Toyota's Tough Boss

By William Green, Michiko Tomoya

After a 41-year apprenticeship at Toyota Motor, Katsuaki Watanabe became its president in June. Best known for a cost-cutting initiative that squeezed suppliers and saved nearly $10 billion over five years, Watanabe, 63, takes charge at a time when Toyota (2004 sales: 7.5 million vehicles) is on track to eclipse General Motors as the world's largest carmaker. He spoke to TIME's WILLIAM GREEN and MICHIKO TOYAMA at his company's headquarters in Toyota City, Japan.

TIME How can you avoid the dangers of what you have called "Big Business disease"--of Toyota becoming too large and complacent?

KATSUAKI WATANABE Everyone should be dissatisfied with the present situation and should constantly try to improve or change things. It's important to realize that there is always something more we need to aim at. That's what needs to be recognized by every individual. When you're growing, you're satisfied with the status quo, and that's no good.

TIME What's your first priority as president?

K.W. Our present concern at our plants around the world is the quality and cost of production. We're concerned with what level each factory is at so we can assess its capability. If there's any gap, we have to fill it.

TIME You're renowned for cutting costs. Is there still a lot of fat to trim at Toyota?

K.W. There's plenty. Look, there are two p.r. people right here.

TIME So you're going to fire one?

K.W. Yes, one is enough ... Regarding costs for design, engineering, quality control, production, work force and management, there are still gray areas with waste and room for improvement. The next step is value innovation, where we're trying to make improvements in design that raise quality and lower costs.

TIME Toyota is more profitable than the U.S.'s Big Three carmakers combined. Why has it been so much more successful?

K.W. Everybody works as a team. We even call our suppliers our partners, and we make things that everybody thinks we should make.

TIME What's Toyota doing in car safety?

K.W. We're developing a night-system sensor that can see things a naked eye cannot. The system would automatically prevent a collision. Another system protects a car from spinning even after its emergency brakes are applied. In the future we can develop a sleep-and-drive-prevention system, whereby a device will tap the sleeper and wake him up. I want to make it happen quickly. My dream is a system that would pick up the danger of collision and save the driver or passenger from being [ejected] and suffering injuries--something like a net that rescues a person before collision because there are many cases where people are thrown and hit the road, an electric pole, a guard rail and die instantly.

TIME Toyota is enormously international, yet you don't have a single foreigner on your board. Do you plan to change that?

K.W. Yes, but not for the sake of change. Only if there's a non-Japanese I deem to be deserving.

TIME What kind of car do you drive?

K.W. In America, it's called Lexus LS and, in Japan, Celsior.

TIME Is there anything about it that annoys you, that makes you think, I must tell my staff to fix this?

K.W. As I drive my car, I get many ideas. On many occasions I notice things and tell my engineers. I test-drive cars too and share my findings with the engineers. Either the design isn't good, it doesn't sound good, or the way the car is built isn't to my liking.

TIME How do you retain this urgent sense that Toyota must keep changing and improving when you've worked there for 41 years? Aren't you tired of change by now?

K.W. I'm a very curious person by nature. My character leans toward aggressiveness, and I like it that way. I immediately recognize the problem, know right away that something is far too expensive, that something needs improvement. I notice things, and I don't resist change.