Toyota Motor Corporation

I would now like to begin the fiscal year 2020 financial results.

Second section of the press conference of Toyota Motor Corporation. I would now like to introduce our attendees for today. Our President, Akio Toyoda.

Operating Officer, Koji Kobayashi. Operating Officer, Shigeki Terashi.

I'd like to start with remarks from the President.

Hello, everyone.

Today, based on our financial results and forecast, I would like to share with you my thoughts on how Toyota intends to confront the COVID-19 crisis.

Since my appointment as President in 2009, Toyota has faced numerous crises.

In overcoming them, I believe that our company has been able to gradually strengthen its corporate composition.

Please have a look at the changes in our earnings structure from just before the global financial crisis to the present.

In the three years just before the global financial crisis, while operating income increased due to favorable exchange rates and increased vehicle sales, our earning structure, excluding the effect of foreign exchange rates, was not good by any means due to a large increase in fixed costs. I think that was a period during which the speed of expanding the size of the company was faster than that of developing our people, which partly led to our recall crisis later. In the year immediately after the start of the global financial crisis, vehicle sales decreased by 1.35 million units for a year-on-year decrease of approximately 15%, to which was added the impact of the strong yen, resulting in our falling 461 billion yen into the red. The four years just after I became president was a time when our entire company faced an overwhelming need to respond and unite to overcome numerous crises such as the global financial crisis, the massive recall crisis, the Great East Japan Earthquake, flooding in Thailand, and the so-called six hardships in Japan, including an ultra-high yen. Over these four years, we were able to bring the number of vehicles sold back up to the levels we had before the global financial crisis. At the same time, by drastically reducing R&D expenses and capital expenditures, we were able to shrink our fixed costs. And despite the ultra-high yen of an exchange rate of 83 yen to the dollar, we achieved and operating income of 1 trillion 320.8 billion yen. However, because we stopped everything to stop the bleeding, including investing in the future, we ended up still needing some time to strengthen our company composition in a true sense.

It was a period in which we lost weight and became slim, but also lost necessary muscle.

In the most recent seven years, our fixed costs increased due to investment for accelerating the making of ever better cars and due to investments in response to case. However, it was a period in which we strengthened our composition while absorbing the costs of these investments through such means as cost reduction. In the first three of those years, although we aimed to strengthen our true competitiveness during what we called an intentional pause, my self-assessment was that I was not able to obtain sufficient results. Our intentional pause made me keenly feel the difficulty of carrying out reforms in normal times. At last year's financial results announcement, I was asked if Toyota faces any challenges, and I replied it would be the fact that there is a sense within the company that Toyota is doing fine. There was a consciousness within the company, which had taken hold over many long years, that Toyota was doing fine, and there was a corporate climate in which things were thought about based on that premise. I sense that what led me to earnestly engage in reforming these things was my own intentional pause. With a once-in-a-century period of profound transformation coming on top of that, over the past few years, we came to feverishly engage in both a fight to bring back what makes us Toyota and completely redesigning Toyota for the future. During that period, as we believed that management would have to change first to change the company in an uncharted era, we took various measures to fundamentally revise our executive and organizational structure, including the introduction of an in-house company system, establishment of our seventh samurai, which is the president and sixth executive vice president structure, and discontinuance of the post of executive vice president. Our revisions covered not only people actively filling posts, but also our advisor system. When it came to communicating with our employees, such as during labor consultations in the spring, we made genuine efforts to achieve true mutual understanding. Labor and management at Toyota share a common foundation, which is the company hopes for the happiness of its employees, and the labor union hopes for the growth of the company. And now, in this period of profound transformation, earnestly hoping for the happiness of our employees, we decided to further address hitherto common practices, such as raising base wages and implementing uniform wage increases. The company and labor union are holding thorough discussions as part of our strive to fundamentally reform how we work. Each time such a reform has been carried out, I have heard people both inside and outside the company say, you don't have to go that far. I have even been told that I was over-instilling a sense of crisis. Even so, I have continued on because I want to be able to pass the baton to the next generation in a way that I consider ideal. That is my ardent wish. I think that bringing back what it is that makes us Toyota is equal to spending time on the past. I want my generation to be the last to spend time on the past. I want the next generation to be able to spend time on the future. That's exactly why I hope to plant seeds for the future. This is what I consider to be the ideal way to pass the baton to the next generation.

