As the strong yen hammers the automaker, it's forced to stay lean and boost innovation.
June 22, 2012
by The Canadian Press
TOKYO: Toyota Motor Corp. has been hammered by the strong yen, putting extra pressure on the automaker to stay lean and come up with new innovations to ride out the challenge, a senior executive said this week.
Toyota Executive Vice-President Atsushi Niimi acknowledged competition was growing extremely tough with South Korean makers, including Hyundai Motor Co., which have the advantage of a weaker currency.
A strong yen the value of overseas earnings for Japanese automakers, making it harder to offer products at cheaper prices abroad. The dollar has traded at 79-yen levels recently, down from about 100 yen in 2009.
Niimi said cost cuts, innovations and worker training will allow Toyota to export lean production to new markets, where Toyota can still grow.
“We can win against ‘yendaka,’ and we must win,” Niimi told a packed hall at a manufacturing conference, using the phrase for “rising yen.”
Niimi said the key was “a total elimination of waste,” such as making assembly lines shorter and more flexible so that profit is generated, even at small volumes.
He showed a time-lapse video, in which a line was extended in just 78 minutes by moving chunks of it and putting it together differently as though they were Lego parts.
Another example was welding without sparks called “sputterless.” Sparks can lead to defects on car bodies and slow production.
Toyota, founded in 1937, has long believed scale can backfire and has relied on “just in time” production, or manufacturing only as much as there is demand for. When it still lacked money and technology to compete against the more powerful U.S. automakers, it resorted to raising the efficiency of, and empowering each worker.
Toyota was on a steady growth path through 2007, but stumbled with the financial crisis and its massive global recalls three years ago. The earthquake and tsunami in northeastern Japan last year followed by flooding in Thailand, which disrupted supplies, added to its woes.
Niimi acknowledged Japanese manufacturing faces tough times. Along with the strong yen, Japan fell behind Korea in promoting free trade, he said.
Japanese companies have also been hit by an electricity power crunch because of the nuclear crisis caused by the meltdowns at the Fukushima Dai-ichi nuclear plant, according to Niimi.
Toyota has been beefing up quality controls, and investing in emerging markets such as Southeast Asia and India, to keep growing. Transferring its production ways to such new markets is critical.
The global auto market is still growing, despite setbacks during the financial crisis. Global production last year was a record 78 million vehicles, driven by growth in China, India, Brazil and other newer markets.
“If we lose to yendaka, there is no future,” said Niimi.
©The Canadian Press