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TOYOTAS 21ST CENTURY DIVERSITY STRATEGY

A Comprehensive Program for Minority Participation in Toyota Today and Tomorrow

Toyotas 21st Century Diversity Strategy

Introduction
Toyota Diversity Strategy

Section One
Diversity and The Toyota Way Our Guiding Principles

Section Two
Procurement Doing Business with Minority-Owned Companies

Section Three
AdvertisingNew African-American Advertising Agency

Section Four
Dealer RepresentationCreating Successful Minority Ownership

Section Five
Employmen tEnhancing Minority Representation and Inclusion

Section Six
Retail Initiatives Avenues for Increasing Minority Participation

Section Seven
Community Involvement Supporting Minority Communities and Causes

Section Eight
Diversity Advisory Board Outside Advice and Accountability

Section Nine
Implementation and Accountability Moving the Agenda Forward

The Toyota Diversity Strategy

Leadership is a choice we make every day at Toyota. Over the last four decades, we have redefined leadership within our industry by constantly moving the benchmark of quality, corporate responsibility and best practices. With a comprehensive strategy that is firmly rooted in the Toyota principles of continuous improvement and respect for people, we now have the opportunity to become a leader in corporate diversity. We are pleased to present the Toyota Diversity Strategy, a ten year, multi-billion dollar sustainable commitment to minority participation in Toyotatoday and tomorrow. The Toyota Diversity Strategy outlines the processes and programs we will use to achieve our diversity goals. The programs discussed in this document are significant and innovative and will impact our organization in meaningful ways. This plan has received commitment from the highest-level officials in Japan and our senior leadership in North America.

Essential Elements
At the core of our plan are elements from which we will build a sustainable diversity platform:

. We aligned our diversity commitment to the tenets of the

Toyota Way, respect for people and continuous improvement.

. We secured the support of our senior management. . We established real goals ones that are actionable, ones that stretch us
beyond the status quo, and, most importantly, ones that we can achieve now.

. We have made ourselves accountable. We have established criteria by

which we will measure change and by which we will be judged.

. We have committed to a training and education program to acquire

new skills and gain new understanding.

. We created a diversity management structure with the authority and

conviction to push our organization toward its vision.

. We have committed to an ongoing communication strategy. We will

communicate our commitment and progress in diversity to all who have a stake in the future of Toyota.

Nine Diversity Initiatives

Toyotas diversity strategy will impact our workplace, our dealerships, our business partners and the larger community. The initiatives discussed in this strategy range from increasing minority representation in senior management to addressing the under-representation of minorities in retail management positions. We are devoting substantial resources (both human and financial) to ensure that all aspects of the plan are fully staffed and fully financed. Further, Toyota is taking the lead in fostering diversity throughout the automotive industry. Two programs in particular address systemic issues in the retail sector and will bring genuine, tangible, and widespread economic benefits to minority communities.

A Better Toyota
Toyota sees diversity as a pathway to create a better Toyota. Success in diversity gives Toyota access to the best and the brightest. It creates opportunities for new partnerships. Diversity allows Toyota the ability to fully participate in todays changing marketplace. Diversity gives Toyota additional ways to make a difference and to earn the respect of all of our communities. In short, it provides Toyota with a new way to fulfill its mission to become the most successful and respected car company in America.

Diversity and the Toyota Way Our Guiding Principles

Over the next ten years, Toyota will make a multi-billion dollar investment in diversity and align diversity with its mission and core business strategies.

The Toyota Way is based on the legendary manufacturing system that has helped Toyota build some of the best and most reliable cars in the world. The Toyota Way is more than a set of tools and techniques. It is an attitude, a philosophy and a culture that permeates all that Toyota does, including our quest for leadership in diversity. Positioned within the Toyota Way, the diversity strategy represents a fundamental sea change in the way we do business and think about doing business. For Toyota, diversity is an opportunity to continuously improve every aspect of our business and to show our respect for people.

Our Commitment

. Toyota is committed to
becoming the industry leader in diversity.

. Over the next 10 years,

Toyota will make a significant impact in the areas of minority procurement, dealership development, management development, employment, job training, and community support.

Toyota Diversity Advisory Council Community Involvement Job Training Retail Management Development Minority Advertising Dealer Representation Procurement Employment Diversity Management Structure

Procurement Doing Business with Minority-Owned Companies

In 2002, Toyota will spend $700 million with minority-owned businesses.