Based on this desire, for the future, I have been actively advancing the building of partnerships through alliances.

We have also changed our company's thinking about alliances. Our basic stance is that alliances are not for taking control of partners based on the logic of capital, but rather for respecting each other and for cooperating through work with like-minded partners. As a result, within an extremely short period of time, we have been able to establish a network with many partners, including those from other industries. When it comes to cooperation within the Toyota Group, based on our new Home and Away strategy, we have largely changed our thinking from becoming strong as an individual company to becoming strong together as a group. Also, with undergoing a complete redesign into a mobility company in mind, we are also engaged in recomposing our assets, such as by revising our cross-shareholdings and selling underutilized real estate. Summarizing our initiatives over the past several years, I think I can say that we have freed ourselves from a hitherto theory and have started constructing a theory for a new Toyota in a new era. And now, I would like to touch on our forecast for the year to March 2021. In the current COVID-19 crisis, although we forecast a decrease in vehicle sales of 1.95 million units for a year-on-year decrease of more than 20%, which would be greater than the decrease during the global financial crisis, we forecast a profit with an operating income of 500 billion yen.

Although this is our forecast at this time, if we are somehow able to achieve this level of earnings, I believe that it would be the result of our having been able to strengthen our corporate composition.

From now, I'd like to talk about something that Toyota has insisted on and committed to for many years. I am referring to defending to the very last our system for domestic production of 3 million vehicles a year. This is not something that is meant to only having to do with Japan. Toyota plants in Japan have served as a mother plant that supports Toyota's global production. It can be said that Toyota's domestic production system is the foundation for a global Toyota. However, this is not something simply left up to fate, nor is it something that can be taken for granted. Based on the conviction that we need monozukuri and a place to hone competitiveness that can drive global production in Japan, we have, indeed, held fast at all costs to protect our domestic production, no matter how severe the economic environment has been, including the ultra-high Yen. We did this not only to protect Toyota, but also to protect the enormous related supply chains and the jobs of the people involved, as well as the fundamental technologies of Japan's automotive industry and human resources who have the skills to support such technologies. Along with COVID-19, people around the world are facing the state of not being able to get what is needed when it is needed.

There is a person who called this situation the mask phenomenon. According to such person, most face masks could not be produced in Japan.

Making better products at a lower cost, this is the foundation of monozukuri. However, I think that only aiming to make something at a lower cost can give rise to this kind of phenomenon.

There is another basic element to monozukuri.

It is making things means making people. People are not costs. People are the source of continuous improvement and the driving force for the growth and development of monozukuri. As COVID-19 infections spread, many monozukuri companies have started to produce medical face shields and protective gowns, as well as medical masks and other items.

We too are making medical face shields in the United States using 3D printers, and we have extended such efforts to other parts of the world, including in Japan and in Europe. Furthermore, when it comes to items that we cannot produce on our own, such as ventilators, we are providing support by applying TPS to improve productivity.

I believe we can do these things because we have insisted on having a system for domestic production of 3 million vehicles and because we have preserved monozukuri in Japan.

What we have been defending to the very last has not been 3 million vehicles.

What we have been continuing to protect have been people who have acquired the techniques and skills that enable them to make what is necessary when the world needs it. We are proud that we have been continuing to protect in Japan places in which such human resources can work and be cultivated. Even as we are now facing the COVID-19 crisis, there is not the slightest bit of distortion or wavering in this belief. That said, however, there is something that I ask everyone to understand. To continue to protect a certain thing and to keep doing what we are doing is by no means easy.

I sense that there seems to be much talk about V-shaped turnaround, sacrificing employment, sacrificing domestic monozukuri.

By deciding to stop various things, an individual company can turn its results around.

Far from being criticized, it bothers me that such action often seems to be pleased.

