Toyota Motor Corp.
) has decided to trim its production capacity in Japan by 10% to
3.1 million units by 2014 in order to cut its domestic output.
However, the company debarred itself for downsizing its workforce
in the country as a part of the plan.
Last week, the automaker has pacified its shareholders by
mentioning that it has recovered from the effects of disastrous
2011 due to the earthquake in Japan and severe floods in
In the fiscal year ended March 31, 2012, the company posted a
30.5% decline in profits to ¥283.56 billion ($3.7 billion) or
¥90.20 ($1.17) per share and a 2% fall in consolidated revenues to
¥18.58 trillion ($241.59 billion) due to the above-mentioned
disasters and appreciating yen.
However, the company still faces some serious headwinds.
Firstly, the issue of strengthening yen still prevails. The
has already indicated that Toyota's overall domestic capacity is
expected to fall to about 3.6 million units in 2012 compared with
3.9 million units before the global financial crisis in 2008.
Toyota aims to maintain annual domestic production at about 3
million vehicles, which is a 500,000 units decline from the current
Second are the looming power shortages in the country caused by
the meltdowns at Fukushima Daiichi nuclear power plant after the
earthquake. Currently, Japan's power generators are mainly run by
imported gas and fuel as all the nuclear reactors have been shut
down for routine safety checks due to the meltdown issue.
The utility has already asked Toyota to bring down the power
consumption by 5%. So what led Toyota to make such an optimistic
statement of recovery despite the headwinds?
As far as resolving the issue of strong yen is concerned, the
company has decided to sell half of its targeted domestic
production in Japan and export the rest. The Japan Automobile
Manufacturers Association has predicted a 19% rise in vehicle
demand to 5 million vehicles in 2012 in stark contrast to a 15%
fall to 4.2 million vehicles in 2011.
Toyota intends to revive sales by launching new models and
redesigning its existing lineups. The company lost its No.1
General Motors Co.
) in terms of sales volumes in the U.S. As a result, the company
plans to increase its dependence on the non-U.S. markets,
especially the high growth emerging markets.
It aims to generate 50% of global sales from the emerging
markets by 2015, up from 45% presently. These would also help the
automaker face burgeoning automakers in the markets such as Korea's
Hyundai Motor Co.
) and Germany's
In this regard, we can recall the fiscal 2013 sales guidance
provided during its fiscal 2012 earnings release. The company has
projected consolidated vehicles sales to increase 1.35 million
units to 8.70 million units in the year. Consequently, the company
expects higher consolidated revenues of ¥22.00 trillion, operating
income of ¥1.00 trillion yen and profits of ¥760.0 billion for the
fiscal year compared with fiscal 2012.
Toyota has also taken steps to deal with the power crisis in
Japan. It has adopted several power saving measures including
installation of LED lightings and plans to boost power generation
on its own.
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