Toyota poised to slash production

Car buyers at a Toyota showroom in Tokyo.
Toyota is poised to slash production by as much as 580,000 vehicles — or almost 6 percent of global capacity — in an effort to stem losses amid the sharp downturn in car sales.

Japan’s largest carmaker, which is forecasting its second consecutive net loss this year, said it would shut a production line in western Japan from next spring through to the second half of 2011, reducing output by 220,000 vehicles. Toyota is also looking to pull out of Nummi, its manufacturing joint venture with General Motors, in California, the company said. “While nothing has been decided, we are in discussions [with GM’s administrator] with a view to pulling out of Nummi,” said Toyota. Japanese media have been reporting that the carmaker is also looking at cutting production in the UK, where it makes the Auris, along with other lines in Japan. If this proves to be the case, Toyota will bring its total of production cuts to almost 1m vehicles, or 10 percent of its global production capacity. It is the first time Toyota has planned to cut production on such a large scale and comes as the group’s global sales have been battered by the recession.

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The company is expected to produce about 7.2m vehicles globally this year, compared with 9.7m in 2007, said Masatoshi Nishimoto, analyst at CSM Worldwide, the market research group. In its home market, Toyota is expected to see production fall to 3.3m vehicles this year compared with 4.9m in 2007, said Mr Nishimoto. However, it is in the US — where Toyota was forced by plunging sales to halt the building of a new plant in Mississippi — that the group has suffered most from the dramatic drop in demand for vehicles. Sales in North America fell 34 percent to 945,000 in the period from January to July this year, the company said. The drop was noticeably larger than the 23 percent drop in Japan and the 27 percent decline in Europe. Akio Toyoda, the founding family scion who took over as Toyota chief executive in June, is on a mission to cut costs and bring the company back to profitability next fiscal year. Mr Nishimoto at CSM said Toyota would have to wait until 2011 to return to its post-crisis levels of production. He said it would be relatively easy for Toyota to pull out of the Nummi facility, where it produced 359,000 vehicles last year, by shifting production of the popular Corolla model it makes there to another plant in the US.