Toyota to treble profit this year, trim costs on robust growth

Tokyo: Toyota Motor Corp expects to treble its operating profit this year to more than $12.5 billion (Dh45.9 billion) — still less than half what it earned before the global financial crisis — as Japan's top automaker recovers lost ground in markets from the United States to China.

Operating profit jumped more than five-fold in January-March to $3 billion, with all production centres back up and running after last year's earthquake, tsunami and Thai floods disrupted supply chains and cost Toyota around 400,000 cars in lost output — roughly 9 weeks worth of US sales.

With robust top-line growth a given in the current year — the company predicts operating profit of 1 trillion yen ($12.54 billion), in line with market forecasts — Toyota is looking to squeeze further cost cuts in a battle to offset a strong yen. Executives say they have gone back to a war on waste — or "muda" — a key component of its vaunted production system.

At a briefing yestersday, Chief Financial Officer Satoshi Ozawa noted the "huge contribution from all the (cost-cutting) efforts we've been making."

Toyota President Akio Toyoda, the 56-year-old grandson of the automaker's founder, said everyone in the company had worked towards improving profitability, and "the focus on making good cars has translated into sales volumes and profits. That in turn is leading to investments for even better cars," he said.

Stripping costs

With US dealerships humming again, Toyoda and his aides have sketched out a strategy aimed at stripping costs from everything — from production lines in Japan to Mississippi to the years of design and engineering that go into making new cars and parts. The goal is to push up profit margins even as Toyota rides a wave of recovering demand while tapping into its tradition of incremental improvement — or ‘kaizen'— the corporate creed that once made it the world's most feared and studied manufacturer.

Toyota expects operating margins to improve this year to 4.5 per cent from 1.9 per cent in the year just ended. That gets it closer to a target of a minimum 5 per cent margin before 2015, but is still short of Nissan Motor Co's 7.1 pe rcent margin and 6.5 per cent at Honda Motor Co, the Japanese automaker that was slowest to recover from last year's lost output. South Korean rival Hyundai Motor's operating margin tops 10 per cent.

Toyota said sales in emerging markets were in line with its plans, including in China where January-April sales were heading for a full-year target of 1 million vehicles. "As we seek growth in emerging markets, a big challenge for us in a market like China, for example, is how to speed up product launches and come up with the right products for the market," Toyoda said.

Despite the pain of building cars at home with the dollar far below the 85 yen breakeven level in Japan, Toyota has committed to build at least 3 million vehicles a year at its domestic factories — roughly triple the output at local rivals Nissan and Honda.