Inside Toyota's radical reorganization

March 7, 2013: 3:06 PM ET

A management shakeup and reorganization at Toyota spell major change for an automaker on the mend.

By Doron Levin

130305124241-toyota-gt86-convertible-geneva-auto-show-340xaFORTUNE -- After widespread vehicle recalls and safety concerns badly dented Toyota Motor Corp.'s reputation and finances in 2009, Akio Toyoda -- president, chief executive and heir of the founding family -- vowed to remedy the automaker's famed insularity.

His goal: make Toyota more nimble and responsive. A management shakeup and reorganization announced this week in Tokyo is aimed at creating a wider variety of perspectives among senior executives beyond those of a typical engineer from Toyota's (TM) hometown of Nagoya.

The changes include the appointment of Mark Hogan, 61, a former General Motors (GM) executive, as a Toyota director. Hogan, a confederate of onetime GM chief executive officer Rick Wagoner, knew Toyoda, 57, when the former worked for GM and Toyota's now disbanded U.S. joint venture.

Jim Lentz, who was head of Toyota's U.S. sales subsidiary, was promoted to head of the North American region. In addition to Hogan, Toyota nominated two non-Toyota Japanese business executives as directors. The three are the first non-company individuals to serve on the automaker's 16-member board. "It was an ideal move by Akio to firmly establish his team," said Jim Press, a former Toyota executive and board member who now advises Nissan (NSANY) and Renault. "He has reinstituted leadership for the family in a much more businesslike way."

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Toyota is showing signs that it's back. Last year it regained the global sales leadership from GM, which had lost it before winning it back from Toyota in 2011. In terms of pure size, Toyota and GM are being challenged by Volkswagen AG, which has set its goal to be No. 1 by 2018.

In financial terms, Toyota's market capitalization dwarfs the rest of the industry at about $164 billion, compared with VW at just less than $100 billion. The market capitalization of GM and Ford (F) are each about half the size of VW's. Toyota's share price, which peaked at 5,590 yen in June 2008, prior to the global financial crisis, dipped as low as 2,413 Yen in November 2011 and now is trading around 4,835 yen.

Under its new management structure, the Japanese automaker will be divided into four organizations: mature markets including the U.S., Europe and Japan; emerging markets; parts and vehicle development; and Lexus. Mark Templin, a U.S. executive, will run Lexus's worldwide business, most likely with the objective of bringing the division on a par globally with BMW, Mercedes and Audi. Templin will be the first U.S. executive to run a major Toyota business unit from Japan.

Fujio Cho, 76, who had been chairman, will become honorary chairman, normally a prelude to retirement. Takeshi Uchiyamada, known as "father of the Prius," succeeds Cho.

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Yasumori Ihara, who will run emerging markets, will be responsible for reversing the disastrous sales decline in China, where consumers were boycotting Japanese-built cars due to diplomatic tensions over disputed islands.

Akio Toyoda has survived a major test of his tenure as Toyota's chief executive. If anyone bet that a family member mightn't have the right stuff to reverse the company's decline, they've been thoroughly contradicted.

The next steps will be interesting as well, because Toyota probably must keep adapting to a global transportation grid whose pace of change is accelerating. Alternative fuels and autonomous vehicles, along with predatory competitors, will loom large on the CEO's radar screen.

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