TOYOTA CITY — With the yen near all-time highs against the dollar, Toyota Motor Corp. said it aims to make compact-car exports from Japan profitable by simplifying production techniques and slashing expenses.
"If we can cut costs by around 20 percent, we can fully compete, even at ¥80" to the dollar, Executive Vice President Atsushi Niimi said Tuesday. "By 2013, new models made in Japan have to be competitive at that level," he said. Toyota at that point also will have to decide where to produce its next generation of vehicles with improved fuel efficiency and lower emissions, reported The Wall Street Journal.
The company previously said it can't make a profit on exported compact cars when the dollar is below ¥90. The dollar fetched ¥80.26 at the close of New York trading on Monday. Mr. Niimi's target sets a new benchmark for Toyota's 17 factories in Japan.
The Japanese currency's appreciation to historic levels has had a disproportionate impact on Toyota because nearly half its global sales volume consists of cars made in Japan. For Japanese rivals Honda Motor Co. and Nissan Motor Co., the level is about 25 percent.
The yen's relentless rise has sparked debate over the wisdom of Toyota President Akio Toyoda's oft-repeated pledge to keep production of at least three million vehicles a year in Japan. Toyota executives in charge of finance and sales have questioned whether Japan's biggest auto maker by sales can afford to keep its domestic manufacturing base intact.
Over the past decade, Toyota has been able to achieve dramatic cost cuts while maintaining employment in Japan, mostly by using less-expensive parts. But some critics have said that resulted in lower quality, leading to increased recalls. In the wake of the massive recalls of 2009 and 2010, the company recommitted to making quality a top priority.
The chairman of the Japan Automobile Manufacturers Association, Nissan operating chief Toshiyuki Shiga, said Monday it is impossible to export vehicles profitably from Japan as long as the dollar remains around ¥80 yen.
Mr. Niimi, who is in charge of Toyota's global manufacturing operations, said Tuesday that he has no plans to close Japanese factories. Instead, the company will preserve some excess capacity to meet any upswings in demand, while the company trims costs by introducing new technologies for such areas as assembly and parts design.
The key behind that drive is a concept Mr. Niimi described as "net shape," that is, reducing the number of steps required to make a key part. For example, Toyota and its suppliers have simplified production design to allow pipes used in vehicles to be stamped out prebored, eliminating the need for precision boring machinery.
Toyota also plans to halve powertrain costs in its next generation of Prius hybrid vehicles by better integrating the internal-combustion gasoline engine with the electric motor, Mr. Niimi said.
Even so, Toyota acknowledges the limits to domestic production. Mr. Niimi said the auto maker plans to increase parts imports from a joint venture operation in China as a way of coping with the yen's strength. Current use of Chinese-made parts in Japanese-made cars is "minimal," he said.
The latest move to cut costs comes as Toyota speeds production to recover from the impact of the March 11 earthquake on the company's supply lines. Mr. Toyoda said last week that the companies' factories world-wide will resume operating at normal capacity next month.
Output of some models will be below normal, however, with other models taking up the slack to meet pent-up demand.
Mr. Niimi said output of the RAV4 and Lexus RX sports-utility vehicles will remain constrained because their specialized rollover-prevention sensors still are in short supply. He said production of all models could resume as soon as October.
The company initially had said that full production was unlikely until November or December due to acute parts shortages. Toyota worked with the Honda, Nissan and other Japanese auto makers to re-establish vital supply lines.
"Our initial best guess was that full production wouldn't be restored until autumn, meaning delayed output of two million vehicles," Mr. Niimi said. "But the pace of recovery has picked up to the point that we'll be back to normal by July, which means only 900,000 vehicles will be affected."
Separately, Toyota said it will hire 3,000 to 4,000 temporary workers for its factories in Japan. Hiring will start next month and be completed by October. The move reflects Toyota's efforts to catch up for lost output after the earthquake. Toyota routinely uses temporary workers to smooth out the production cycle.
Mr. Niimi, a former operations chief for Toyota in North America, said he expects a new Toyota plant in Blue Springs, Miss., will begin production as soon as October. The factory had been slated to make Prius vehicles, but instead will assemble compact Corollas. Mr. Niimi said Toyota is considering production of a new type of Prius family vehicle in the U.S., but he didn't specify where or by when.
Mr. Niimi said he agrees in principle with an outside panel's recent recommendation that Toyota appoint a non-Japanese director to its board. "I think it's just a matter of time," he said. The person likely would come from the ranks of Toyota's overseas factory managers, he said.
An independent panel led by former U.S. Transportation Secretary Rodney Slater last month recommended that the company institute several internal reforms, including the addition of at least one foreigner to its board. The panel was created by Toyota in the wake of the company's recalls in 2009 and 2010. Jim Press, Toyota's first non-Japanese board member, left the company in 2007.
