Toyota Chief Resignation Watch: Why Toyoda Will Stay CEO

The media has begun speculating that Akio Toyoda, the CEO of Toyota (TM), may resign. An editorial published Tuesday in BusinessWeek suggested that "He must go not because of the company's biggest-ever and growing recall, but to take responsibility for how pathetically he is handling the crisis." While it may be true that the trouble appeared on his watch, he is probably not going anywhere.The world's No.1 car company has announced recalls of eight of its major models -- approximately 8 million cars worldwide -- due to accelerator problems. Recently, Toyota said it would also recall 437,000 Prius and other hybrid models due to potential brake problems.

It would not be unusual for any CEO to step down due to problems of this magnitude, and in the Japanese corporate culture, the pressure to leave would be especially great.

But Toyoda has several things in his favor as he struggles to keep his job. The first is that he has only been CEO for eight months: The problems that have led to most of the recalls predate his promotion. Second, Toyota risks further damaging its image by forcing a member of the founding family to leave the firm's top job. Indeed, Toyoda, whose grandfather founded the car company, was promoted to CEO last June to help steady Toyota's finances, and to respond to the then-growing concerns about the quality of its vehicles.

Another factor in Toyoda's favor is that most of Toyota's senior managers have been with the company for many years. None of them can claim that they weren't part of the problems that have hurt the company's finances and tarnished its once nearly invulnerable reputation for making the most reliable cars in the world. Toyota would have to go outside the firm to find a new chief, and it would take that person months to get educated about the company and its growing troubles.

If for no other reason, Toyoda may keep his job because there aren't many viable alternatives.
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