Toyota plans another deep cut in purchasing

By James B. Treece, Automotive News Europe

TOKYO -- Toyota's next round of cost cutting will focus on systems and modules rather than individual components.

The Japanese automaker plans to launch a savings program it calls "Value Innovation" or VI.

"We have no target today" for overall cost savings under VI, said Katsuaki Watanabe, who will become Toyota's president in June.

In some areas, the savings will be in the 15 percent to 20 percent range, he said.

Engineers currently are examining a wide range of systems for savings and determining targets for each, he said. These include braking systems and steering systems, among others.

Over the last three years, Toyota cut its purchasing costs 30 percent as part of its previous cost-cutting program. That initiative sought savings in component design and engineering, as well as through improvements in the supply chain.

For example, Toyota redesigned individual parts so that common parts could be used across the entire lineup, thus reducing complexity and costs.

Toyota executives admit that achieving cost savings will be more difficult with prices rising for steel, rubber and other commodities. Toyota is still negotiating with its suppliers over the price of steel for April to September delivery.

"Overall, we will aspire to a level of cost reduction similar to last year," said Takeshi Suzuki, senior managing director in charge of Toyota's finance and accounting group.

He said: "We wouldn't like to see less than" the $1.49 billion (E1.2 billion) in cost cutting achieved last year.