Toyota to treble profit this year, trim costs

Wed May 9, 2012 5:58am EDT
 
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By Chang-Ran Kim

TOKYO (Reuters) - Toyota Motor Corp (7203.T: Quote) expects to treble its operating profit this year to more than $12.5 billion - still less than half what it earned before the global financial crisis - as Japan's top automaker recovers lost ground in markets from the United States to China.

Operating profit jumped more than five-fold in January-March to $3 billion, with all production centers back up and running after last year's earthquake, tsunami and Thai floods disrupted supply chains and cost Toyota around 400,000 cars in lost output - roughly 9 weeks' worth of U.S. sales.

With robust top-line growth a given in the current year - the company predicts operating profit of 1 trillion yen ($12.54 billion), in line with market forecasts - Toyota is looking to squeeze further cost cuts in a battle to offset a strong yen. Executives say they have gone back to a war on waste - or "muda" - a key component of its vaunted production system.

At a briefing on Wednesday, Chief Financial Officer Satoshi Ozawa noted the "huge contribution from all the (cost-cutting) efforts we've been making."

Toyota President Akio Toyoda, the 56-year-old grandson of the automaker's founder, said everyone in the company had worked towards improving profitability, and "the focus on making good cars has translated into sales volumes and profits. That in turn is leading to investments for even better cars," he said.

With U.S. dealerships humming again, Toyoda and his aides have sketched out a strategy aimed at stripping costs from everything - from production lines in Japan to Mississippi to the years of design and engineering that go into making new cars and parts.

The goal is to push up profit margins even as Toyota rides a wave of recovering demand while tapping into its tradition of incremental improvement - or "kaizen" - the corporate creed that once made it the world's most feared and studied manufacturer.

Toyota expects operating margins to improve this year to 4.5 percent from 1.9 percent in the year just ended. That gets it closer to a target of a minimum 5 percent margin before 2015, but is still short of Nissan Motor Co's (7201.T: Quote) 7.1 percent margin and 6.5 percent at Honda Motor Co (7267.T: Quote), the Japanese automaker that was slowest to recover from last year's lost output. South Korean rival Hyundai Motor's (005380.KS: Quote) operating margin tops 10 percent.   Continued...

 
Toyota Motor Corp President Akio Toyoda speaks at a news conference in Tokyo May 9, 2012. Toyota Motor Corp, Japan's top automaker, said on Wednesday it expects group-wide global sales to rise to 8.70 million vehicles in the business year to March 2013, from 7.352 million last business year. REUTERS/Toru Hanai