New Toyota Motor Corporation president Akio Toyoda is unlikely to make drastic changes, a Japanese auto analyst has said.
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Erasing the losses is an urgent task but fundamentally, this company does things with a medium-term vision,” Tsuyoshi Mochimaru at Barclays Capital told Reuters.
“They’re not going to suddenly change the way they do things to satisfy the short term. I expect the new management’s strategy to be an extension of the previous one’s,” he said.
Unlike bankrupt US rivals, Toyota has said it plans to ride out the downturn with its production capacity intact, arguing global vehicle demand will eventually recover.
Forced to implement non-production days and lay off temporary workers in many of its Japanese plants, Toyota has chosen to use the down-time to train workers. Already known as a lean operator, it is trying to squeeze costs further so it can be profitable using just 70% of its production capacity, Reuters noted.
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By GlobalDataToyota officials in Japan told just-auto earlier this month that they thought the days of non-production had bottomed out in May, as the company had managed to reduce finished vehicle stocks in line with plans announced earlier.
The company has since announced it would add weekend shifts at its key Tsutsumi Prius hybrid plant in Toyota City.
“A V-shaped recovery is actually not that difficult if you slash capex and jobs, for instance. Toyota could probably get a restructuring impact of close to one trillion yen. It’s not that they can’t do it – they won’t do it,” Mochimaru told Reuters.
According to the news agency, Toyoda has said he would steer the company “back to the basics” from a run of expansion in the past decade that outgoing president Katsuaki Watanabe had conceded may have been too fast.
Toyota insiders in Japan told just-auto earlier this month they welcomed Toyoda’s appointment – with one describing him as “a real car guy who loves driving”.
Another said that the outgoing Watanabe – now serving as one of TMC’s two vice chairmen – had been an excellent manager during his term and had become well respected as a mentor by younger, rising executives at the automaker.
Reuters noted that chairman Fujio Cho had admitted last January that there was some hesitation about handing the baton to the relatively young Toyoda at such turbulent times, but said ultimately that a younger leader and the Toyoda name were the best hope for taking the “drastic measures” needed during the crisis.
But neither Cho nor Toyoda specified what those measures would entail while analysts said they could be elusive anyway.
“A drastic reform at Toyota would involve cutting back its domestic production base,” Tokyo-based Deutsche Securities auto analyst Kurt Sanger said.
“But that probability is low. And with 50% of its production in Japan and the dollar at JPY95, even if the US market returns to 16m units tomorrow, they’ll still be making less profit than before.”
Toyota last month posted a stunning year on year fall in its full fiscal year operating profit from 2.27 trillion yen to a loss of JPY461bn – its worst result in its 70-year history. It also forecast that the operating loss for fiscal 2009/10 would almost double to JPY850bn but estimated that, through the reduction of variable and fixed costs, it would achieve a total profit improvement of around JPY800bn in fiscal 2010.
According to Reuters, analysts regard Toyota’s loss projection for this year as too cautious – consensus forecasts put the loss at JPY495bn – but said returning to profit would be tough, and dependent on an economic recovery.
Even then, Toyota could face tougher competition as long as the yen stays relatively firm. With most of its high-end Lexus cars produced in Japan, Toyota will either have to raise prices or accept lower margins. In contrast, a drop in the Korean won has made Hyundai’s cars more attractive and profitable.
The new, low-priced Prius hybrid launched last month has reversed the sales decline for that model, but risks eating into sales of its other, more profitable cars.
In contrast, analysts say Honda Motor’s new low-cost Insight hybrid is relatively profitable, probably yielding higher margins than its Fit/Jazz subcompact.