Toyota seeks long-term quality relationships with its business partners and suppliers. Partners and suppliers are considered part of the Toyota family and are an integral part of the legendary Toyota supply chain management network. Building on the success of the minority procurement program that started just four years ago and has already made great strides, Toyota is on track to become an industry leader in minority supplier development. In addition to its direct investments, Toyota leverages its relationships with all of its suppliers to create a second tier of minority purchasing. This creates even more economic opportunity for minority businesses. Toyotas procurement efforts will include the diversification of our professional service providers. Toyota builds accountability into its minority procurement systems. Its procurement program offers a state of the art training program. Toyotas opportunity fair is the largest in the industry, attracting thousands of minority vendors each year.

Our Commitment

. TMMNA will purchase at

least $600 million from MBEs in 2002, surpassing its 5% minority procurement goal.

. Toyota numbers are in

addition to the $100 million in confirmed Tier Two minority purchasing at TMMNA.

. TMS will purchase at

least $100 million from MBEs in 2002, including professional services.

. TMS will achieve its 5%

Minority Expenditure Trend

minority procurement goal by 2003 and will impose a 5% goal on its key Tier Two suppliers.

$ Million
700 600

. TMS plans to set a goal of

putting $100 million into minority and women-owned money management firms by the end of 2002.

500

. Toyotas financial services

company will continue its use of minority investment banking firms in connection with its ongoing funding efforts.

400

300 200 100 1997 1998 1999 2000 2001 2002 Projected

Advertising New African-American Advertising Agency

Over the next three years Toyota will spend $150 million on African-American and Hispanic promotional programs and establish a new relationship with an African-American advertising firm.

Loyal and satisfied customers are essential to Toyotas business. To continually grow our market share, we must connect with all of our potential customers in meaningful and creative ways. This is especially true in a marketplace where we must be heard above the cacophony of competing advertising messages. In a growing diverse marketplace, Toyota must have advertising partners who bring a wide array of perspectives, creative solutions and energy to our business. These partners will help Toyota realize the promise of a diverse market. According to the National Association of Minority Automobile Dealers, approximately 15% of American new car buyers are minorities. This number is substantial and represents tremendous growth potential for Toyota among this important group. Conill Advertising has helped Toyota reach the Hispanic market. In September 2001, Toyota will enter into a new relationship with an African-American owned advertising firm to extend Toyotas reach to the African-American market. To further ensure that Toyotas marketing materials are effective and appropriate for multi-cultural audiences, Toyota has drawn on its diverse employee base to establish an Advertising Diversity Awareness Panel. On a frequent basis, the panel reviews upcoming advertising and provides feedback and insights on the messages, images and cultural context of the materials. In a multi-cultural society, where communication is even more complex, Toyota is making sure its messages to all audiences are consistent with a pillar of the Toyota Way, respect for people.

Our Commitment

. Toyotas commitment is to
capture the full promise of the ethnic marketplace. We bring to this goal a minimum commitment of $50 million annually to African-American and Hispanic marketing and advertising firms, which will be split roughly on a 50-50 basis.

Dealer Representation Creating Successful Minority Ownership Interests

Driven by a vision-goal to lead the industry in successful minority dealer ownership in terms of profits and per store sales, Toyota will add 4 to 6 new minority dealers each year over the next 10 years and increase our dealer development budget to $25 million for 2002.

When it comes to Toyota dealerships, our aim is clear: To have the best dealers in the industry selling the best products in the world. This philosophy extends to Toyotas minority dealership program and is the reason Toyotas dealer diversity program is one of the most successful in the industry. While the industry tendency is to emphasize quantity over quality when it comes to minority dealerships, Toyota takes a careful approach to increasing its dealer count. This approach results in dealership values far exceeding those of other leading manufacturers. For the minority dealer, this equates to greater profits and a more valuable franchise. For the industry, Toyotas approach provides an exemplary model for minority dealer success.

Our Commitment

. Building on the success

that has made Toyota #2 in the industry for percentage of minority ownership and #1 in minority dealer success, Toyota is pushing for even greater gains.

. Toyotas vision-goal is to
place 4 to 6 new minority owners each year over the next 10 years.

