By Maki Shiraki and Norihiko Shirouzu
TOKYO, Feb 20 (Reuters) - When Koji Sato was named Toyota CEO in 2023, he appeared to be the man for the moment: a veteran engineer who could give the world’s best-selling automaker a badly needed boost in electric vehicles. But after just three years in the top job, he is being replaced by Chief Financial Officer Kenta Kon, a close ally and former secretary of Chairman Akio Toyoda.
The management change, announced this month, will see Sato become Toyota's vice
chairman and chief industry officer from April. He delivered record sales and profit and, according to two people familiar with the matter, is regarded by suppliers and investors as a sharp and talented leader. Yet he will have had one of the shortest tenures on record for a Toyota boss.
In recent months he was absent from some high-profile events that Toyoda attended, leading to speculation among executives about his future, according to three people. Two of the sources said there was no evidence of any falling-out between the men. The people declined to be identified because of the sensitivity of the issue.
Instead, the shake-up reflected Toyoda's thinking that his hand-picked successor was no longer the best fit for the job given mounting cost pressures, three people said. The grandson of Toyota's founder, Toyoda was CEO for almost 14 years prior to Sato.
This account contrasts with the explanation given by Sato at a press conference announcing the change and includes previously unreported details. In an on-stage interview with Toyota's own media outlet, Sato said Toyoda was not involved in the decision.
"Toyota keeps emphasising, over and over, that Akio Toyoda wasn’t involved in the personnel decision," said Seiji Sugiura, a senior analyst at Tokai Tokyo Intelligence Laboratory. "Mr. Sato also says the same thing very carefully – which means he probably was involved."
In a statement to Reuters, Toyota said that Toyoda was not a member of the group that determined executive appointments and not involved in the decision-making. That group had been discussing succession since last year and talks became more concrete when Sato's appointment as chairman of Japan's auto lobby was finalised in late 2025, it said.
After discussing with the group, Sato decided to step down and the proposal was then submitted to the board, Toyota said. Sato contributed to strengthening Toyota's finances and would be taking on multiple roles to address industry-wide challenges, it said.
TOYOTA FOCUSED ON BREAK-EVEN POINT
The leadership change came as the Japanese automaker was increasingly focused on tackling higher costs, partially due to U.S. tariffs, the three people said. Meanwhile, it needed to invest heavily in technology, two of them said. Although EVs were seen as a less immediate threat given cooling demand, Toyota executives were concerned that it was falling behind global rivals in software development, one of them said.
Kon, the incoming CEO, served as Toyoda's secretary for eight years and is known as the architect of a planned buyout of forklift maker Toyota Industries. That deal, which would tighten the Toyoda family's grip on a key supplier, has drawn opposition from minority investors who say it lacks transparency and is significantly underpriced.
While automakers have been hit with billions of dollars in added expenses since Trump's tariffs took effect in April, Toyota has an additional burden, having pledged to take on higher costs faced by its suppliers. In recent years the automaker has focused more on its "break-even" point – the number of cars it needs to sell to cover its cost. Toyota sees lowering the break-even as an important gauge of management's ability, one person said.
"Over the past year or so, they’ve been talking a lot about needing to lower the break‑even point," said Sugiura, adding that could spell more cost-cutting under Kon.
Toyota doesn't make the break-even point public. It has a legendary reputation for squeezing costs through its philosophy of "kaizen", or continuous improvement, that identifies seven types of waste, including overproduction and defects.
In its statement, Toyota referred to comments by Kon at the same press conference, where he said Toyota must be "vigilant" to withstand even the most challenging external conditions. As CFO, Kon had been at the forefront of efforts to improve earnings, it said.
Kon is also CFO of Toyota's technology subsidiary, Woven by Toyota, where Toyoda's son, Daisuke, is a senior vice president.
Toyota said it expected to spend 360 billion yen ($2.3 billion) in the current financial year to help suppliers. It did not see the outlay as just a cost, it said, but an investment in improving competitiveness.
Toyota this month raised its full-year profit outlook by 12%, helped in part by cost-cutting. It has fared better than other automakers, thanks to its contrarian bet on gasoline-electric hybrids that now looks prescient.
($1 = 153.6700 yen)
(Reporting by Maki Shiraki and Norihiko Shirouzu; Additional reporting by Daniel Leussink; Writing by David Dolan; Editing by Stephen Coates)
