New cost-cutting measures boost Toyota earnings
Firm’s half-year savings top ¥100 billion
TOYOTA, Asia’s biggest car maker, has saved ¥100 billion (R12.4bn) in the half-year to the end of September through measures that include rolling out a new manufacturing process.
The money will help to bolster spending on research and development (R&D) to a record ¥1.06 trillion this year as president Akio Toyoda pushes the company deeper into new electrified powertrains and artificial intelligence, where, he says, the vehicle maker needs to lead.
Aggressive cost cutting, a weaker yen and continued dominance of the Japanese market led Toyota to raise its full-year profit yesterday and announce a share buyback.
“We not only need to develop these leading technologies, but we also need to commercialise them,” chief financial officer Osamu Nagata said. “In order to do that, we need to increase R&D expenses. This will be a cost burden, so we need to speed up cost reduction.”
Toyoda had earlier set up a task force comprising four executive vice-presidents, including Nagata, to ensure that new spending was funded by cuts in other programmes.
Toyota predicted that operating income in the year to the end of March may be ¥2trln, up from the ¥1.85trln forecast in August.
The improved forecast signals that Toyota may avert a second consecutive annual profit decline, a landmark that last happened since 1994 and something Toyoda has vowed to prevent.
A weaker yen is providing a strong tailwind, adding ¥175bn to projected operating income.
Toyota now sees the yen averaging 111 per dollar and 128 per euro over the year to March, from 110 and 124 seen in August. While Toyota joins Honda in raising annual profit forecasts, Subaru cut its estimate for the fiscal year and Mitsubishi maintained its numbers.
Toyota warned that incentive spending and the continued customer shift toward trucks and SUVs were clouding the outlook for the US market, the company’s biggest.
Despite the caution, Toyota is on track to sell more vehicles in the country this year than in 2016, even as the market heads for its first annual contraction since 2009. In the three months to September, Toyota took a 15 percent share in the US for the first time since 2009, outselling Ford over the entire quarter.
Toyota’s RAV4 is the best-selling compact crossover in the country, and in July it introduced an all-new Camry, America’s best-selling car.
The Camry is the first model from Toyota that has been redesigned from scratch around the new manufacturing process, which saves costs by using more shared parts across different vehicles and simplifying the manufacturing process.
Toyota is strengthening its presence in the US, joining with Mazda to build a $1.6bn (R22.6bn) vehicle plant in the country. As a consequence of the plan, Toyota reduced the size of its initial investment in a new Mexican factory by 30 percent to $700 million.
In January, President Donald Trump criticised the Mexican factory plan, demanding that Toyota build a plant in the US instead.
Trump, who is in Asia this month, left Japan on Monday without a concrete agreement to address what he deems an unfair trade relationship between Japan and the US. – Bloomberg