Well, that's not right, this is how I feel. Regardless of how big or how small they might be, there are many companies in Japan that have clinched their jewels and protected their human resources through their techniques and skills, no matter how tough times were, or, more importantly, because times were tough. I believe that now is exactly the time what we need in a society that can support such companies. I humbly request that you support companies that have supported Japan and Japan's economy through monozukuri. In concluding, I'd like to talk about what I currently consider to be the dearest of all things. Because our session here today is to explain our financial results, I have talked about how the corporate composition of Toyota has grown stronger as we overcame numerous crises. But over these years, not once have I ever thought that I want to make Toyota into a strong company. I believe that I have helmed Toyota with a wholehearted desire to make it a company that can be depended on by people throughout the world and a company that is necessary. I think that what is important is thinking about why we should become strong and about how we go about becoming strong.

For us to be useful in the world, I believe that we must become stronger together with our partners throughout the world.

During Golden Week, I received a letter from a certain person. In it was written the following.

While taking a walk around the pond, I saw birds, turtles, fish, and the like scurrying about.

All living creatures, other than human beings, are going about life as before. Only human beings are learning about in confusion. Perhaps this is a good opportunity to change our perception of the world, being a theater in which human beings play the leading role. I feel exactly the same.

This crisis made me think about something.

It made me think about how we, as human beings and as companies, should live our lives.

With us, with society, with all stakeholders, live together.

Just as in the case of the hometown or home country, that means taking care of a home planet in the course of conducting corporate activities. And there is another thing, one that many people have been reminded of. It is the feeling of appreciation for, of course, all the people on the front lines of the medical sector protecting our lives, but also for all the people who are supporting our everyday routines. When what we take for granted ceases to be a matter of course, we notice that nothing is a matter of course and that we have things thanks to someone somewhere working hard. We want to create a relationship in which people can say thank you to each other and can thank the Earth. Companies and people need to think seriously about how to live and then change what they are doing. It could be that we have all been given a great chance, and that chance might be the last one.

Toyota is a global monozukuri company born in Japan and raised in the world.

I believe that our mission is to provide goods and services that make people throughout the world happy, or in other words, to must produce happiness. To achieve that, I believe that it is necessary to cultivate Toyota people in the world who can wish for and take action for the happiness of those other than themselves.

That means developing human resources that have what I like to call a U perspective.

This is what I will devote my own heart and soul to for the COVID-19 era and post-COVID-19 era. And I view this as also being a part of earnestly engaging in the Sustainable Development Goals or SDGs for which international society is aiming with the stance of no one will be left behind. There is no crisis that humankind cannot overcome. For us to overcome the COVID-19 crisis together, Toyota is ready to do whatever it can to make itself of use. We humbly request your continued support. Thank you very much for your attention today.

From here, we would like to entertain questions.

If you have any questions, please press the button on the screen that says raise your hand.

We will call your name from this side, so when your name is called, please turn your microphone and camera on. We would also like to ask you to keep your questions to two questions.

Now,

Yamada-san from NHK, please. We will be switching the screen, so when you see your face on the screen, may you start with your question.

Thank you for your patience. We are now switching the screen. A moment, please. So Mr. Yamada, please.

I'm Yamada from NHK. I have a question to President Toyoda.

First of all, for the financial results for the term ending in March, how are your thoughts about it? And also, currently, many companies have refrained from giving a forecast for the running term. However, you have made the forecast. And what is the basis of the forecast? How are you forecasting this year? And another question is, currently, we are in the COVID-19 crisis, which is an unprecedented crisis for all of us.

And for this... Together with this crisis, we have the once-in-a-century profound transformation times.

How are these going to change Toyota? Or on the other hand, what are the things that you are not going to change? What is it that you have to protect? Can I ask these two questions, please, to President Toyota? Thank you for your questions. Starting with your first question, regarding the assessment or my thoughts on the financial results for the ended term, and also we did announce the forecast for the running term, but what are our thoughts behind the making, announcing the forecast?

