Toy­ota Mo­tor aims to lower break-even point for Ja­pan op­er­a­tions

The Pak Banker - - Company& -

NAGOYA: Toy­ota Mo­tor Corp (7203.T) is aim­ing to sig­nif­i­cantly lower the breakeven point for its Ja­panese op­er­a­tions through a slew of im­proved man­u­fac­tur­ing pro­cesses, a top ex­ec­u­tive said, Reuters re­ported.

Toy­ota Pres­i­dent Akio Toy­oda has said he wants to main­tain do­mes­tic pro­duc­tion of at least 3 mil­lion ve­hi­cles a year in Ja­pan to pro­tect jobs and the tra­di­tion of man­u­fac­tur­ing, or "monozukuri," at home de­spite head­winds from a stronger yen.

Toy­ota is more ex­posed to a firm yen than ri­vals Honda Mo­tor Co ( 7267. T) and Nis­san Mo­tor Co ( 7201. T) since it pro­duces a big­ger por­tion of its ve­hi­cles in Ja­pan, and is un­der in­tense pres­sure to lower costs or take the po­lit­i­cally dif­fi­cult step of shift­ing more of its pro­duc­tion over­seas. Nis­san has es­pe­cially been ag­gres­sive in pur­su­ing ways to shield it­self against a strong yen by im­port­ing more parts, as well as some cars, from over­seas.

"We're try­ing to be able to op­er­ate at 85 yen (to the dol­lar) and 70 per­cent ca­pac­ity uti­liza­tion," At­sushi Ni­imi, ex­ec­u­tive vice pres­i­dent in charge of man­u­fac­tur­ing, told re­porters.

As the global fi­nan­cial cri­sis ham­mered sales and left much of its pro­duc­tion ca­pac­ity un­used, Toy­ota em­barked on ef­forts to make its do­mes­tic fac­tory lines more flex­i­ble and in­tro­duce other changes to be able to break even at ca­pac­ity uti­liza­tion of 70 per­cent, equiv­a­lent to daily pro­duc­tion of 12,000 units.

But that had as­sumed a dol­lar rate of 90 yen, far more fa­vor­able than the cur­rent 83 yen level.

Ni­imi said im­prove­ments in pro­cesses could re­duce Toy­ota's cap­i­tal spend­ing by about 40 per­cent, lim­it­ing an­nual ex­pen­di­ture to about 700 bil­lion yen ($8.4 bil­lion) for the next five years or so. That is about half what it used to spend at its peak.

One mea­sure Toy­ota is tak­ing is to make its en­gine assem­bly process more com­pact. "We used to be­lieve that the most ef­fi­cient scale for an en­gine assem­bly line was about 18,000 units a month," Ni­imi said. "But now we think half of that is bet­ter."

He said that be­cause emis­sions and fuel econ­omy reg­u­la­tions were evolv­ing all the time, en­gine pro­duc­tion would fall to half in two to three years, hurt­ing the pace of de­pre­ci­a­tion.

By chang­ing the lay­out of the en­gine pro­duc­tion process and mak­ing other changes, Ni­imi said Toy­ota's en­gine pro­duc­tion could be 20 per­cent more cost-com­pet­i­tive than Volk­swa­gen AG (VOWG_p.DE), which he said was prob­a­bly the leader now.

"De­pre­ci­a­tion-wise, Volk­swa­gen's en­gine (pro­duc­tion) cost is prob­a­bly about 30 per­cent cheaper than ours," he said. "But we think we can win by 20 per­cent with our new pro­cesses."

Last week, Toy­ota fore­cast its sales in Ja­pan to fall 17 per­cent to a 37-year-low of 1.3 mil­lion units in 2011, worse than a 9.9 per­cent drop pre­dicted for the over­all mar­ket by the Ja­pan Au­to­mo­bile Man­u­fac­tur­ers As­so­ci­a­tion. It plans to pro­duce 3.1 mil­lion ve­hi­cles in Ja­pan, mean­ing 58 per­cent would be ex­ported.

Be­fore the global fi­nan­cial cri­sis, man­age­ment had talked of sus­tain­ing min­i­mum do­mes­tic out­put of 3.8 mil­lion ve­hi­cles.

In a sep­a­rate news item, Wall Jour­nal re­ported Toy­ota Mo­tor Corp. has restarted hir­ing for a fac­tory near Tu­pelo, Miss., that has been dor­mant since 2008, with the first 10 new re­cruits of a planned 2,000-strong work force set to be­gin train­ing dur­ing the first week of Jan­uary. Af­ter a twoyear hia­tus, Toy­ota plans to start pro­duc­ing com­pact Corolla cars at an eighth ve­hi­cle assem­bly plant in North Amer­ica in fall 2011, pro­vid­ing a long-an­tic­i­pated boost to north­ern Mis­sis­sippi. -Bloomberg

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.