Tokyo: Toyota Motor Corp, the world's largest automaker, said it would halt a production line in Japan as it looks to cut excess capacity to return to profitability amid an industrywide sales slump.
Car plants around the world are idle or running below capacity as the industry copes with a slide in sales that sent General Motors Co and Chrysler Group LLC into bankruptcy and has Toyota headed for a record loss this year.
Total cuts could reach 700,000 cars, or 7 per cent of Toyota's global capacity, including a production line in Britain that may be halted and a joint venture with General Motors in the US likely to be closed, a source with knowledge of the matter said.
"Though sales in some countries have been picking up, the outlook for global car demand is still uncertain," and the company thinks it should be prepared, the source said.
Toyota's sales have been boosted over the past few months by government incentives aimed at kick-starting demand, but it is still plagued by an excess capacity of more than 3 million vehicles following a rapid expansion earlier in the decade.
The company said it has decided to halt a production line in Japan for about a year and a half from next spring.
"The production cut is positive for its earnings, but there is room for further capacity cuts in the United States and elsewhere," said Yoshifumi Tabei, an auto analyst at Kazaka Securities. Shares of Toyota closed up 1.5 per cent, in line with the benchmark Nikkei average, which rose 1.4 per cent.
Toyota expects to lower its break-even point by halting some assembly lines, but will not dispose of them so that it can quickly raise production in the event of a demand recovery. Workers on the halted Japanese production line will be employed at other Toyota factories.
The source said the extent and timing of the output cuts had not yet been set but the Nikkei business daily reported that Toyota planned to reduce its global capacity by 10 per cent, or 1 million vehicles, as early as the current financial year to March 2010.