So for this first question, we have been able to make the announcements of the financial results as we had planned originally, and being able to do this,

We would like to extend our gratitude to all the related people. If it was a normal year, we take it for granted that in this timing, we'll make our financial results, and then in the following month, we'll do a general shareholders meeting. So this is a kind of a taken-for-granted schedule that we have on our business calendar. However, with the COVID-19 crisis, things that used to be taken for granted cannot be done as it had been. So thinking about that, being able to make these announcements as we had planned to originally, I have a deep appreciation for all of the people involved, including the employees of the company. Now, with that, to summarize my thoughts on the financial results, like the CFO, Mr. Kohn, has mentioned in Section 1, as a result, we have dropped sales volume and also we have both dropped revenue and the profit. So that has been the result. But an important point for us, the important challenge was TPS and also to be working on cost. And with these activities running, we have been able to clarify our issues and challenges. And because these challenges are now identified, we believe that we can make further progress in these activities. However, this kind of a COVID-19 shock, to say, it is much a larger type of shock that he received compared to the global financial crisis.

However, in our forecast for the running term.

We are going to make efforts. Even though there is going to be a large magnitude of a drop for the volume of sales, we are going to have a forecast that will secure profit to be in the black. And we have hopes to become the leader for the recovery of the economy going on after COVID-19 shock. I think we are now prepared to start those activities from here. So in that sense, the financial results that we have announced, we have been able to be at the starting point to have Toyota be reborn. into a new Toyota. I think we are now on the starting point to start that change. And now for our thoughts on why we have made announcements of the forecast for the running term. Actually, we had a lot of discussions internally about whether or not we should make an announcement of the forecast. But we are an OEM, we are a maker of cars, and we can only have our activities if our customers place an order of cars. So thinking about this cycle, if we start to give a forecast and if we make the cars, then business will start to move and this society, the business community and communities will start to move. and also the automotive industry, there is a large impact to the wider business activities. There is even a figure 2.5 that would be the impact that the automobile OEMs activities make. And because we are in this kind of position and because we are in this kind of very tough and difficult situation, we want to organize what we know as of now and be honest in showing what we can. so that it can become a criteria to move forward. And having a certain criteria, I think the related automobile industry companies and the related industries may be able to prepare somewhat, having a certain criteria. So that is why we decided to share a criteria, and we believe it's important to timely share the information that we achieved and the understanding that we have in the time of uncertainty. And with the criteria, we want to manage forward by managing the abnormal values, and we want to unite people to make our challenges. moving forward. So that would be my answer for your first question. For your second question about the COVID-19 crisis added to the once-in-a-century profound transformation period, what is the impact to Toyota? Is there going to be changes to what Toyota needs to stop or change?

For this question, actually for myself,

I have – upon receiving the guidelines from the government of refraining from going outdoors, I have personally taken measures to avoid moving outside the borders of the prefecture. So I have been in an executive training center that is in Aichi prefecture and not in the main office. And then I was able to reduce 80% of my moving time and also 85% of the people I meet, and also reduce 30% of the time that I used for meetings, and also reduce 50% of the documents that was prepared for meetings. That is the figures surrounding myself. So up to now, when the employees in my company have an appointment with me, they will be preparing documents.

to brief me.

And also, if it is someone in an upper position, they will have their subordinates prepare that document. And that document, when it arrives to myself, those data will be something that is one or two weeks before. And we use that kind of old data to have discussions. But now, using net meetings, internet meetings, web meetings, and TV conferences, we are able to discuss and consult more in a timely manner using the information that we have now.

And by this change, I've seen that we've reduced half of the documents that we used to prepare.

So with this reduction, I hope that the reduced efforts will be used for the future of Toyota to shift our resources to focus more on what is necessary to prepare for Toyota's future. I think we'll be able to do that as we have experienced this kind of a change. And also, I was in this trading center in Aichi Prefecture, but for the overseas CEOs, also people for the overseas companies who are abroad outside of Japan, and also the top executives of other companies, I was able to frequently contact them more than before this crisis. Up to now, I thought that it would be rude if I don't go and visit these people from myself and travel to meet them. Because of this feeling, I tried to, much as possible, have... have a face-to-face meeting and visiting these people that I wanted to meet. But if I work in that way physically, with the physical limitations, I'll be able to have only one appointment with a very important person in another company. But having these kinds of web meetings, people will be able to spare about 10 minutes. Anyone will be able to spare me about 10 minutes. So I'm able to have more meetings and more talks with the top executives, top people of other companies as well, and also my company. So I think this is an opportunity for us to change significantly on what we can change And also, we can identify things that we will further accelerate to promote changes. I think we will be able to do this with this opportunity, and we'll be able to do that with more speed. So for your question about what are we going to continue to protect, my answer would be it will be the real world. We have a genba, or the shop floor. The genba, the site that we work at, that is the real world. And at the real world, we have been accumulating a lot of experiences and skills and knowledge. So no matter how much we may transform further, we may go toward digitalization, there will be a site, a genba, that people will be working. So utilizing our strength, our real world, we are going to further develop our necessary human resources and become a company that will be relied on and depended on by others. So that will be my answer to your question. Thank you.

