NEW IDEA: Toyota plans to overhaul production to cut development costs to help the auto sector. Image: Toyota
TOKYO, Japan - A Toyota plan to overhaul production and slash development costs has been described by a top executive as crucial to navigating "drastic changes" in the auto world.
While the Japanese car giant is on track for a record $18-billion (about R216-billion) fiscal year profit, largely due to the weak yen and strong North American sales, the world's most prolific automaker believes it needs to go further to protect its bottom line in a fast-changing market.
A statement from Toyota president Akio Toyoda said: "Sudden and drastic changes in the business environment mean conventional ways of thinking and doing business can no longer help us to grow sustainably. We are at a crossroads where we must build a new business model."
The company said it would boost the fuel-efficiency of its engines/transmissions and build more new models on common platforms as rivals also boost the number of shared parts.
Toyota said the move, intended to cut development costs by 20%, would start with mid-sized front-wheel drive vehicles through 2015. It wants half the vehicles it sells globally to fall under the new platform strategy by 2020.
Toyotas are currently built on more than a dozen platforms.
The cost of starting new production lines would be halved and the investment required for new plants cut by by 40% from 2008 levels.
Toyoda added: "Through these combined projects Toyota wants to shift to plants that are always competitive rather than plants that depend on volume."
Analysts at IHS Automotive have predicted that companies, among them Toyota and General Motors, will cut the number of vehicle platforms by more than half by 2021, according to Bloomberg News - VW embarked on a similar platform-reduction strategy several years earlier.
An analyst at the SMBC Friend Research Centre, Shigeru Matsumura, said: "This is Toyota's version of a cost-saving business model first launched by Volkswagen. The strategy, including using more common parts, is quite efficient and has become a global trend."
Matsumura warned, however, that the moves could mean huge recalls if the same defective part were found across a company's vehicle models. Major automakers are still reeling from the global recalls of millions of cars to correct various problems, among them exploding crash bags made by now embattled supplier Takata.
The scandal has sparked the recall, by 10 major automakers, of more than 20-million vehicles worldwide.
Matsumura added: "This strategy... can be a double-edged sword. Toyota and its rivals are likely to boost their investment on improving quality control."
Toyota will now, reportedly, lift its three-year freeze on new plants with the construction of one in Mexico that will cost the equivalent of more than R12-billion.
The ban was imposed after aggressive expansion through the previous decade.