The Crown, the preferred ride of staid Japanese executives, had received an edgy makeover. With a new oversize grille, vamped-up hybrid engine and an unveiling at a fashion mall, there was nothing stodgy about this car.
“Reborn,” read a logo beamed onto a large screen.
“My initial reaction was: ‘You’re kidding! Please, not pink,’ ” Akio Toyoda, the Toyota chief executive and a scion of the Japanese automaker’s founding family, told reporters at the event. “But being reborn does mean taking on new challenges.”
Toyota has spent much of the last year trying to leave behind what has been a tumultuous four years in which the automaker booked its largest loss ever, became embroiled in a recall scandal, struggled with a decimated supply chain after the 2011 tsunami and weathered the punishing effects of a strong yen.
One by one, the pieces have been falling into place.
In 2012, Toyota leapfrogged General Motors and Volkswagen to regain its title as the world’s largest automaker, selling 9.7 million vehicles, a record for the company. Now the company is on the cusp of a recovery, analysts say, that could put it on track to post the kind of growth promised before the crises.
“Toyota is now in the position — for the first time in years — where it is beating market expectations while its peers are disappointing,” Clive Wiggins, a Tokyo-based autos analyst for Macquarie, said in a recent note to clients. “We expect earnings to continue beating expectations over the next three years.”
Last week, Toyota agreed to pay more than $1 billion to settle a class-action suit over claims that its electronic malfunctions caused its cars to accelerate without warning, one of the largest payouts ever for an automotive lawsuit. Toyota still faces personal injury and wrongful death lawsuits, as well as an unfair business practices case brought by 28 attorneys general in the United States. But the company’s $1.1 billion charge against earnings for the class action was seen as a significant step toward closing the chapter on its recall problems.
There have been other signs of change. The company supply chain bounced back more quickly than predicted, profits are on the rise and the yen has started to weaken after the newly installed prime minister, Shinzo Abe, promised to drive down that currency.
And there is a loud message of change being sounded through the stepped-up emphasis on design — with both Toyota and Lexus models getting new looks, including the pink Crown. “It’s actually a beautiful color,” Mr. Toyoda said.
Toyota’s rebound has been centered in the United States, where its sales increased 28.8 percent last year to 1.88 million vehicles through November. That’s more than double the industrywide increase of 13.9 percent over the same period.
The biggest contributors have been stalwart products such as the Camry, and the expanded line of Prius hybrid models. Through November, combined sales of Prius cars had risen 81.3 percent in 2012, as the company continued to dominate the hybrid segment.
The company is also betting on a revamped version of a perennial also-ran, the Avalon sedan. Sales of the current version of the car were down 5 percent last year. The new model, with its wide-mouth grille and sculptured headlamps, reflects the company’s efforts to appeal to younger buyers. Toyota is trying to shave 10 years off the average age of buyers, now in the mid-60s.
The Avalon, which was designed and engineered in Michigan and is being built at Toyota’s assembly plant in Kentucky, is also a test of how much Japanese officials can delegate decision-making to the company’s subsidiaries. Promoted as Toyota’s most American vehicle ever, the Avalon is the first Toyota prototype not developed in Japan but at the sprawling Toyota Technical Center near Ann Arbor, Mich., where 1,100 employees work.
“We didn’t have to go back to Japan for approval on everything,” said Randy Stephens, the chief engineer on the Avalon. “We might go back to review the status of the project, but there is a feeling of ownership of this car here.”
By shifting more production overseas from Japan, Toyota is also addressing a critical weakness in its production setup: that it still makes the bulk of its cars in high-cost Japan, where the strong yen of recent years has weighed on the automaker’s bottom line.
Through line closures and reorganization, Toyota is slashing its production capacity in Japan from nearly four million to around three million by 2014. It has increased overseas production capacity by one million, opening new factories or expanding existing ones in the United States, China, Thailand, Indonesia, India and Brazil.
For every one-yen drop in the value of the dollar, Toyota loses 35 billion yen (roughly $400 million) in operating profit.
Delegating responsibilities more globally has also been a pressing task as Toyota digs out of its recall crisis. At the time, Toyota was criticized over its seeming need to coordinate every decision from its Toyota City headquarters, thousands of miles away, which American regulators said contributed to large delays in issuing global recalls for known problems.
Toyota says it has overhauled its quality control setup and given broad powers to regional executives in charge of safety in North America, Europe and Asia. Company executives at the time said that customer complaints would be tracked more closely and necessary recalls issued more quickly.
Those changes appear to be a work in progress. Last month, Toyota agreed to pay a $17.35 million fine — Toyota’s fourth since 2010 and the maximum amount allowable — to settle allegations by the National Highway Traffic Safety Administration that the automaker delayed a safety recall.
The safety agency contended that over 150,000 2010 Lexus and RX sport utility vehicles recalled in June should have been included in a 2009 recall of 3.8 million vehicles for the same issue.
Toyota did not admit any wrongdoing and said it was paying the fine to avoid a continued dispute with the safety agency. Nevertheless, it is clear that Toyota needs to rebuild confidence. Since the start of its recall crisis in late 2009, when the automaker issued its first recall for sticky accelerator pedals and floor mats that could trap such pedals, Toyota has recalled about 20 million vehicles globally, surpassing all other automakers.
In its latest large-scale global recall, in October, Toyota said it would fix 7.43 million vehicles for faulty power window switches. In August, the company also recalled crossover S.U.V.’s and Lexus hybrids for faulty rear suspension arms that could separate, causing the driver to lose control.
Still, analysts say Toyota’s sales numbers show that consumers are giving the automaker’s fuel-efficient cars another chance, after a dedicated crisis public relations campaign including visits by a teary Mr. Toyoda to auto dealers in the United States and appeals on YouTube from top executives. “Despite two recent large-volume recalls, we think the Toyota brand is back and that many new and refreshed vehicles will boost global volumes,” Efraim Levy, an analyst at S&P Capital IQ, said in a recent report.
One danger that looms large on Toyota’s horizon is tumbling sales in China, with which Japan is engaged in a bitter spat over a set of uninhabited islands between the two countries. Toyota’s sales in China fell as much as half after protesters staged anti-Japanese rallies across China and consumers there boycotted Japanese brands.
In response, Toyota has shaved 50,000 units from its vehicle sales outlook for the year through March, and now expects to sell 8.75 million units. It also adjusted its revenue outlook to 21.3 trillion yen, down from 22 trillion, a figure nevertheless 15 percent higher than the previous year.
Over all, though, executives say the company’s various setbacks have given Toyota the license to take risks it might not have taken in the past.
During the development of the new Avalon, for example, the Toyota organization was reeling from the recalls associated with unintended acceleration, said Mr. Stephens, the chief engineer. “It was a terrible time, but it created an opportunity to change,” he said.
He recalled a presentation of the Avalon prototype in early 2010 to Mr. Toyoda, the chief executive, who wholeheartedly embraced the changes. “He wanted us to be aggressive,” Mr. Stephens said.
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