Toyota Motor Corp. (TM) plans to reorganize its Japanese production facilities at group companies for the first time by the end of the decade. The restructuring aims to avoid the backlash from its string of global automotive recalls by boosting productivity, lowering costs and ensuring quality.
Toyota manufactures vehicles at 18 plants in Japan, four of which are its own and the rest are facilities operated by its subsidiaries, including Daihatsu Motor Co., Hino Motors Ltd. and Toyota Auto Body Co. The company aims to reorganize these operations by vehicle type and size.
Besides reorganizing, Toyota aims to reduce its annual production costs by ¥100 billion ($1.1 billion) by 2012 by increasing the use of common parts among different models.
So far, Toyota has recalled 8.5 million vehicles around the world related to problems such as faulty accelerator gas pedals, and slipping floor mats and defective braking systems. The recall included popular models such as 2010 Prius hybrid and Toyota Camry. The company has estimated the recalls cost ¥180 billion yen ($1.97 billion) for the fiscal year ending this month.
The latest string of recalls has no doubt besmirched the reputation of the automaker. In February, the automaker’s sales fell 9% to 100,027 vehicles. According to Autodata Corp., the automaker’s U.S. market share fell to 12.8%, the lowest since July 2005.
Moreover, the company has been slapped with dozens of lawsuits due to the recall. The value of claims under the lawsuits is estimated to reach about $4 billion, reflecting an average loss of $600 per vehicle.
Kelley Blue Book — the largest automotive vehicle valuation company in the U.S. — has stated that its resale value is now worth $200 to $500 less per recalled model (a decline of 1%–3%).
The auto research website Edmunds.com estimated resale or trade-in values to fall up to 10% in the short term. Edmunds’ estimate for the trade-in value of a 2009 Toyota Camry has fallen 4%–6% to $13,967 while the 2009 Toyota Corolla has declined 6% to $11,233.
To regain consumer confidence, Toyota has been offering unprecedented discounts, including zero-percent financing for five years on top-selling models such as the Camry. It has also offered attractive leasing terms and free maintenance for two years for Toyota loyals. Further, the automaker has apologized to the public in the U.S., Japan and China — its three biggest markets.
In the last fiscal year, Toyota posted its first annual loss of ¥437 billion ($4.4 billion) in 59 years. However, the company expects to return to profit in the current fiscal year, driven by recovering auto demand and cost-cutting efforts.
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