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Cost cuts Toyota's top priority(Kyodo News International (Tokyo) (KRT) Via Thomson Dialog NewsEdge) Feb. 11--NAGOYA -- In front of JR Nagoya Station at the end of last year, applause erupted when a steel frame with a banner reading, "Congratulations. Roof-Raising" was lifted under a clear sky. The high-rise building, called Midland Square, will become the base of Toyota Motor Corp.'s sales divisions, both domestic and overseas, in early 2007, a base for a "new age" along with the head office in Toyota city in southern Aichi Prefecture and the Tokyo head office. "It is most suited as a window to the world," said an executive who attended the roof-raising ceremony. Toyota is expected to overtake General Motors Corp. of the United States in the near future in both sales and the number of vehicles sold on a consolidated basis to become the world's largest automaker. "We are not conscious of whether we are the world's largest. We will merely try to continue growth and establish a firm foothold," said President Katsuaki Watanabe. But contrary to his statement, Toyota's global strategy is proceeding at an amazing pace. In the last several years, the group's global production has increased about 10 percent annually. "When we try to scale down the plan, those at workplaces say no, and ask why there should be such a plan while sales are bullish," said an executive. The company's production in 2008 will certainly top the 10 million-unit level, a performance even GM has been unable to achieve. The pillar of Toyota's growth strategy is the capture of new markets overseas, cost reductions and strengthened environment-protection technology. The company will build up production bases in Asia and Russia, whose markets are expected to expand. In the field of hybrid vehicles, which emit fewer pollutants, the company is quickly developing the next generation of its Prius car. Toyota's target is to raise its global market share to 15 percent in the early 2010s, a target expected to be realized, but in Japan, sales are continuing to drop, making profitability sluggish. This is an area where the company wants to improve. Parts manufacturers under the wing of Toyota are eager to expand their factories. "At any rate, we will have to follow" Toyota, said the president of a major parts company. Toyota plans to continue with consolidated capital investment at record levels of some 1 trillion and several hundred billion yen annually for a while. The effect of this spending on related enterprises and regional areas is called "Toyota Prosperity." Also expanding are peripheral businesses supporting automobiles. In April this year, Toyota Tsusho Corp. will merge with fellow general trading house Tomen Corp. The automobile loan and nonlife insurance businesses are also favorable, and the Toyota group's total financial assets amount to 10 trillion yen, equal to those of a major securities company. "Is there anybody who complains about a company name with the word Toyota attached?" asked an executive of Tomen, whose name will disappear in April with Toyota Tsusho to be the surviving entity. Amid the expansion of its businesses, Toyota is strengthening its efforts to reduce costs by promoting "VI Activity," a cost reduction program. Under the previous program, nearly 1 trillion yen was cut over three years. Under the present program, Toyota has increased its target for reductions in parts costs fivefold and is paying attention even to prices of parts materials. "There is no end to kaizen (improvement) even if the business performance is very favorable," said a Toyota executive. "The pillar is good labor-management relations. I would like to say thank you," Watanabe said as he shook hands with the chairman of the company's labor unions in a ceremony celebrating the foundation of the union in late January. Toyota is giving traditional priority to cooperative labor-management relations, and the president has never failed to attend major consultative meetings, such as negotiations at the spring labor offensive for higher wages and better working conditions. "Chairman Hiroshi Okuda once shed tears at a meeting. That cannot be imaginable at other enterprises," said a union executive. But there is a voice of unrest in the company. An executive giving a preview of Midland Square, where about 3,000 employees will begin work in January next year, said, "While here, they may misunderstand that they have been promoted. It is not good to forget the spirit at workplaces." His worry was not groundless. |