As a long-overdue cost-cutting measure, a production line in Japan is being halted by Toyota Motor Corp. as it looks to cut excess global capacity by up to 700,000 units. Nikkei business daily reports that a company source said that although sales in a few countries have been improving, the outlook for global car demand is still uncertain.
Toyota plans to reduce its global capacity by 10 percent, or 1 million vehicles, as early as the current financial year to March 2010. The unnamed source added that Toyota had made no decisions on such deep cuts. The source said that total cuts could reach 700,000 cars, or 7% of Toyota's global capacity.
Possibilities also include a joint venture with General Motors Co. in the U.S. that could be shut down and a production line in Britain that may be halted.
In the wake of the global financial crisis, Toyota has begun restoring some production cuts, as inventories shrink and government stimulus efforts improve sales, but it made no announcement on whether it plans longer-term cuts in factory capacity.
Yoshifumi Tabei, an auto analyst at Kazaka Securities, said that while the production cut is positive for its earnings, there is room for further capacity cuts in the United States and elsewhere.
Toyota was helped by government measures to promote such vehicles and in fact, its Prius hybrid ranked as Japan's top-selling car in July for the second straight month. However, while Toyota has seen a recovery in sales of fuel-efficient cars, it has lagged behind its rivals in cost cutting.