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Earthquake aftershock: Toyota to shake up supplier relationships

There's a purchasing revolution going on at Toyota, and it could generate some shock waves among the world's parts suppliers.

The March 11 earthquake and the sharp rise of the yen have undermined the automaker's confidence in its Japanese supply base. And now we are witnessing the consequences:

• Toyota has told its suppliers in Japan to slash prices or risk losing business to overseas rivals, Bloomberg reported last week. It will be interesting to see how Toyota deals with some of its key suppliers, such as Denso Corp., Aisin Seiki Co. and Toyota Boshoku. How can Toyota achieve an arms-length relationship unless it unloads its part ownership in these companies?

• In the wake of the earthquake, Toyota has asked suppliers to stock several months' worth of key components such as computer chips if those parts can be produced at only one location, according to Reuters.

• Reuters also reported that Toyota is pushing Japanese automakers to standardize some parts so that they can share common components produced in different factories.

Is Toyota taking a few lessons from rival Nissan? After the March 11 earthquake, Nissan suffered fewer disruptions in part because it had previously stockpiled computer chips. And those with good memories will recall that Nissan CEO Carlos Ghosn demanded and got lower prices from Nissan's supplier keiretsu about a decade ago.

Toyota may be a copycat. Maybe not.

Either way, it seems the company is getting ready to shake things up.

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