Toyota ‘must cut $3800 from Camry cost’

TOYOTA Australia today revealed it must slash almost $3800 from the manufacturing cost of every car built at its Altona plant if it is to keep making vehicles in Australia beyond 2018.

The company also announced it would make its crunch decision on the future of its Australian operation in 2014, saying it had to convince its parent company that it could be globally competitive by the time the next-generation Camry is due to go into production in five years’ time.

The deadline puts Toyota on a similar timeline as rival GM Holden, meaning Australians will know some time next year if it will have a vehicle manufacturing industry by the end of the decade, and if so, how much.

Ford Australia has already announced it is slamming the doors on its factories at Campbellfield and Geelong from 2016 with the loss of around 1200 jobs.

At Toyota, up to 100 jobs are set to go by the end of next month due to a drop of 5000 cars a year in export demand from Toyota Australia’s biggest overseas market, the Middle East, placing a further cloud over the manufacturing operation that currently employs 2500 people out of a total Toyota Australia workforce of about 4000.

The assembly line speed is set to be reduced from 470 a day to 431 in the first week of December to bring it into line with demand.

Toyota Australia executive vice-president and chief operating officer Dave Buttner said a production cost cut of $3800 could only be made by looking at every facet of the car-building process right across the business.

Left: Toyota Australia executive vice-president Dave Buttner.

He said current productivity improvement goals were being met, but added that “some gaps” were beginning to emerge in plans to meet production cost targets.

“We have to start closing those gaps now,” he warned.

But Mr Buttner revealed that if Toyota Motor Corporation (TMC) gave the tick of approval for the next-generation Camry – and possibly its V6 spin off, the Aurion – to be made in Australia and exported to significant markets, then a third model would be on the cards for the local plant.

He said such a decision could only be made on that model if plans for the local manufacture of the new-generation Camry were approved next year for production after 2018.

Mr Buttner declined to say when the deadline for a Toyota manufacturing decision would fall in 2014, saying the discussion would go on through the year.

He said the new federal government and industry minister Ian Macfarlane were being kept informed of Toyota’s deadlines and timelines in a “continuous discussion” over the future of Toyota manufacturing in Australia, where the company has just clocked up 50 years and two million vehicles.

Mr Buttner said Toyota was not seeking incremental government aid as a condition for remaining in Australia, but stressed that government policy needed to be conducive to investment in a competitive global environment.

Mr Macfarlane visited the Altona plant last week, saying his goal was to have an Australian car-making industry for decades to come.

Mr Buttner was careful not to criticise the pre-election policies of the Coalition, including a pledge to axe $500 million from car industry support, but said his company had been “relatively happy” with the previous government’s levels of support.

Toyota Australia is Australia’s biggest car producer and exporter, turning out about 104,000 units this year, with about 70 per cent exported to the Gulf states of the Middle East.

Mr Buttner said severe competition from rivals in that export market had eroded Camry sales dominance, forcing Toyota to lower its orders from the Australian plant.

“This order reduction and resultant labour reduction is a further solid reminder of the global nature of Toyota’s business,” he said.

Mr Buttner said Toyota Australia had benchmarked Toyota’s Camry plant in Kentucky, in the United States, in its efforts to improve its efficiency and cost base under its six-year Toyota Australia Future Business Transformation plan that kicked in at the start of 2012.

“We have to ensure that we remain focused on our long-term vision for building cars here, and that we must continue to move towards being globally competitive with other Toyota affiliates,” he said.

“By 2018 this transformation journey we are on will be complete, but we need to improve our productivity and reduce the cost of each of our locally built vehicles by just off $3800 per unit.

“We need to continually show our parent company that we are not only achieving our target now but that we are showing the wherewithal to achieve those targets into the future, right up until 2018.

“Last year, through a lot of significant effort by our people, we achieved our target, and so far in this current calendar year, we are on track to achieve it again.

“However, we have to look to the future, and frankly, some gaps are starting to emerge in our plan in the remaining years, and we have to start closing those gaps now.

“Our ability to do this will impact on TMC’s decision for our next generation and our export program, and these decisions will be made some time next year.

“So the process of approval is about to begin.” Mr Buttner would not say if Toyota would ask its workforce for concessions such as a Holden-style wage freeze to help meet productivity targets, saying only that it was having internal discussions with its employees on ways to improve the business.

He also did not rule out further job cuts, but said: “I certainly hope not, as it is not something that we enjoy doing.” Mr Butter said Toyota was building a foundation for growth in Australia.

“But in that future growth we need to be competitive, and we are doing everything we can to reduce our cost of manufacturing so that when we are compared to the other Camry-producing plants around the world, we can show we have the right to put up our hand and say we want to continue manufacturing and this is what we want to do,” he said.

Mr Buttner said the model approval process for local production was being made in three stages, with the first being approval of the Camry facelift due in 2015.

He said Toyota Australia’s plans had provided “sufficient comfort for our parent” to award production and export order to the local company.

“The next milestone, the next hurdle is to secure the next generation of product, and at the same time to continue to service our export customers,” he said.

Once that decision was in place next year, the third step would be to make a pitch for a third model, which many pundits believe could be a locally built RAV4 compact SUV.