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Toyota has announced a major reorganisation of Japanese production units aimed at maintaining domestic production levels amid the continuing pressures on profitability created by a strong yen.

The currency “is at a level where it no longer makes sense to keep producing in Japan,” President Akio Toyoda told a news conference. The plans are designed to improve efficiency so that production can be maintained in Japan.

Toyota plans to build around 3m vehicles in Japan this year, equivalent to about 40% of its total global production. The firm aims to continue to build at least 3m units a year in Japan.

Under the new plans Toyota will get more centralised control over its ‘body maker’ production subsidiaries. It will take full ownership of Toyota Auto Body Co. and Kanto Auto Works Ltd. via stock swaps in January 2012. Toyota Auto Body makes minivans and commercial vehicles in Aichi and Mie prefectures, while Kanto Auto Works churns out small cars in Iwate Prefecture and elsewhere. Toyota currently has stakes of 56.2% and 50.1%, respectively, and the two units’ market capitalisation totals about 210 billion yen.

The sub-contracted body makers’ output is around 1m vehicles a year for Toyota in Japan – around 30% of Toyota’s entire domestic output.

The reorganisation also calls for Kanto Auto Works to merge in the second half of next year with subcompact manufacturer Central Motor Co. and components maker Toyota Motor Tohoku Corp.

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By GlobalData

The changes will reform Toyota’s domestic production organisation. Currently, on some models, the parent company now handles development and a subsidiary is charged with production. Under the new structure, a subsidiary will carry out everything from planning to production for a particular model, but all under the parent’s lead. The wider use of common parts is also being proposed to curb costs.

“We’ll improve competitiveness by having each subsidiary handle start-to-finish production of its marquee models,” Toyoda said.

The Nagoya region will become the development base for new technologies and manufacturing techniques. In southwestern Japan, the Kyushu region will produce luxury vehicles, such as those under the Lexus brand. And the northeast’s Tohoku region will be positioned as the production base for small cars and autoparts, according to Japanese media reports.