The widely expected selection of Toyoda, 52, marks the first time a Toyoda family member has taken the helm at 's No. 1 automaker in 14 years and comes on the heels of the company announcing that global sales last year fell 4 percent to 8.972 million vehicles.
Toyoda, an executive vice president, has been groomed for years for his eventual rise. But his appointment comes sooner than some had expected. Chief executives in their 50s are relatively rare in a conservative corporate culture like Japan's that values seniority.
"I am simply determined to do my utmost in being handed this big role of steering Toyota as it faces what has been said to be its worst crisis in a century," Toyoda said in a Tokyo news conference.
The founder's family name is spelled with a "d," but the company name was changed to read Toyota as that was considered luckier according to Japanese superstition, Toyota says.
A fresh face, and the mystique of the Toyoda family name, may be exactly what the ailing automaker needs to bring its ranks together and send a strong message of change, analysts said.
Company employees say the Toyoda family name holds special meaning, although the Toyodas own only a tiny portion of the automaker's stock.
The maker of the Prius hybrid and Lexus luxury models is forecasting a 150 billion yen ($1.69 billion) operating loss for the fiscal year ending March 31 - its first such red ink in 70 years - as the global economic downturn dings demand for new vehicles.
"Toyota is raising the flag," said Yasuaki Iwamoto, auto analyst at Okasan Securities Co. in Tokyo. "It sends a strong message that moves toward change will be sped up. And that's an important message."
His appointment is symbolic, Iwamoto added, because Toyota tends to be managed by a team of leaders, which will include President Katsuaki Watanabe, who becomes vice chairman with Toyoda's rise.
Toyoda said he does not yet have concrete plans on how to lead the auto giant, but stressed he would value the needs of customers and stay close to the company's rank and file. "I want to take up challenges toward change with aggressiveness and courage," Toyoda told reporters in Tokyo.
Fujio Cho, a former president who has overseen Toyota's growth in North America, will stay on as chairman and is expected to retain considerable influence along with other senior leaders, including Toyoda's father Shoichiro Toyoda.
The friendly and unpretentious Toyoda - grandson of Kiichiro Toyoda, who founded Toyota - has been called Toyota's "prince" by the Japanese media as one of the youngest executives to join the board, in 2000.
Toyoda, who holds a master's degree in business administration from Babson College in the U.S., has overseen Toyota's China operations, Japan sales and the Internet business. Previously, he served as vice president at New United Motor Manufacturing Inc., a Fremont, California-based joint venture between Toyota and General Motors Corp., giving him key experience in the U.S.
Before the U.S. financial crisis struck last year, Toyota's sales had been booming because of its reputation for mileage and quality. But financially it remains in far better shape than American rival General Motors which had been on the brink of collapse until securing a multibillion dollar government bailout.
Toyota has been on track to dethrone GM as the world's No. 1 automaker by annual sales, a title it has held for 77 years, though the parlous state of the global auto industry would make it a hollow victory.
Detroit-based GM is scheduled to give its global vehicles sales tally Wednesday.
For 2007, Toyota sold 9.366 million vehicles globally, about 3,000 vehicles fewer than GM and just barely allowing the U.S. automaker to retain its crown.
For the first half of this year, GM, pummeled by falling U.S. sales and high gas prices, lost the global sales lead to Toyota, by about 277,500 vehicles.
For that period, Toyota's global sales rose 2 percent from the same period the year before, while GM's sales fell 3 percent.
The gap has widened since then. Toyota reported it sold 7.05 million cars worldwide during the first nine months of the year, compared with 6.66 million for GM for the same period.
Despite the intense interest in their rivalry, both companies have played down the sales numbers.
Before the downturn, Toyota had repeatedly given ambitious growth numbers, targeting 10 million vehicles in annual global sales in the next few years.
In the latest sign of dire straits, the Yomiuri newspaper reported Tuesday that Toyota was slashing its temporary workers in Japan to zero later this year to cut costs. Toyota said nothing has been decided.
Toyota, which employs about 70,000 full-time workers in Japan, has said its temporary work force in Japan will be reduced from 6,000 to about 3,000 by March. Japanese rivals Honda Motor Co. and Nissan Motor Co. have already said their temporary workers in Japan will be gone in the next few months.
Toyota shares rose 2.3 percent to 3,100 yen in Tokyo. Toyota said it was announcing a new president before trading closed.