Getting back on top

01 March 2013 | Glenn Brooks

Despite natural disasters and an over-valued yen, Toyota managed to finish 2012 as the top selling car maker in the world.

Japan’s top six automakers logged record production numbers in 2012, as output rose to meet demand in North America and Southeast Asia. Toyota led the gains, producing 8.74 million vehicles globally, up 26.1% from 2011. 

As a whole, the eight major automakers produced 9.44 million units at home, up 18.3% from 2011, and 15.44 million units abroad, up 18.6%. Toyota’s domestic sales alone jumped 40.9% to 1.69 million units, thanks in part to government subsidies for purchases of environmentally friendly vehicles. The company’s exports climbed 24.0% to 1.95 million units. This performance by Toyota Motor Corporation (TMC) meant it regained the global number one spot, outselling both General Motors and Volkswagen AG. Worldwide sales for TMC and its brands, including deliveries from Hino Motors and Daihatsu Motor, rose 23% to a record 9.75 million units last year, compared to the 9.29 million units sold by GM and 9.07 million by Volkswagen.

Road to recovery

Global sales numbers underline just how far TMC has come in a relatively short space of time, with a full recovery clearly having been made from both recall-related and natural disaster production losses over the previous two years. The knock-on effect to the group’s profitability has also been noticeable, especially with costs associated with the global recall programmes of 2009-2011 now having been largely put behind the company.

“The yen’s fall gave us a ¥140bn ($1.5bn) boost,” said TMC director and senior managing officer Takahiko Ijichi while announcing the firm’s April-December results at a recent news conference. For April-December, Toyota said its group operating profit jumped nearly sevenfold from a year earlier to ¥818.5bn, while its net profit rose almost fourfold to ¥648.18bn.

Japan’s leading vehicle manufacturer has now lifted its full-year forecast for group operating profits to ¥1.15 trillion from ¥1.05 trillion and its pre-tax profit estimate to ¥1.29 trillion from ¥1.18 trillion. Much of the reason for the improved outlook is a steady and welcome slide in the value of the yen.

As well as announcing improved profit expectations for fiscal 2012-2013, Toyota has also now revised its exchange rate assumptions to ¥81 against the dollar and ¥104 versus the euro. It had previously based its annual financial projections on ¥79 to the dollar and ¥100 to the euro.

Restoration of Tohoku production base

The Tohoku region (north-eastern Japan) was the area hardest hit by the earthquake in March 2011. Eighteen months after the disaster, Toyota announced a new initiative to restore and strengthen its manufacturing base in that part of the country.

Tohoku has now been classified by TMC as its third production centre in its home market, following the Chubu (central Japan) and Kyushu (southern Japan) regions. As part of the new focus on manufacturing in the north-east, three TMC subsidiaries that operate in Tohoku – Kanto Auto Works, Central Motor Company and Toyota Motor

Tohoku Corporation – were in 2011 instructed by the parent company to move towards a full consolidation. The three-way merger took place on July 1, 2012. The resulting entity, Toyota Motor East Japan, functions as a semi-autonomous unit and manages the entire range of manufacturing for the vehicle programmes for which it has responsibility. This stretches from R&D to production, as well as procurement, engine manufacturing and the supply of other vital components.

As part of its remit, the merged division for the Tohoku region has been given responsibility for the production of new compact vehicles. This includes the latest generation Spade and Porte models, each of which went on sale in Japan in July 2012. Kanto Auto Works originally operated the Higashi-Fuji plant, in Shizuoka Prefecture, that builds the two small cars.

One interesting aspect of this regrouping of manufacturing operations is how other TMC subsidiaries have been impacted: the first generation Spade and Porte were built at the Kyoto plant, operated by Daihatsu Motor Company (DMC). Two Toyota delivery vans – the Probox and Succeed – are still manufactured by DMC at Kyoto. Whether or not their replacements, each due later this year, will also shift to a Toyota Motor East Japan plant will be worth noting.

Prepared for future disruption

While Suzuki took the radical but understandable step to shift some of its operations away from at-risk parts of the country, TMC instead made a commitment to staying put, albeit with greatly strengthened measures for coping with any future disasters.

The company now has fortified on-site electricalgenerating capacity at its Tohoku operations. This will not only help it to cope more smoothly with any future power interruptions, but it should also have a stabilising effect on the regional power grid.

The initiatives for Toyota Motor East Japan’s operations include the installation of an eight-megawatt generating capacity at Central Motor’s Miyagi plant. This, the company claims, is adequate to supply about 90% of the plant’s electric power demand, when needed. Toyota is also looking into tapping renewable energies at its Tohoku operations.

Toyota, Daihatsu and Subaru expand manufacturing alliances

Since becoming a shareholder in Fuji Heavy Industries (FHI), Toyota has largely left the company’s management to get on with the job of running FHI subsidiary Subaru. That doesn’t mean that TMC has been without infl uence – both the Subaru BRZ and the Toyota 86 (Scion FR-S in North America) twins are made on the same line at Fuji’s Gunma Main Plant in Ota-city north of Tokyo.

Gunma Main did not have to be expanded to accommodate production of the two sports cars. Daihatsu Motor also being in the TMC sphere of infl uence, a decision was taken to end production of Subaru mini-vehicles at Ota. Their replacements are now supplied to Japanese market Subaru dealers by Daihatsu on an OEM basis, the former Subaru Sambar micro-van line at Ota in turn being given over for production of the BRZ and Toyota 86.

Sambar build ended in February 2012, followed just one month later by the start-up of BRZ and 86 production. In addition, FHI began manufacturing the Subaru Impreza at the same location in March 2013. Subaru has gained three new Kei-class mini-vehicles in recent years, each of which is a rebadged Daihatsu and built at DMC’s Shiga and Iked

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