A Toyota Motor Corp. executive said Tuesday that as the Japanese yen continues to appreciate against the dollar, the automaker will need to cut production costs in order for Japanese exports to remain profitable, The Wall Street Journal reported.
"If we can cut costs by around 20 percent, we can fully compete, even at ¥80 (to the dollar)," Executive Vice President Atsushi Niimi told the Journal. "By 2013, new models made in Japan have to be competitive at that level."
By then, if Toyota hasn't slashed production costs, Niimi said, the company will be forced to consider producing its compact vehicles elsewhere in the world.
Historically, Toyota made similar claims when the Japanese currency was at 100 yen to the dollar, 95 yen to the dollar and 90 yen to the dollar.
But last month Toyota CFO Satoshi Ozawa said the company could turn a profit at 85 yen to the dollar, but not much lower.
"Frankly speaking as a CFO, the current exchange rate of around 80 yen to the dollar represents the limit of continuing to conduct manufacturing in Japan," Ozawa said at the time.
Toyota currently operates 17 plants in Japan, and output there accounts for approximately half of the automaker's global sales volume.
Still, Toyota President Akio Toyoda has remained committed to manufacturing in Japan despite the exchange rate.
"How to protect this industrial base and employment base in Japan is something always at the top of my mind and is why I constantly insist on manufacturing in Japan," Toyoda said in May.
Niimi told the Journal that Toyota has no plans to close any of its Japanese plants. Instead it will invest in new, cost-saving, technologies in manufacturing and parts design, he said.
Importing more parts from China also will help ease Toyota's yen-induced pain, Niimi said. He said that although the company currently uses only a few Chinese parts, a joint venture in that country will allow an increased number of parts imports.
Toyota plans to reduce the number of steps in producing several parts by using a process called net shape, Niimi said. He added that Toyota is working on a next-generation Prius engine that will cut costs in two by improving integration between the vehicle's engine and motor.