. Toyota will expand its

model to embrace and encourage increased levels of minority ownership interests, matching investors to investment opportunities.

Employment Enhancing Minority Representation and Inclusion

With a base of nearly 8,000 minority associates nationwide, Toyota will increase minority representation at senior and executive levels of the organization.

Toyotas North American workforce is in many ways beautifully diverse. Statistical comparisons with the civil labor workforce and the equal employment profiles of the major U.S. automakers bear this out. However, we recognize that there is still more to do as we dedicate ourselves to the goal of meaningful diversity and inclusion at every level of the organization, particularly at the top. Toyotas existing significant human resource tools and programs will be better aligned with our new diversity strategy. These include The University of Toyota, Career Net, minority scholarships and intern programs, Toyotas management trainee program and its leadership development programs. Toyota intends to become, over the next five years, an outstanding employer of choice for all groups-by every reasonable and objective measure.

Our Commitment

. Toyota is committed to a
immediate and steady improvement in its representation of people of color and women in our senior management ranks.

. TMS will create a new

Director of Diversity at a senior management level. The Director of Diversity will report to the executive committee and be charged with the responsibility of coordinating all aspects of TMS diversity efforts.

. Toyota will improve representation through a strategy of targeted development, recruiting and retention.

. TMS will implement a

comprehensive dispute resolution process for associates.

Retail Diversity Initiatives Avenues for AdvancementMinority Participation in the Industry

Through its newest program, Avenues for Advancement, Toyota will create sustainable avenues for minority candidates to become successful senior managers in Toyota and Lexus dealerships.

Retail Management Development

The automotive retail environment, which employs more than one million Americans at more than 22,000 dealerships, offers thousands of well-paying management opportunities. Partnering with its own dealers as well as major publicly and privately owned dealer groups representing all makes, Avenues for Advancement will open a new dimension to increase diversity in the retail environment. Retail automotive experience, especially at the general manager level, is considered essential for anyone aspiring to acquire equity in a dealership. Providing specific training in dealership management will create the allimportant link between successfully operating the dealership and owning it. Toyota funding will help subsidize real-world experience as well as education through such institutions as Northwood Universitys automotive retail curriculum and the University of Toyota.

Our Commitment

. Toyota is committed to
helping talented minorities prepare themselves for leadership positions within the retail automotive sector.

. Toyota pledges $1 million

to partner with Toyota/ Lexus dealers to help recruit, train, and develop minority employees for dealership management and technical positions.

. Toyotas commitment will

have a significant economic impact within minority communities.

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Retail Diversity Initiatives Avenues for AdvancementMinority Participation in the Industry

With thousands of jobs open within the technical fields of the automotive industry, Toyota is opening doors for hundreds of minority youth.

Automotive Training Centers

Toyota depends on certified automotive technicians to provide quality service for the millions of Americans who own our cars and trucks. Yet each year there is a dwindling pool from which to draw candidates to complete intensive training programs and become automotive technicians. In fact, the industry at large is witnessing a shortage of thousands of workers in this field each year. In 1993, Toyota created the Los Angeles Urban League Automotive Training Center (ATC). This joint venture with the Los Angeles Urban League provides no-cost job training and placement for unemployed and underemployed urban residents in the automotive industry. The program has graduated 850 trainees who have gone on to secure entry-level jobs. The economic impact of this program has exceeded $20 million to date. Starting in 2002, Toyota will replicate the success of the Los Angeles ATC by opening a similar training facility in the eastern United States. Over the years, it too will have a significant economic impact of hundreds of millions of dollars.

Our Commitment

. Toyotas investment in the

Los Angeles Automotive Training Center (ATC) has exceeded $7 million since 1992.

. The Los Angeles ATC continues to receive $1 million annually for operating costs.

. Toyota will spend $4 million to build an ATC in the eastern United States and train 125 students annually.

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Community Involvement Supporting Minority Communities And Causes

Each year, Toyota invests millions of dollars towards education and other social programs in the community, providing thousands of people a chance for a better life and access to opportunities.

