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Toyota Tells Suppliers to Gear Up

Despite recent problems, the maker is planning on big growth.

by on Aug.03, 2011

Toyota will count on an array of new products, including an update to the Camry, to help drive big sales growth in 2012.

Even as it prepared to report a 99% drop in its global earnings, Toyota was telling its worldwide supplier network to buckle up and get ready for a fast ride as it lays out plans for record production — backed by one of the most aggressive product roll-outs in its history.

Reports out of Tokyo indicate that the Japanese giant intends to come back from the setbacks of the last two years by launching a big growth effort that could boost production to a record 8.9 million in 2012.  That would be nearly a million more than Toyota said, on Tuesday, it will build this year.

It has been a tough couple years for the maker – which is expected to lose its crown as the world’s largest automotive manufacturer this year.  In 2010, it was hammered by a series of safety-related problems, at one point idling a number of plants to make repairs.  This year, Toyota has been struggling to overcome the effects of the March 11 Japanese earthquake and tsunami which – during the first quarter of its fiscal year alone – cost it nearly 600,000 units in lost production.

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But Toyota officials tell that they are moving ahead on the global expansion program announced by CEO Akio Toyoda – ironically just days before the Japanese disaster.  And now, the maker confirms, it is telling its suppliers to get ready to support the push.

According to a report in Japan’s Kyodo News, Toyota plans to boost production at its Japanese assembly network to 3.5 million in 2012, adding another 5.4 million vehicles at “transplant” assembly lines in the U.S., Europe, China and other parts of the world.

The Associated Press, meanwhile, quotes Toyota spokesman Paul Nolasco confirming that the automaker met with suppliers to outline its plans and make sure they were prepared to follow.

Those suppliers are currently struggling.  Many of them, impacted by the earthquake and tsunami, are still operating below their own capacity.  Others will have to ramp up their operations due to cutbacks made during the recession.  But Toyota plans to drive its vendors to get moving.  And that won’t wait for 2012.  It already has plans to make up much of the production it lost in recent months during the second half of its fiscal year – which began on April 1.

The ramp-up of production will be accompanied by one of the most aggressive product roll-outs in recent Toyota history, with new models including a heavily  updated version of the best-selling Camry, as well as several new members of the Prius hybrid family, including the new Prius v, the Prius c and a plug-in  version of the original hybrid.

There will be headwinds, industry analysts caution.  It remains to be seen just how much long-term damage was done by the safety scandal – which led to the recall of more than 10 million vehicles – and the March disaster.  The good news for the maker is that research by CNW Marketing and others indicates most potential Toyota customers are waiting until supplies improve rather than migrating to other brands.

But there are still concerns about the maker’s continuing dependence on factories in Japan, CEO Akio Toyoda last month stating his commitment not to abandon the home market.  Meanwhile, “Toyota’s relative weaknesses remain apparent in a strong yen environment,” warns Kurt Sanger, of Deutsche Bank.

The recent rise of the yen has translated into an estimated $3,000 profit dip on the typical $20,000 vehicle.

CEO Toyoda is calling for a 30% reduction in costs to offset the exchange rate problem.  But how soon that can happen is unclear.

In the meantime, he is pushing to get production on track as soon as possible.  And, if Toyota can deliver on its apparent target for 2012, it will have a good shot at regaining its crown as the global automotive leader.

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