Toyota’s focus on cost pays dividends

TOYOTA has cost-cut its way back to increased profitability, reversing a one-year dip to notch a 2.5 trillion yen ($A30 billion) after-tax profit for the financial year ending March 31.

 

Foreign exchanges rate fluctuations also made a major contribution to the Japanese giant’s bottom line, despite a slight fall in global vehicle sales, down by 6466 units to 8.96 million vehicles.

 

But Toyota executives warned this week that a stronger yen would work against profitability in the 2018-19 financial year, prompting a call by Toyota president Akio Toyoda for continued company-wide concentration on keeping costs down.

 

“In all workplaces, there is a call to action to fundamentally review fixed costs,” he said. “We have begun steady cost-reduction efforts in which each and every cost, whether it relates to daily tasks or large events or projects, is being scrutinised, with everyone thinking about what elements actually represent waste.”

 

The yen exchange rate has firmed from 111 to the US dollar to 105, making Toyota’s Japanese-made exports more costly and therefore less competitive in overseas markets.

 

Last year, Toyota chopped 165 billion yen ($A2b) out of its costs. This year, the company is targeting a further 130 billion yen ($1.6b) in cost reductions.

 

Toyota’s operating profit last year jumped 20 per cent, to 2.4 trillion yen ($A2.9b), on sales revenues of 29.3 trillion yen ($A360b).

 

This again makes Toyota the most profitable major motor company on the planet, ahead of German powerhouses Volkswagen and Daimler.

 

Despite its profitability, Toyota was impacted by slowing sales in its three biggest markets, North America, Japan and Asia.

 

In North America, sales slipped by 30,867 units, to 2.8 million vehicles, while in Japan, sales fell 18,649 units, to 2.25 million. Asia sales dived the most – down 45,016 vehicles – to 1.54 million units.

 

These falls were partly offset by sales growth in Europe where 968,077 sales represented an increase of 43,517 vehicles, and in “other regions” – including Australia – where a 44,549 vehicle gain resulted in 1.39 million sales.

 

Toyota predicts its global sales will largely flatline this year, at 8.95 million vehicles, but that net income will fall to 2.12 trillion yen ($A26b).

 

Mr Toyoda stressed that Toyota would put even more effort into new technologies this year as the motor industry faced what he described as a “once in a century era of profound transformation”.

 

He said he saw the change as an opportunity to create a “new future for ourselves with unprecedented speed and imagination”.

 

Toyota plans to spend a record 1.08 trillion yen ($A13b) on research and development this year, much of it on technologies such as electrification and autonomous vehicles.

 

Mr Toyoda said he had relinquished some of his control to a new group of executive vice-presidents, including outsiders such as former president of the International Paralympic Committee Sir Philip Craven.

 

He likened the switch to a move from a racing driver on a race circuit to rally driving, in which teamwork and trust between the navigator and driver on an unknown track is essential for success.

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