Toyota shareholders demand vote against chairman Toyoda as automaker embroiled in testing scandal

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TOKYO (AP) — Toyota Chairman Akio Toyoda will face some disgruntled shareholders this week, as two major proxy groups demand a vote against keeping the founder's grandson on the company's board.

The vote, expected at the annual shareholder meeting on June 18, comes after Toyota recently apologized for fraudulent certification tests for vehicles, a major embarrassment for a company that prides itself on a reputation for excellent quality. The cluster of problems at Japanese automakers including Toyota is said to not involve any safety issues and no recalls have been announced. But Toyota stopped production of three models produced by the group's companies in Japan.

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Toyota's stock prices tripled over the past five years to about 3,800 yen ($24) before falling amid its recent troubles. Its shares are now trading at more than 3,000 yen ($20) — a loss of about 3 trillion yen ($18 billion) in market capitalization.

Institutional Shareholder Services, majority owned by German capital market firm Deutsche Börse Group, which advises investors, said in its proxy report that Toyoda “should be considered ultimately liable.”

She pointed out that his promises of change did not include a change in the Board of Directors. While Toyota said it plans to communicate better with workers on the ground, that likely wasn't enough to prevent repeat test-cheating problems, ISS said.

“The company's tendency to maintain its corporate culture is actually questionable, and Toyoda should bear responsibility for that,” she added.

ISS does not oppose the appointments of other board members, including Toyota CEO Koji Sato, who takes office in 2023.

Last year saw a wave of scandals involving improper vehicle inspections, including crash tests, at Daihatsu Motor Group, which makes small models, truck maker Hino Motors, and Toyota Industries, a maker of forklifts and other machinery. .

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Japanese officials say such violations have also been found at Honda Motor Co., Mazda Motor Corp. and Suzuki Motor Corp.

Another major shareholder, proxy consulting firm Glass Lewis & Co., recommended voting against the reappointment of Toyoda and Shigeru Hayakawa, another senior executive.

“More specifically, we believe that Mr. Toyoda bears responsibility for failing to ensure that the group maintained appropriate internal controls and for failing to ensure that appropriate governance procedures were implemented in the group companies,” it said in its proxy report.

“Furthermore, as the issues are widespread across the Toyota Group, this raises further questions regarding the corporate culture that has evolved under Mr. Toyoda’s leadership.”

Hayakawa has overseen board director appointments, and more independent directors should be added, according to San Francisco-based Glass Lewis. It also recommended voting against a motion on lobbying by Toyota on climate change, stressing the need for more disclosure.

Under Toyoda, the automaker has pushed a “multi-track” approach to eco-vehicles, focusing on hybrids, which have a gasoline engine and an electric motor, and using hydrogen as fuel rather than focusing on battery-powered electric vehicles that some environmentalists favor for cutting-edge cars. . emissions.

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It is unlikely that Toyoda will be ousted at the general shareholders' meeting to be held at the company's headquarters in the central Japanese city that bears the name of the maker of the Prius hybrid car, luxury Lexus models and the Camry sedan.

Toyota's largest shareholders, numbering about a million people, are Japanese companies such as Japanese banks and financial institutions that are unlikely to challenge the automaker. Toyota Industries Corporation, one of the group companies, is the second shareholder.

Cross-ownership of shares between subsidiaries, long the norm in Japan, is gradually disintegrating, but long-standing loyalties are likely to be strong enough to keep Toyoda in office. Last year, he won re-election with nearly 85% of the vote, although that is down from 96% in 2022.

In a recent report on Toyota, Kazunori Maki, an auto analyst at SMBC Nikko Securities, noted that the shipments Toyota halted affected only 1% or 2% of its global sales.

He also hinted that factory workers may have been circumventing rules that are seen as precise but not vital to safety.

In the fiscal year ending in March, Toyota's profits doubled from the previous year, reaching 4.9 trillion yen (US$31.9 billion), exceeding its expectations, as car sales rose and overseas profits swelled due to the weakness of the Japanese yen.

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Although Toyota is late in transitioning to electric vehicles, the company is the world's leading automaker, with sales of 9.4 million vehicles in the fiscal year ending in March.

The company is performing well, said Aaron Ho, equity analyst at CFRA Research. He said the latest scandal would have only a “minimal impact.” “So there are no fundamental issues. We just think that since production has been halted – probably for a few months, we estimate – deliveries will be affected.”

“We really don't see any deterioration in the company culture or how the company is run.”

In apologizing for the recent problems, Toyoda pointed to how he faced a huge recall scandal in the United States, shortly after taking over as CEO in 2009, due to what he called an “unintended acceleration.”

Toyoda was questioned by Congress and apologized. This time, he seemed to reassure himself as well as the audience that Toyota had been through worse, and survived.

“We are not a perfect company. But if we see something wrong, we will take a step back and keep trying to correct it.”

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Yuri Kageyama is at X: https://twitter.com/yurikageyama

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