DETROIT -- With the U.S. economic recovery under way, Toyota Motor Corp. wants to make sure its second- and third-tier suppliers can handle rising production volumes.
Robert Young, vice president of purchasing with Toyota Motor Engineering and Manufacturing North America Inc., said the automaker's Tier 1 suppliers are healthy and ready to boost production.
But the automaker can't easily check on the health of its subsuppliers, so he wants to make sure that Tier 1 suppliers are properly monitoring their own vendors.
"We are relying on our Tier 1 suppliers to teach our subsuppliers how to do financial risk management," Young said last week at the Automotive News World Congress. "With production volumes returning, the issue is going to be the pace" of recovery. "If it comes on too quickly, I don't believe any of us will be able to react to it."
Young said he was confident that Toyota and its Tier 1 suppliers can handle the most likely scenario: a moderate recovery with U.S. light-vehicle sales of 12.5 million units.
"Toyota and its suppliers have the installed production capacity to exceed this level," he said. "But we recognize there will be risks to meet market demand."
To minimize production fluctuations, Young said Toyota's production operation will work closely with its marketing team to keep a lid on inventories.
"The risk of [sales] volatility does not appear to be going away," he said. By limiting vehicle inventories, "you are reducing your risk" of overextending yourself.