Toyota Motor president Katsuaki Watanabe on Monday said the automaker would continue its efforts to cut costs to combat rising materials prices as stiff competition and reducing demand in some key markets have made it hard to raise vehicle prices.


“We’re not in a good situation to raise prices. We will continue to pursue cost reduction,” Watanabe was quoted by Dow Jones as saying at a press conference in Japan to launch a new version of the domestic market Crown sedan.


He reportedly said materials suppliers need to work more on reducing costs as automakers do, though he stopped short of commenting on whether the company would have no choice but to accept a steel price hike.


The news agency noted that Watanabe’s “sombre” remarks came right after Japanese steel makers Nippon Steel and POSCO said they had agreed to a 65% hike in the iron ore price with their supplier Companhia Vale do Rio Doce (RIO) next financial year, a move that would likely make it more expensive for car makers to produce vehicles.


Potentially higher steel prices together with other negative factors such as a strong yen, weakening domestic car demand and signs US demand is faltering are all threats to Toyota’s long run of high profitability, Dow Jones said.

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According to the report, Toyota has been working on a new cost-saving programme, ‘Value Innovation’ or VI, an initiative under which it groups automotive components into several dozen categories and lowers costs in each segment.


The redesigned Crown is the first model developed under the initiative.


Dow Jones said, via the project, Toyota aims to generate cost reductions of JPY300bn a year together with conventional cost-controlling efforts. The company expects this to be a bigger contribution than the annual cost-saving of JPY200bn achieved by through its previous initiative, dubbed ‘Construction Of Cost Competitiveness 21 (CCC21)’.


Giving an example of a change made in developing the new Crown under the VI program, Watanabe told Dow Jones that designers unified the electronic control units and actuators in the vehicle stability system into a single unit to cut the number of parts, which in turn would slash costs.