Toyota was toyoda in Japanese, but they changed the spelling to look better in English. It can be done. And why not? They change the names of cars all the time. Why not the brands too?
Because brands have a value. And probably VW doesn't really care that much if some people call them wolkswagen instead of folkswagen (even if they could pronounce the latter).
Also, I don't think FW would look better than VW ;). And well, Toyota didn't change their name to look better in English (or rather, written with the Latin alphabet). At least not according to wikipedia. Quite the contrary, it was about how it was written in Japanse:
"Vehicles were originally sold under the name "Toyoda" (トヨダ), from the family name of the company's founder, Kiichirō Toyoda.
[...]
In September 1936, the company ran a public competition to design a new logo. Of 27,000 entries, the winning entry was the three Japanese katakana letters for "Toyoda" in a circle. However, Rizaburo Toyoda, who had married into the family and was not born with that name, preferred "Toyota" (トヨタ) because it took eight brush strokes (a lucky number) to write in Japanese, was visually simpler (leaving off the diacritic at the end), and with a voiceless consonant instead of a voiced one (voiced consonants are considered to have a "murky" or "muddy" sound compared to voiceless consonants, which are "clear").
Since toyoda literally means "fertile rice paddies", changing the name also prevented the company from being associated with old-fashioned farming. The newly formed word was trademarked and the company was registered in August 1937 as the Toyota Motor Company.[31][32][33]"