Thank you very much, Mr. Yamada. Next question, please. From Nikkei newspaper, Mr. Omoto, please.

And again, please wait until your face is shown on the screen. We are now switching the screen.

Thank you for waiting.

Mr. Omoto, please. I have two points. Number one, as you said in your presentation so far, you have overcome several crises. And COVID-19 is the current crisis. And your past experiences overcoming the other crises, including what you have learned, What is your learning from the past cases to overcome this crisis of COVID-19?

And in terms of COVID-19, what is your prioritized area in managing the company in overcoming the crisis of COVID-19?

Thank you very much. Number one priority we're learning is that I am not panicking. I am managing the company very efficiently and stably.

Now, 10 years as a president, after the financial crisis, as a president and as a top executive, I was managing the company.

And during these 10 years, New years were peaceful. Every year, year on year, we have witnessed and experienced the large drastic change or event of one in 100 years. Now, looking back the 10 years, no one

expected that my presidency will continue for 10 years. I didn't either because when I became a president here's my impression when I became a president no one was accepting me happily as new president in and outside of Toyota.

There were just a few people who accepted me happily and

The Genba people of TMC were the only exception. They were happy to receive me.

Especially those people, shop office people, never wanted to change their way of doing the business. This is my own impression when I became the president.

And in the 11 years as a president, I had to overcome many different crises. I had to respond to many crises.

And without right answer, I managed to show the direction for the future or for the company.

And because of this, Even in the administration and engineering people, even in the office people, some people started to show the sympathy with what I have said.

Some people started to develop acceptance to my presidency.

And then now, as of today, I am creating the opportunity to show my appreciation to those people who were slow in accepting me and who is now accepting me. So I think the company is rather stable, not panicking at all. At the financial crisis triggered Lehman Brothers' shock, we had to stop so many things to enjoy the surplus again. And currently, we are having the impact of more volume decrease compared to the financial crisis, but still we are making the profit and we can make an investment for the future. We can make the investment for the advanced R&D. So that means that we now have a good communication by which we are able to say thank you to each other in the company.

So to show the appreciation to each other in the company means that people in the company are working for not only themselves but for the other people than themselves. And this you should not change at all. Now, the prices and also the prioritized tasks in the prices. Now, the first priority is decided by the priority that we have at Toyota.

First, safety. Second, quality. And third, volume.

And fourth, profit-making. With the time changes, this priority might have to be revisited.

However, amid this crisis, this traditional priority of Toyota continued to be very important. And based upon this priority that we have developed so far, we will try to develop the Toyota people. And this is very important. And as I said already, this financial announcement

will make a starting point for us to change Toyota into a new Toyota. Therefore, this time, to be accepted by the new age

In the new age, Toyota will continue growing as a company which will be depended on by the people in the world. So this is a new start for Toyota, and this is the opportunity for us to make or to start that transition into a new company. And with this philosophy, I'd like to continue working on Toyota.

from here in order to receive as many questions from as many people as possible we'd like to keep your questions to one question per person next question please we will be switching the screen now when you see your face please start to ask your question

Thank you very much for the opportunity.

I've been able to hear very – I was impressed with the remarks. So since my question is restricted to one, I'd like to ask about the vehicle that will be used for private transportation, not for public usage. So I think in this current situation, we might have a change in how we acknowledge and utilize cars from a macro perspective. And also, for the way to sell cars, I think there's already a focus on how cars are sold online. And if that changes as well, you'll need to have more tools. You won't be able to just sell cars with textbooks, with paper books, and also telephones. What is Toyota's thoughts on that? If cars are used as a tool, maybe that's fine, but if it's GR or Lexus, maybe people will be hesitant to purchase. We might not be prepared enough to sell remotely or online in order to move people's heart and then to sell it. So on the sales side, is there any ideas that is on your mind that you'd like to work on or any thoughts of things that you have to change for selling vehicles going forward in the future?

