As the yen becomes even stronger, Toyota Motor Corp. has given an ultimatum to 219 parts suppliers in Japan to lower their prices or be replaced by overseas competitors, according to sources. Toyota has got a lot to lose with the appreciation of the yen’s value. For every 1 yen appreciation against the dollar, Toyota loses 34 billion yen ($443 million) in operating profit.
The automaker has told parts suppliers that it wants to increase procurement in growing markets in cases where domestic suppliers are unable to match overseas prices.
Toyota aims to reduce costs to compensate for the strengthening yen as it enhances production in Japan to typical levels after the March 11 disaster damaged factories and resulted to shortages in parts and available power, according to Autonews.
Last Thursday, Carlos Ghosn, the CEO of Toyota's largest domestic rival Nissan Motor Co., said that Japan faces a "hollowing out" of its industrial base if the government is unable to control the yen's rise.
Sources said that Toyota met with its largest domestic suppliers like Denso Corp. and Aisin Seiki Co., last August in Nagano prefecture. In August, the yen rose to a postwar record 75.95 yen compared to the dollar. The yen has averaged 79.54 yen in the fiscal year beginning April 1, compared with 88.68 yen for the same period the previous year.