Toyota fights to bolster profitability amid a strong yen, overhauls domestic production

Article by Christian A., on July 14, 2011

Toyota Motor Corp. will obtain full ownership of Kanto Auto Works Ltd. and Toyota Auto Body Co., which are two of its domestic body-making units, in a plan to streamline Japanese production as the company fights to boost profitability amid the strong yen.

The two domestic units, which will be made into fully owned subsidiaries, produce around 1 million vehicle units each year, or about 30 percent of the domestic output of the Toyota brand.

This separately calls for Kanto Auto to begin discussing a merger with Toyota Motor Tohoku Corp., a parts-making unit, and Central Motor Co., a wholly owned auto assembler.

The new entity is intended to boost the centralized leadership on the company’s far-flung subsidiaries but still be able to keep nominal independence. Having them together under Toyota City executives’ direct control can aid the company to coordinate a wide scope of strategy.

Moreover, the realignment is treated as a way to provide subsidiaries a bigger role in research and development at home and overseas. In addition, the company will also obtain a greater control over costs while it struggles to boost profitability of its export operations despite a stronger yen.

The company has cautioned that it may have to bring some of its operations to overseas due to the strong yen, which eats away the profits on vehicle exports from Japan.

Executives mentioned that the Toyota group has to produce at least 3.1 million vehicle units in Japan for its domestic operations to be profitable.

In 2010, the company manufactured 4.05 million units in Japan, including Hino truck-making subsidiaries and Daihatsu minicar. Local production of Toyota-badged units, however, dropped to 3.28 million vehicle units from peaking at 4.23 million units in 2007.

Topics: toyota

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