Thank you very much for your question.

So after I make a comment, since I have the operating officer, Mr. Terashin, next to me, from an engineer perspective, I will ask him to make some additional comments. So I will start. First of all, by experiencing this COVID-19 crisis, going forward, I think we'll be moving more rapidly toward a society that has less physical contact. However, when we achieve a physical contactless society, it doesn't necessarily mean that cars will all be driven by autonomous driving cars. I think we'll still have the need to enjoy driving vehicles and also be able to live in a rich way. That means fun-to-drive cars. So drive there will be good and not-so-good drivers, fun-to-drive cars. So that kind of autonomous driving car is what I want to target. So more personal mobility needs will be heightening, as you said, and several years ago, I have declared that we will be changing Toyota from an automobile company into a mobility company. And I think this change that we're aiming for is becoming more closer to reality. And at the beginning of this year, we've made a public announcement of our project, Woven City. And Woven City is a project or a demonstration trial that will place people in the center. And with this, once again, when we look at the word move, it is about moving people from place A to B, but also move is about moving people's hearts. And if people move from a certain destination to a different destination, I want to have cars that will move people's heart together.

And on the sales side, in the same timing for Toyota's domestic

dealers, from all dealers, we have started selling all models in all dealer channels. That means for all Toyota dealers in Japan, all of the models can be purchased. So this is one initiative we started. And also, Kinto, we have the fixed cost subscription model, subscription service. So we are trying to prepare various options for customers to select from. And like Shimashita-san has mentioned, internet or online sales, we are considering what would be appropriate for cars like GR and Lexus. I believe these kinds of cars will need a certain story to sell together.

We need to share a story about the joy of

these cars. So more than the actual specifications of these kinds of vehicles, we want to share a story so that everyone can share a joy and also happiness of owning such a vehicle. And I'd like to have Mr. Terashi next to me to add some comments. This is Terashi speaking.

So I'd like to make some additional remarks.

So like President Toyoda mentioned, in this crisis, we have all experienced about what it means to stop moving, when people stops moving.

I think everyone has experienced this character.

we do see that there is a limitation with just the virtual world, and we still have the real world that is enriching our lives. I think this is something that we have all experienced amid this crisis. And thinking from this perspective, I think that using vehicles in many ways to have diverse ways to use cars, not just moving people and goods, is going to be wanted by society. But as a flow of the society, we are moving toward the case type of business, the technologies that will enrich people's lives. I think these technologies will further be developed as a fact. And just for your reference,

A year ago, we provided the hybrid patents free of charge, and one year has passed since this attempt. And the current situation is that the hybrid itself is something that many people want to use.

from 2024 to 2025, there's about an annual amount of 500,000 hybrids that we are signing contracts on to provide. So thinking about these numbers, I think we understand what kind of difficulty or struggle people are having related and how technology is related. And we want to have more partners, like-minded partners, so that we can cooperate and work in these areas as well. So that is all from myself. Thank you. I'm looking forward to having continued discussions with you. Thank you. Shimashita-san, thank you very much.

Now it's time to stop, but I think we can extend the time. And I'd like to welcome the next question.

So Mr. Hans Greimel of Automotive News, when you see your face on the screen, please start your questions. We are now switching the screen.

Thank you for your patience. We are now switching the screen. Mr. Hans Greimel, please.

I'm Hans Greimel from Automotive News.

Thank you for the opportunity.

May I ask my question in English?

Yes, please. Please ask your question in English.

I'm very impressed by your commitment, Toyota's commitment to 300 million capacity or production in Japan. Toyota is truly an anchor of the national economy here, but as a proponent of this home planet philosophy, can Toyota make, maybe today, make a similar commitment to some of the other markets where you are an anchor of the economy? For example, the United States, where last year you produced about 1.2 million vehicles, Is Toyota ready to make a similar commitment to the capital and the personnel and the human resources development that you've invested in these other countries, especially the United States, where you are an adopted hometown player?

