

If we look back 5 or 10 years ago, 5 years ago or 10 years ago, did we expect that autonomous driving become so talked about often or connectivity or MaaS becomes so extensively discussed?

Nobody thought of that.

Now did technology not exist 10 years before?

That's not the case.

There are certain elements available there.

In the past, people purchase vehicles and replace that with new vehicles.

There are many stage of technology.

And in a very accelerated speed, those new technology will be incorporated into the vehicles, and that in itself will change the way in which business is conducted or style of business.

So not just catching up with that, but we need to be ahead of those trends so that we can prepare ourselves to take actions before that becomes a reality.

And when we consider that, we really have to reflect upon ourselves and what we are doing is adequate enough.

So you'll never know what is going to happen.

But knowing that you don't know, you have to prepare yourselves and you'll be able to create the future on your own.

And that's the greatest challenge for us to consider.

Maybe 2 more people from the audience?

The one in the front -- or in the middle, please.

The first row, please.

[Shinjo] of [Magazine X.] I have one question.

As President has been repeatedly saying that in the challenge, the how you challenge, but Toyota is a Japanese company, but it's a global Toyota as well.

As you mentioned, that simply put, that the -- that's a message to the Japanese employees here in Japan.

That's my interpretation.

It's a huge company, and people work for Toyota.

Once you work for Toyota, you enjoy a good life, and then things are smooth.

But now you are saying that it's not that simple.

It's a global company.

In the spring level, first, the level you say that investing in the human resource is crucial.

But if you invest in people, what's the return?

And the union members could not really respond properly to the executives.

But now the Toyota people now are scattered around the world in the genba and field.

But what's your requirement to -- what's your expectation to each employee of Toyota who are now working globally?

And your message is to the global Toyota workers and the Toyota workers here in Japan, is your message different?

Well, the answer is rather simple because when I talk to the employees and all the stakeholders, my one expectation is that please try to make Toyota the #1 automobile company in that local community, that area.

What do you mean by the best in that local community?

It's not that #1 in the world or #1 in Japan or the U.S.A., but rather in that particular local community, you should become #1 company.

Then you can put the smile on the faces of the customers, to please them.

If they're upset, you know that why they are upset as customers.

So Toyota's strength is, of course, kaizen improvement.

And we can improve always for the sake of the local residents in order to continue; it's the process of improvement.

We should become the #1 automobile company in that local community.

That's what I expect my employees to do, our stakeholders to do, and that will lead to the sustainable growth of Toyota as well, eventually.

So for sure, as [Mr.

Shinjo] mentioned, that in many places I send this message.

But mostly, that has been the message to the head office, headquarters here in Japan because in genba, lots of things are happening in different parts of the world.

It's not that headquarters are not always supervising, controlling everything.

I always tell that.

And I'm always warning the headquarter members.

And then I'd like to show them by my own action.

Even though that's not fully implemented, we should never stop that process of having a good understanding as a big company because in order to continue to survive and find the source for the future growth, we have to always have the sense of crisis.

And that's how I would like to proceed with.

So I feel so humble to make additional comment to this.

But in January this year, he said he was going to attend the CESs to explain about e-Palette.

I thought that he would make a New Year's greeting here in Japan, but instead, he chose the U.S.A.

to make that announcement.

So I have seen that global broadcasting because the Toyota people is one in the world.

And we saw the English version translation as well.

But anyway, that is to say Japanese members got a bit surprised, shocked to see that.

And TPS and cost reduction, these are now already launched, rolled out globally.

So as Mr. Shirayanagi mentioned, that in Europe, the efficacy effect is already being felt step-by-step.

So we'd like to fully implement that.

There are 340,000 -- 370,000 workers, employees of Toyota Group globally.

But anyway, each employee, if they share this sense, we will be a winner globally.

That's my wish.

Thank you.

The last question, please.

The person in the front row, please.

Yes, [so a free journalist.] This is a very fundamental basic question.

One of the keywords today was TPS and cost reduction, and repeatedly, those 2 key words were mentioned.

And those are practiced and implemented.

It will generate time, time to think and time to act and leads to innovation.

I somehow vaguely understand that.

But cost reduction and TPS, those are uniquely Toyota.

And if you continue to pursue that when nobody knows what's going to happen in the future, when changes are taking place in the magnitude of once only in centuries -- 1 century, can really generate something new.

There has to be some multiplication for the company to change, so TPS plus cost reduction, and something must be added to that for the company to change.

So cost reduction, TPS, multiplied by something, so what should that something be from the perspective of the President?

Is TPS and cost reduction enough?

Or do you need that extra factor to go over this profound transformation happening in once in a century?

What remains in the passion of people, the passion of the people who lead the way and the perseverance?

Now why do we talk about TPS and cost reduction?

As I mentioned earlier, we need to regain the true characteristic Toyota-like features.

Now what does that mean?

Themes and actions are taking place in genda -- genba, and people close to the genba must be able to make judgment on the spot, might have the ability to make decision on the spot.

There is a gap there between my thinking and my determination.

So at least for those people working for Toyota, within Toyota, the decision can be made, judgment can be made close to the genba, and action could be initiated there.

And to ensure that to happen, the top management must create the environment and structure that enables that to happen.

I personally think that when I became President, I said that I want to be a President closest to the genba, where the action is.

Now 8 years into my presidency, have I accomplished that objective?

I still see quite a large distance or gap between myself and the genba.

So I personally would like to be close to the genba as much as possible.

I want to be a President.

I will continue to make efforts so that I'll be referred to as President who is closest to the genba.

I mean, in a sense, the [TNA] of a Toyota employee, without TPS and cost reduction, one cannot call oneself a Toyota man or Toyota employee, and I strongly feel about that.

Now does TPS and cost reduction leads to innovation?

Looking back the history of Toyota, we talk often about innovation.

And because we talk about innovation, we don't see innovation to actually happen.

Toyota history shows that we began with imitation that happened at automatic loom company that apply -- that happened with that automobile business.

So the imitation is a starting point for Toyota.

But we added improvement to imitation.

We changed imitation.

We changed ourselves from simply imitating to improving that, and we made continuous and repeated improvement that led to the innovation.

So in the case of automobiles, at first, we purchased vehicles in United States, we took it apart into parts and components.

And the founding members, including Kiichiro, he did that and tried to develop the company that is most suited for Japanese roads, the vehicles that are most suited for roads outside of Japan.

We came up with the Land Cruisers, the Corolla and the Hiace, and those are vehicles that have been selling very well for many years.

So that was a period of improvement.

But now we see hybrid and FCV, that improvement -- continuous improvement led to the birth and development of hybrid and fuel cells.

And we are now moving under the e-Palette and others.

So just talking about innovation itself, I believe, represents one of the weaknesses of Toyota or may have become one of the weaknesses of Toyota, just talking about it.

So in that sense, the cost reduction of Toyota, the TPS of Toyota, those would be the basic action individuals will have to have.

What's wrong with imitation?

What's wrong with improvement?

So long as these leads to innovation, it should be enough.

So we would like to make sure that Toyota leads the way in leading to those innovation after imitation and improvement.

Thank you very much.

This completes the second part of our financial results briefing.

Thank you very much for taking time after your occupied schedules to join us.

We really appreciate your participation.

Thank you.

(foreign language) So the website will air this, but we have this -- the scripts outside of this room, if you are interested, please pick that up.

Thank you.