Being a good corporate citizen is important to Toyota. We support a large number of civic, cultural and charitable groups, education and scholarship initiatives. Our support focuses on education with an emphasis on mathematics and science. One of the most significant aspects of Toyotas diversity activities is its support of minority organizations. Among these are United Negro College Fund, Hispanic Scholarship Fund and our trademark Toyota Community Scholars program. We also provide funding and volunteers to the 100 Black Men Young Black Scholars program. Toyota supports organizations by giving time as well as dollars. Many of our executives and associates volunteer in a broad range of non-profit boards, mentoring and scholarship programs and other community based activities. Toyota recognizes its corporate responsibility to respond to the needs of these communities.

Our Commitment

. Toyota is committed to
giving back to minority communities through financial resources and corporate volunteerism.

. Toyota will allocate a

minimum of 10% of its annual giving to minority groups and causes.

. Toyota will dedicate a

senior staff member to supervise corporate giving on minority programs.

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Diversity Advisory Board Outside Advice and Accountability

By the end of 2001, Toyota will appoint a distinguished panel of outside advisors to provide North American management with guidance, oversight and fresh ideas for its diversity strategy.

As an international company, Toyota Motor Sales, USA, is a wholly owned subsidiary of an overseas firm and therefore does not have the traditional American board of directors structure. In a move believed to be unprecedented for a multi-national company, Toyota will establish a Diversity Advisory Board consisting of high-level community leaders from such fields as business, law, labor and government. As a group, this board will represent the racial, ethnic and gender diversity of the community. Built on a model much like the Toyota and Lexus Dealer Advisory Councils, the Toyota Diversity Advisory Board will bring real world insights, provide an objective sounding board for our diversity strategy and, over time, create a powerful network on a range of issues and opportunities. The Toyota Diversity Advisory Board will meet with senior management several times a year to be given overviews of Toyotas North America operations. The Board will be fully informed about Toyotas diversity strategy in progress. We expect the Boards involvement to be a significant asset. This program is expected to become an integral part of our ongoing North American diversity efforts.

Our Commitment

. Toyota is committed to
the success of its 21st Century Diversity Strategy.

. Toyota has established

measures for real accountability, real change and real impact.

. Toyota will appoint a

Diversity Advisory Board as an expert resource and a virtual guarantor of accountability.

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Implementation And Accountability Moving The Agenda Forward

Toyota has developed a strong implementation process for its diversity strategy, which is supported by the highest levels of Toyota management.

Aligning resources and policies in a manner consistent with the stated importance of Toyotas diversity strategy is key to ensuring that the strategy remains a priority. Only by dedicating resources and conveying the centrality of diversity to all members of the Toyota family, can Toyota generate the ongoing energy necessary to follow through with our diversity commitment. Toyota is committed to developing a culture that views diversity as a pathway to a better Toyota. This commitment demands that we support the human resources aspect of our diversity strategy. We are embarking on a five-prong plan to ensure that our diversity initiatives succeed throughout our organization. First, the senior management of Toyota North American companies will communicate the strategy to every manager and associate. There will be a system-wide rollout, both orally and in writing. Second, the implementation of our diversity strategy will be driven by real benchmarks and real timetables, which will be set forth in a written document to be provided to all relevant managers. Third, we will dedicate a lead manager in each area to ensure full compliance at all levels of the company. These lead managers will report directly to a senior level executive on a quarterly basis. In addition, we will provide incentives to managers (reflected in rewards, bonuses and positive performance evaluations) to ensure their full compliance with the diversity plan and their full energies to achieving the specific goals of the plan and meeting its timetables. Fourth, we will have in place a planned deviation system, which will address situations where managers fail to achieve our established goals and timetables or commit less than their full efforts to achieving them.

Our Commitment

. Toyota is committed to
regular reviews and the strong oversight of our processes, programs and policies on diversity, so to ensure that we achieve all that is truly possible for a great company like Toyota.

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Finally, we will continue to work with outside organizations to ensure that our strategy is working and remains state of the art. We know that our diversity strategy is the first step in becoming the company we strive to be. We have already referenced the importance of communications to all stakeholders; our strategy relies on ongoing communications, updates and announcements of success, and discussions of serious issues with our associates, our suppliers, and our community. Starting with the launch that will communicate the diversity strategy from our most senior executives, Toyota will make information accessible and will have mechanisms to respond to issues and concerns. Ongoing communications and prompt feedback will be key to the success of the program. Toyota fully appreciates the importance of follow through.

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