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UNSOLD TOYOTA'S STACK-UP AT A JAPAN SHIPPING PORT

THE Japanese phrase genchi genbutsu translates as “go to the spot” — in other words, “see it for yourself.” Few executives embrace that philosophy as completely as Akio Toyoda, who is slated to become the next president of the Toyota Motor Corporation.

Last summer, during a trip so secret that Toyota’s public relations staff didn’t know he was here, Mr. Toyoda visited a dealership in Ann Arbor, Mich., and decided to satisfy his curiosity about a pickup truck recall.

Still wearing his business suit, he got down on his hands and knees on the warm blacktop to examine the undercarriage of one of the trucks, shocking his American hosts, who didn’t expect a corporate V.I.P. to be so hands-on.

They, and everyone else at Toyota, had better get used to it.

In June, Mr. Toyoda will take charge of a renowned company facing its most serious setback since a crisis in the early 1950s forced his grandfather, Kiichiro Toyoda, to give up control of the carmaker he founded in 1937.

The momentum that allowed Toyota to become the world’s biggest and richest carmaker is screeching to a halt. It’s set to report billion-dollar losses for 2008, a stunning reversal from the record annual profits it earned earlier this decade.

In the United States, its biggest car market, unsold Toyotas are piling up on storage lots while dealers, once used to waiting lists of eager customers, grapple with sales that have plunged by a third.

Inside Toyota, the situation is being referred to as “the emergency,” with top management canceling routine meetings and trips to focus on overcoming a global auto slump. On Thursday, Toyota said worker buyouts, possibly shorter workweeks and executive pay reductions would be part of urgent cost-cutting.

At a news conference last month announcing his appointment, Mr. Toyoda put managers on notice that he will pop up everywhere, just as he did in Ann Arbor. “I have assumed the huge responsibility of steering Toyota at a time when we’re facing a once-in-a-century crisis,” he said. “Given the circumstances, I take my responsibility very seriously.”

All of this is far more challenging than anyone at Toyota anticipated even a year ago. Early this month, Toyota forecast a $3.9 billion net loss for the 2008 fiscal year, which ends in March, the first time it has lost money since 1950. It expects an even deeper operating loss of about $5 billion, its first since it was founded.

The dismal financial news came only days after Toyota confirmed rumors that Mr. Toyoda, after a 25-year apprenticeship, would finally become its next president, replacing Katsuaki Watanabe, who has held the job since 2005, and who will become vice chairman.

The prospect of deep losses and the abrupt announcement that a Toyoda would return to power, after people from outside the family had run the company for 14 years, have jolted the auto giant in the same way that looming bankruptcy has rattled Detroit automakers.

“The financial crisis and the economy are intertwined, and the crisis is expanding significantly faster, wider and deeper than we expected,” Mr. Watanabe wrote in an e-mail message in response to questions.

Even before Mr. Watanabe hands off the top job at the company to Mr. Toyoda, pieces of Toyota’s response to the crisis are being rolled out.

Toyota, which has been on a steep growth curve this decade, has put new plants on hold, including a factory under construction in Blue Springs, Miss., that was supposed to open next year. The company plans to cut spending by 10 percent and is letting many temporary workers go; permanent workers thus far have been protected by a lifetime employment policy.

Toyota is also rethinking its lineup of cars for every region of the world and accelerating offerings of more environmentally friendly vehicles. And it’s already planning for 2030, when it envisions a world in which hybrid vehicles — and other types, like those that run on hydrogen — dominate the roads as traditional internal combustion engines fade in importance.

Toyota doesn’t plan to seek government support, either in Japan or elsewhere, Mr. Watanabe said. That fact alone illustrates the gap between Toyota and its American counterparts.

“G.M., Ford and Chrysler are trying to survive,” says John Paul MacDuffie, an associate professor of management at the Wharton School of the University of Pennsylvania. “All Toyota is trying to do is survive a downturn.”


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