Regulatory Warrior -- Stephen Ciccone often uses these props -- replicas of a Spartan shield and sword from the movie "300" -- to emphasize the existential threat posed by the administration's talk of imposing a Border Adjustment Tax on products sourced outside the U.S.
Nearly 30 years ago, Toyota established a Government Affairs office in Washington, D.C. But with the realities of a new administration, maintaining a prominent presence in our nation’s capital has, perhaps, never been more important.
“I can’t remember another time when so many people were so interested in politics -- and held such strong opinions about it,” says Stephen Ciccone, group vice president of Government Affairs. “We seem to be in the midst of a political sea change that, depending how it translates into policy, could have a major impact on our business.”
Ciccone knows of what he speaks. He came to Toyota a little over five years ago in the wake of the company’s unintended acceleration-related recall crisis, bringing with him more than 25 years of government affairs experience and expertise. His mandate? To learn from the lessons of those dark days and prepare Toyota for the new storm clouds that, inevitably, would gather on the horizon.
Recently he set aside an hour or so in his busy schedule to chat with us about how that work is going and, more specifically, how Toyota is faring on this critical front.
Driver’s Seat: So, the fact that Toyota has a presence in D.C. is nothing new. But we’re hearing that, since you took the reins, its approach to monitoring and helping to shape public policy, is. Can you please explain?
I like to joke that we were “One Toyota” before it was cool to be One Toyota. From my first day, we have brought together leaders from throughout our company, including dealers and suppliers, to be advocates for Toyota. That’s one of the reasons that we call our office “Toyota’s Embassy in Washington DC.”
What do you mean by that?
In the past, the work of government affairs was carried out almost exclusively by the team members in this department. Now, my team’s mission is not so much to promote Toyota’s interests from the top down but to facilitate others – from executives to dealers to suppliers to team members – to represent the company and the brand from the grassroots up. It’s an approach that gives us multiple points of contact with a much wider array of elected officials.
More than that, these Toyota people are voters in the districts of the elected officials they’re engaging with – and politicians listen closely when a constituent is talking.
Have these Toyota emissaries embraced this new challenge?
Absolutely. Let me use the dealers as an example. They understand how government can help or hurt their business. In the past, though, the dealer might not have known how best to engage in the process. Now, with 600 dealers in our grassroots program called the Toyota/Lexus Dealer Advocacy Network (TLDAN), we are helping them to more easily engage on issues of interest to them and Toyota.
How does it work?
Well, for example, we can send out a call to action and, with just a few clicks, each of the dealers in TLDAN can send a personal email to their member of Congress or state legislator on an issue important to their competitiveness. At the federal level, there are 435 Congressional districts – and we have a TLDAN dealer in nearly all of them. That gives us clout that other companies can’t match.
It works because everyone appreciates just how high the stakes are. For Toyota, the recall crisis was a wake-up call for the company about the power of government and the importance of being able to defend ourselves and advance our interests. I was fortunate to come on board when everyone here had already figured that out – albeit they learned the hard way.
Seems like fortuitous timing, given President Trump’s focus on the automotive industry. Why do you think this sector of the economy is so important to him?
Donald Trump won the election because he broke what’s known as the Blue Wall. This refers to Midwestern states like Wisconsin, Michigan and Pennsylvania that have voted Democratic for the past quarter century, as well as the swing state of Ohio. All presidents want to be reelected. So if President Trump wants to be reelected, he will need to win in those states again. His focus on manufacturing jobs, in particular automotive jobs, plays very well in those states.
Toyota's "Embassy" -- Here's the entryway to Toyota's Government Affairs office in our nation's capital. Its mission is to promote the company's public policy interests in coordination with executives, dealers, suppliers and team members.
At the same time, the President has emphasized a philosophy of “America First,” as evidenced by a greater focus on the Detroit-based automakers. What does that mean for Toyota?
It means we really have to shine a light on Toyota’s presence in this country. For instance, we talk about the fact that Toyota is celebrating its 60th anniversary of operating in the U.S. Just in the past year, we announced a $1 billion investment in the Toyota Research Institute, $600 million in our plant in Indiana, $1.3 billion in our plant in Kentucky and – of course -- the opening of our sparkling new headquarters in Plano. We also announced that we will invest $10 billion in the U.S. over next five years.
We have a great story to tell. And, I think, it’s starting to break through. Recently, President Trump provided a nice quote about our investment in Kentucky. That was the first time he made such a comment about a non-Detroit automaker. We are also making connections with key people in the Administration. Akio Toyoda has met with Vice President Pence on two occasions, and between the two of them, Jim Lentz and Bob Carter have met with the Secretaries of Transportation, Commerce, Energy and the EPA Administrator. So we are working quickly to build relationships with the new Administration.
After 60 years, you’d think this story would be common knowledge.
There is, of course, an awareness of Toyota in the U.S. But the task of making our case never ends.
We need to continue highlighting the magnitude of our economic presence and why we deserve a seat at the public policy table. But, even in the most favorable political environment, that will never be a reserved seat. We’ll always have to fight for it. And if you’re not at the table, chances are you’re on the menu.
It sometimes feels like we’re the visiting team. Just as in sports, we may not get the close calls. The crowd may not always be on our side. But our job is to win. And we need to be able to win our away games.
Which areas of public policy are of particular importance to Toyota right now?
There are four main thrusts: 1) tax policy; 2) trade policy; 3) fuel economy regulations; and 4) autonomous vehicle regulations.
Of these, the much-discussed Border Adjustment Tax, or BAT, is by far our top priority. In simple terms, if implemented, every product that comes across the U.S. border would be subject to a 20 percent tax.