Thank you very much. Toyota has the same commitment to other Japanese markets. For example, I would like to mention the United States. Last year, Toyota was produced in the United States. And so far, the capital has been distributed and human resources have come out. Thank you for your questions.

I would like to respond in Japanese.

So it will be translated over the line. So currently, Toyota's production is around 9 million units.

And how we have come to here is that in the initial phases, it was all done by domestic production in Japan, and we have exported to the other markets. That is where we started. So I just confirmed that it is simultaneously translated. And I think it was the beginning of 1980s. From that period, overseas production has advanced. And currently, we have 3 million for domestic production, and overseas production is about 6 million units. So that is the current state that we are in.

And in this situation, for models, we want to have to produce models that will be sold in the market that will be sold. So thinking from this philosophy, that is how we have come to increase the overseas production ratio. And for us, in all of the markets that we enter, we aim to become the best in town automobile company in all.

all of the communities and all of the regions, this is how we execute our activities.

And Japan is included, and also in U.S., Europe, China, Asia, in Africa, South America.

When we are blessed with the opportunity to produce cars in those regions, we aim to become the best in town company so that everyone will be happy that they have Toyota in their community. And with this kind of thinking, and when you think about an automobile, even if we build a final assembly plant in the region, at the same time, we'll have to build the supply chain. So the procurement foundation will have to grow together with our plants.

That is a necessity for us to have production.

So that will end up in 3 million units in domestic production and the rest made in overseas, including the parts procurement. I think we have yet more to go in order to become the best in town in all these regions.

For U.S.

that you have listed, you have given out for Camry, for U.S. production, even for the parts procurement rate, the local parts procurement rate, It is a car that has the highest procurement ratio of parts, and even NASCAR, which can only enter cars that have American-made cars, we are able to participate in the NASCAR races because we have such a high localization rate for cars that we manufacture in the U.S. and overseas. So this is the way that we're thinking. So in Japan, we had a large continued increase of volume in Japan, but we have seen a shift to overseas production. But there is a line that we want to protect, and that is why we have been announcing our 3 million criteria. But for overseas production, rather than committing to a certain volume amount, we want to first think about how we can become the company necessary for that region, for that market, and to become a company that can be depended on, relied on as an automobile company in that country and region. So that will be our priority. And then as a result, maybe our volume will be increasing for the production volume in that market. And we hope that will be a happy thing for the regions that we operate in. And we hope then we will both be happy in moving in that direction. So that will be my answer. Thank you, Mr. Hans.

Thank you.

Next question, please.

From Yomiuri newspaper, Mr. Isozumi, please. And again, please wait for your face to be shown on the screen. We are switching the screen. Mr. Isozumi, please, it's your turn. Please.

Isozumi speaking. Thank you very much for this opportunity.

As President said, Toyota is now reborn into a new company, and this is a starting point. And here is my question. As Toyota, investment or how to spend the money, which will change this activity? Now, the year ending in March 2021, 1 trillion 6 billion is the R&D. With the profit and revenue going down, you are keeping the same level of the investment as the previous year. So, I'd like to ask you the reason why you do so. And also, in terms of the contents of the breakdown of the investment destination, is there any change?

And also, you have many huge projects, for instance, smart city, urban city.

Do you see any changes to this type of investment into the already started projects?

Thank you very much. So we are now making Toyota our new Toyota. So any change to the contents of our activities, especially investment? Recently, we have started

the seed for the new Toyota. And for this kind of new project, we continue pushing the accelerator pedal. But Mr. Kobayashi next to me may have a different answer. So I'd like to invite Mr. Kobayashi to give an answer to your question. So, I'm Kobayashi.

Thank you very much.

Now, before the financial settlement announcement, executives made a discussion so many times, including the President himself.

