Toyota needs to start over from “rock bottom” and will abandon for now its policy of offering a full product range world-wide to focus more on local market needs, new president and founding family member, Akio Toyoda, said at his first press conference in Tokyo today.
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“The new management feels like we are setting sail during a storm. We want to return to profit as quickly as possible,” he said. Toyota’s aim to slash fixed costs by JPY800bn ($8.32bn) in the year to next March was “only a starting point”.
”We will determine the areas where we need to push forward and the areas where we need to withdraw,” he added, without providing details.
In Europe, Toyota would shift focus to the hybrid sector, so as not to get “lost in the crowd”, Toyoda said.
Immediately after his appointment earlier this week, Toyoda reshuffled Toyota’s top management, assigning four of the automaker’s five executive vice presidents to take charge of specific regions including Europe, North America, Japan and emerging countries.
He acknowledged that the company might have overstretched itself in recent years with its brisk global expansion. “In some areas, we need to take a step backwards,” he said. ”We built our product strategy on offering a full lineup in all regions. ‘We would like to continue, but we have to wait on that in view of our current strength and capability.”
Toyota named a Toyoda family member to the top post for the first time in 14 years after it posted its first ever group net loss – of JPY436.9bn; down from a record-high profit of 1.72 trillion yen in the previous year – for the fiscal year ended last 31 March.
The company has forecast a staggering JPY850m operating loss for the current business year but some analysts believe the company is too pessimistic – a recent Reuters poll of analysts produced a consensus estimate of about JPY495bn.
”Tough conditions are likely to continue for the next two years,” Toyoda said. ”We will take every possible measure” to avoid sinking into the red for three consecutive years through March 2011,” he added.
Toyoda also said he would return 30% of his monthly salary for a year from July to take responsibility for the company’s dismal performance.
While many industry observers saw Toyoda’s organisational change announced earlier this week as a cue for a departure from a US-focused policy, he emphasised that the North American region would continue to be a key market that would form ”the pillar of Toyota’s overseas strategy”.
But he added, ”There will be changes to the market structure, which formerly focused on large-sized cars.”
Most of Toyota’s US and Canadian range consists of locally built medium or large SUVs, minivans and sedans supplemented by C-segment Corolla sedans from Canadian and Californian plants and the B-segment Yaris hatchback and sedan line imported from Japan. The automaker had earlier planned to build the Prius hybrid in a new, but now mothballed, plant in Mississippi originally slated to make Highlander SUVs but US Prius build is curently on hold indefinitely.
North American operations chief Atsushi Niimi said the market there was expected to pick up in two or three years. “We are not going to close down any plants as we aim to prepare for a recovery in demand,” he added.
Toyoda promised a deeper drive into emerging markets, many of which have been less affected by the global economic crisis than traditional territories. He also said Toyota was considering establishing a new marketing company to better meet Japanese customer needs.
He said he will continue to direct resources towards expanding the range of eco-friendly cars, focusing particularly on the petrol-electric hybrids – mainly the Prius – which have provided a rare bright spot for Toyota – its Tsutsumi factory is the only one in Japan currently working overtime and still employing some temporary workers.
The redesigned, lower-priced Prius hybrid, which debuted in Japan in mid-May and topped the sales chart the same month, has already received domestic orders for 200,000 units, already surpassing last week’s announcement of orders totalling 180,000 units.
“As the company acknowledges, it has gone a bit too far in leaning towards large vehicles as a profit driver and got a bit out of touch with consumer needs. In a sense, it’s followed the footsteps of General Motors ,” Shigeo Sugawara, senior investment manager at Sompo Japan Asset Management, told Reuters.
“I expect we have to wait at least five years for the auto market to fully recover, and that means Toyota will be left with excess capacity in that period unless its products can match consumers’ needs.”
“The company will have to learn to adjust to this new paradigm of lower sales growth and higher technology spending. But they are definitely in a better position than US companies to do so,” Yoji Takeda, a Hong Kong-based vice-president with RBC Investment Management (Asia), was quoted as saying.
“Toyoda’s position as a member of the founder family may help push through changes faster.”