Take, for example, the Camry. It’s the most American-made vehicle you can buy. Yet 25 percent of its parts are sourced outside of this country. So if BAT were to be implemented, it would increase the cost of the Camry by $1,000. If we were to raise the price by that amount, we would sell fewer cars. If we were to absorb the cost, our profitability would be severely challenged. It’s not too extreme to say that BAT poses an existential threat to the company.
When making presentations on this issue, I often bring along a prop to help drive home the point. It’s a full-scale replica of a Spartan shield that was used in the movie "300." It’s three feet across and weighs 17 pounds. I tell the story of the young male Spartan going off to war and the last words he hears from his mother: “Either come back with your shield or on it.” It’s the same for Toyota and the battle over BAT. And, trust me, we have every intention of coming back with our shields.
We seem to be winning the battle. The administration recently released its tax plan and BAT was not part of it. News reports indicated that intense lobbying from Toyota and other big retailers, such as Wal-Mart, Target and Home Depot, played a key role. Is it time to lay down your shield?
It might be a nail in the coffin, but BAT is not dead yet. I have a slide in my presentation with a picture of Jason from the “Friday the 13th" movies. And I say, “We are not going to declare the BAT dead until it’s completely dead. Because, just like the villain in a horror movie, every time you think it’s dead, it comes back.” So we’ll keep making our case on BAT until it’s irrevocably dead. With no chance of a sequel.
Let’s shift our attention to trade. What’s Toyota’s position on this front?
It’s important to remember that 95 percent of the world’s population lives outside of the U.S. So for our economy to grow, the country needs to be able sell its products globally. Toyota’s U.S. manufacturing plants contribute to this flow. We now export vehicles made here to 34 countries. And trade deals like NAFTA allow us to be far more competitive.
The administration seems to be softening its stance on this, too. President Trump campaigned on pulling out of NAFTA. The latest news reports, though, suggest he is open to renegotiating it.
It’s an encouraging sign. But, like with BAT, we will remain vigilant.
Meanwhile, one of the strengths of the U.S. is its ability to attract investment from around the world. In many ways, Toyota is the poster child for this kind of investment.
Jobs are part of this equation. But it’s also about contributing to the communities in which we operate. That’s something where every team member, through their volunteer efforts, can make a big difference.
The EPA’s fuel economy standards have also been in the news a lot lately. Toyota, as a champion of hybrid vehicles, has been a leader in the search for improved fuel economy. Yet it seems we’ve joined with other automakers in petitioning for a softening of the standards. What’s going on here?
We’re not pushing for a rollback on fuel economy. What we, and the other manufacturers, have asked for is a return to the agreed upon timeline – which includes a midterm review to make sure the standards are still in alignment with things like the price of gasoline and consumer preferences. The Obama administration tried to rush the process because they were concerned about what the Trump administration would do. That’s what we objected to.
I think it’s also important to remember, when discussing this issue, that it wasn’t all that long ago that two of the three Detroit-based automakers filed for bankruptcy. Yet it was the auto industry that led this country out of recession. Things can change in a hurry. So our overriding concern is to ensure that Toyota, and the industry, remain competitive.
You said autonomous vehicles are an area of focus for your team. It would appear such innovation is in our future. What role is Toyota playing to help shape the regulatory landscape within which this shift in technology must operate?
Short answer: We’re playing a leading role. Toyota has more patents on this technology than any other company, including Google. And we’re a leader in the public policy space with a particular emphasis on safety.
The key point here is that different developers have different visions for how this technology will be deployed. Companies like Uber and Waymo, and even some automakers, are pushing legislation that would advantage their business plans and disadvantage other plans. We are working hard to make sure that the policy landscape allows for maximum flexibility on what we deploy and how we deploy it. We are all seeing a flurry of activity at the state level, and face a very real risk of a patchwork of inconsistent state laws. We are actively involved in efforts to ensure a single, national framework for autonomous vehicles so that we can test and deploy these things across state lines.
Here’s another tangible sign of its importance: the first job I created when I got here was director of innovation and technology policy. In five years, it went from not existing to being the most active area for our team – encompassing everything related to connected cars, such as privacy, cyber security, vehicle to vehicle communication and autonomous vehicles.
We’ve focused heavily on the federal government. What role does your team play on the state level?
I’m glad you asked. The federal issues get the headlines. But it’s the state issues that hit the bottom line. So we work hard to build relationships with governors and key legislators.
Things move fast in the states. And it’s a bit like playing whack-a-mole. It’s a lot easier to see and stop an issue at the federal level. It’s much harder to keep an eye on 50 different states and be quick enough to react before one establishes a new precedent.
A prime example is Tesla, which is challenging the franchise laws in multiple states in hopes of selling their vehicles directly to customers. As I mentioned earlier, Toyota’s relationship with its dealers is one of its competitive strengths. So we’re very much interested in keeping the current system in place.
What’s the one issue that keeps you up at night?
Truth be told, I sleep pretty well.
But what I will say is that every company is always in one of three states of being: 1) in a crisis; 2) coming out of a crisis; or 3) heading into a crisis it can’t yet see. So what we’ve tried to do is build an organization that can respond to any threat.
Clear and concise communication is critical to this. If you can’t explain your issue to an official in the time it takes to ride an elevator, you’re in the wrong line of work. Some lobbyists get lost in the weeds. Some are too superficial. The trick is to understand the complexity of the issues, but then make the complex simple.
I love it! The issues are always changing. The players are always changing. And politics is dynamic. I think that’s why, after all these years, I still get excited about the work. Always.
By Dan Miller