Toyoda to Steer Toyota towards Growth

Recently, Toyota Motor (TM - Snapshot Report) announced the 53-year old Akio Toyoda as its new President. Toyoda is the grandson of Toyota's founder, Kiichiro Toyoda, and the son of Toyota's honorary Chairman, Shoichiro Toyoda. Akio Toyoda replaced his predecessor, Katsuaki Watanabe, as the 11th president in the automaker's 72-year history.

Akio Toyoda joined Toyota in 1984 and went to the U.S. for a two-year stint as head of a joint venture plant, New United Motor Manufacturing Inc. (NUMMI), in Fremont, California. The California plant was a General Motors (GMGMQ) plant that had been opened in 1962 and had become a joint venture between General Motors and Toyota in 1984.

Akio Toyoda assumes presidency right after the company posted its first annual loss (437 billion yen or $4.4 billion) since 1950 for the fiscal year ended March 2009. Further, management has recently projected net loss to worsen to 550 billion yen ($5.5 billion) for the fiscal year ending March 2010.

However, the new president is very optimistic about Toyota's as well as the auto industry's future. He looks forward to increase in annual global vehicle production capacity from 10 million units to 13 million units. His company is trying to tap government incentives in Japan, U.S., and Europe for so called 'green' cars. Consequently, Toyota would be heavily focused on hybrid cars.

Recently, the company has already shown signs of success in this effort by receiving a bumper order of 180,000 units for its third generation 4-door compact hybrid, Toyota Prius 2010, debuted in Japan on May 18, 2009. The company also foresees significant growth potential in emerging markets such as Brazil and India.

Despite his optimism, Akio Toyoda looks well aware of the present condition of his company. In light of the difficult market scenario, he has volunteered to take a 30% pay cut for one year from July. He also expects other top managers to follow suit. This portrays the new president's cautious approach to mitigate the problems in the company. We all welcome him!

We reserve our opinion on the stock as Hold with a target price of $75.00.