Toyota will need to cut production costs due to strong yen

Article by Christian A., on June 21, 2011

As the Japanese yen continues to appreciate against the dollar, Toyota Motor Corp. will have to reduce production costs so that its exports would still be profitable, Executive Vice President Atsushi Niimi told The Wall Street Journal.

He calculates that if costs can be cut by about 20%, then the company will be able to “fully compete” even if the yen is valued at ¥80 to the dollar. Niimi said that by 2013, new models built in Japan would have to be competitive at that level.

Niimi clarified that if Toyota won’t be able to cut production costs by then, it will have to think about shifting its production to another country. It can be recalled that Toyota made similar assertions when the Japanese currency was at 100 yen to the dollar, 95 yen to the dollar and 90 yen to the dollar.

Toyota CFO Satoshi Ozawa said last month that the carmaker may turn a profit at 85 yen to the dollar, but not if it drops further. Ozawa said that the current exchange rate of about 80 yen to the dollar mirrors the limit of continuing to have manufacturing in Japan.

Toyota is running about 17 plants in Japan, and the products make up about half of Toyota’s global sales volume. But despite the dollar-yen exchange rate, Toyota President Akio Toyoda continues to be committed to manufacturing in Japan.

Last May, Toyoda said that he insists on having its production in Japan because he prioritizes the protection of the industrial base and employment base in Japan.

Topics: toyota, production

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