January 16, 2009 / 1:17 AM / 9 years ago

UPDATE 3-Toyota cuts North American production, shares rise

*Toyota to cut production at several North American plants

*Aims to cut inventory by half in second quarter

*Nissan reportedly plans to shift March car output overseas

*Toyota shares gain nearly 3 pct, Nissan up 0.3 pct (Adds analyst comment, background)

By Sachi Izumi

TOKYO, Jan 16 (Reuters) - Toyota Motor Corp (7203.T), the world’s largest car maker, said it would cut production at several North American plants over the next few months in a bid to halve its inventory of vehicles.

Toyota shares gained nearly 3 percent in Tokyo, outperforming the overall market.

Automakers are grappling with slumping sales in the mature markets of North America, Europe and Japan as well as slowing sales in emerging markets such as India, China and Russia amid a spreading global recession.

Toyota’s announcement followed a newspaper report that Nissan Motor Co (7201.T) would move production of its key subcompact to Thailand from Japan as part of a structural overhaul to cut costs. [ID:nN15531438]

Nissan announced further production cuts in Japan on Thursday and a source said it would post an operating loss in the financial year to March 31. [ID:nT227889]

Toyota, which has warned it will post its first ever annual operating loss this business year, said its inventory of North American-built vehicles was 80-90 days, having doubled in the past year. It hopes to cut it by half in the second quarter.

Toyota said last week it would halt production at its Japanese plants for 11 days in February and March. [ID:nT158]

“The current inventory level is a record high for Toyota, though the market slump is unprecedented so rising inventories are unavoidable,” said Okasan Securities analyst Yasuaki Iwamoto.

“Sales are falling 30-40 percent every month, and this pace of fall is unheard of for either Toyota or the overall industry,” he said. “Automakers have to cope with it through production cuts as quickly as possible.”

The industry downturn has caused inventories to build up even for Toyota, which is known for running lean and cost-efficient production where parts are delivered in a “just in time” system to be installed in vehicles on the assembly line.

It had already reduced North American production of its best-selling cars, including the Camry and Corolla sedans, and suspended work on a new plant in Mississippi that was due to start producing the popular Prius hybrid car from 2010.


A relentless sales slide and the yen’s sharp rise led Toyota to forecast its first-ever annual operating loss in December and prompted the company’s 2,200 general managers to voluntarily commit to buying its cars by the end of the business year. [ID:nT299128][ID:nT166936]

Toyota’s sales in the United States, its key market, fell 37 percent in December.

“This is a tough environment, and it may continue for a while,” Jim Wiseman, vice president of external affairs for Toyota Motor Engineering & Manufacturing North America, said in a statement.

“In addition to slowing production, we are redoubling efforts to cut costs at each of our facilities,” he said, adding that further action may be needed to cope with falling sales and rising inventories.

Toyota spokesman Yuta Kaga in Tokyo declined to disclose the actual number of vehicles involved in the planned production cut.

In 2008, Toyota group, including truck maker Hino Motors (7205.T) and mini-vehicle maker Daihatsu Motor 7262.T, expects to have produced 9.23 million vehicles globally, down from its earlier forecast of 9.5 million, Kaga said.

Its latest move sets non-production days at manufacturing facilities in Canada and in Kentucky, California, Texas, Indiana, West Virginia and Alabama in the United States. The number of non-production days varies by assembly line and model. [ID:nPnCLTH106]

Toyota’s U.S. marketing head, Jim Lentz, said this week it would bring its U.S. inventory of unsold cars and trucks in line with demand by May.

Japan’s No.3 automaker Nissan, facing its first operating loss since Carlos Ghosn became chief executive officer in 1999, was reported on Friday to be aiming to cut production costs by 30 percent by making the March subcompact in Thailand instead of Japan and procuring more parts locally.

The Nikkei business daily said Nissan aims to take advantage of the strong yen by importing the cars back to Japan, and will cut new vehicle development by 20 percent in the next five years.

Nissan spokeswoman Yuko Matsuda said she could not comment on the firm’s future product plans.

Toyota shares rose 2.8 percent to 2,920 yen by midday, more than double a 1.3 percent rise in the benchmark Nikkei average .N225. Nissan shares edged up 0.3 percent to 315 yen. (Additional reporting by Nichola Groom; Editing by Michael Watson)

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