Toyota warns parts makers to slash prices or be replaced
TOKYO -- Toyota Motor Corp. is telling parts suppliers in Japan to slash prices or face being replaced by overseas rivals as the yen's value appreciates, four people involved with the discussions said.
Toyota, which loses 34 billion yen ($443 million) in operating profit for every 1 yen appreciation against the dollar, told partsmakers it intends to increase procurement in emerging markets in cases where domestic suppliers can't match overseas prices, according to the people, who declined to be identified because the talks are private.
The automaker seeks to cut costs to compensate for the yen's climb as it boosts output in Japan to normal levels after the March 11 earthquake and tsunami damaged factories and caused parts and power shortages.
Carlos Ghosn, chief executive officer of Toyota's biggest domestic rival Nissan Motor Co., said on Thursday that Japan faces a "hollowing out" of its industrial base should the government fail to take steps to counter the yen's rise.
Toyota made the demand to its 219 largest domestic suppliers, including Denso Corp. and Aisin Seiki Co., at a meeting held at the end of August in Nagano prefecture, the people said.
Toyota spokeswoman Amiko Tomita in Tokyo declined to comment on the automaker's discussions with partsmakers about prices.
The Japanese currency strengthened to a postwar record 75.95 yen versus the dollar in August and has averaged 79.54 yen in the fiscal year started April 1, compared with 88.68 yen in the same period a year earlier.
Toyota suggested Japan-based suppliers should procure more parts from overseas as one way to reduce their prices, the people said.
The company requested to reduce prices by as much as half to some of its suppliers, according to one of the people.
The automaker has said it expects global production to rise 5.1 percent from a year earlier to 7.72 million units in the 12 months ending March 31.
Toyota's global output increased 10.6 percent to 626,817 vehicles in August, the first increase after the government ended subsidies for fuel-efficient cars in September 2010, the carmaker said Sept. 28.
Domestic output gained 12 percent to 252,374, while overseas production rose 9.8 percent to 374,443, it said.
Source: BloombergContact Automotive News