And here, ending in March 2020,

We will have 500 billion, which will make a deficit when we are in the time of the financial crisis. Now, 11 years of Akio's presidency has seen so many events. And if you look at the breaking point, it is now getting better. And the president is the only person who had the experience of the financial crisis. So, somewhat we have to stop the discussion And now, growing concern we have talked about, and anything which you cannot stop is this kind of investment for the future. We cannot stop this investment for the future because this is one of the things which we have to continue forever in the future, which has to be supported by our money. At the financial crisis time, 3 trillion yen is the cash on hand. However, we have 8 trillion yen cash on hand. Now, to look over the company, this is smaller because Apple has 20 trillion yen. So, of course, the companies will experience ups and downs, but anything for the future will be necessary because to have a continued growth for the future will make a contribution to the society. And this is the philosophy why President Akio Toyoda, which we are following as executives. So you have talked about the smart city, women's city project, and also R&D investment. or the investment into testing, these will never be changed.

However, I am having a keen eye on how much we spend.

So if we see any wasteful spending, I will cut it so that we can have a better prioritization.

So at the time of the COVID-19 crisis, our prioritization is more...

better than the past. So looking for the future, we will have more discussion among the top executives so that we can have a better prioritization on how much we spend for what. Thank you, Mr. Isazumi.

I'm sure that we still have a lot of questions, but since we are over our scheduled time, we would like to just receive the last question. Mr. Osada from Chunichi Shimbun Place, Chunichi Newspaper Place, we will switch the slide.

And when you see your face, please begin your questions.

I also want to ask a question from the perspective of change.

Earlier in the President's remark,

you have mentioned that now is the chance and opportunity to change actions.

So currently in this COVID-19 era, we're talking about the new normal or a new way of life. And I think one of Toyota's philosophy is Genchi Genbutsu, so that would be going to the actual site and looking at the actual goods.

Will this change?

And also, in last year's financial results announcement, President Toyoda, when he asked the question of what is the threat or challenge of Toyota, and President responded that it will be the way of thinking that Toyota is all right. So in this era of new challenge, new norms, what is the challenge of Toyota?

That's a very difficult question that I received at the very end. Well, for Toyota's Genji Genbutsu philosophy, going to the actual site, looking at actual goods, I believe that we need to make a clear definition of this once again.

Up to now, we placed importance on, first of all, go to the actual site, go to the Genji. So it was done as a matter of course. Even if we look at products, we will always have to look at the product and place it in front of our own eyes. So no one questioned this up to now.

But in the past month, we have been looking at products more through images on the screens. This was a new thing for me, and what I felt was that, what is the timing that I'm confirming the product?

At what timing is the people consulting me and asking for my comments? At certain stages, it is fine to see the product through the screen, and there will be always times that you'll have to see the actual product. I think the line between these has become more clear with the past month experience. And even for this, for example, if you have to go to make an apology, for example, if you have to have consultations with a certain person, I think in these kinds of cases, you need to have a face-to-face contact, be able to understand the emotions, the temperature of how you're feeling. These kinds of incidents, these kinds of cases, it will be necessary to go to the site to see the person, see the product. When you look at a product, Going to the actual site, going to the genpa, what is important is to feel the change point. What has changed? Understanding what has changed is important. So if I have to look at a product through the screen, then I will confirm what is the change point that people want to show me. Also, how do people look like? How are their eyes looking like? How are they feeling? Some things can be only felt when you are at the Genba. So for those kinds of things that you will need to feel from the actual products, actual people, then that should be done at the actual site, the Genba. So I think we need to review our definition. I think we should not just say that we do Genchi Genbutsu everywhere, but we need to clarify what is necessary to do Genchi Genbutsu and what we don't have to. Also, last year I did say that the threat for Toyota would be the thinking that Toyota is our right. And now a new threat, I would say, is that rather than saying it's a threat for myself currently, I am staying very calm.

And there are many people making their utmost efforts.

And I'm seeing, including the office workers, seeing the efforts. So I have more opportunities to say thank you to the people around me.

So rather than seeing things as a threat, from making comments and from the actions that I take,

I hope that there will be more opportunities for me to say thank you to the people who are making efforts. But if the opportunity for me to say thank you goes down, and when I start to be complaining to myself more often than now, I think that will become a time where I see more threats. So including the way I work, I want to create a relationship in the company, also build a relationship with the suppliers and the dealers, also the relationship with communities, so that I can say thank you to all these friends and partners. So that is what I'm aiming for. through my words and actions. So rather than the threat, I want to explain about the expectations that I have. That will be my comments.

That will be my answer.

Thank you.