The new engines will be the cornerstone of Toyota's overhauled product development strategy. The approach, dubbed Toyota New Global Architecture, or TNGA, aims to maximize common parts in a new era in which its annual sales exceed a massive 10 million units.
Toyota's makeover comes as rivals such as Honda Motor Co. and Mazda Motor Corp. overhaul their engine lineups to meet increasingly stringent fuel economy regulations. Honda's line of Earth Dreams engines taps direct injection technology and turbocharging. Mazda's Skyactiv engines pair fuel injection with high compression ratios.
Toyota's first TNGA cars, complete with new platforms, are due in 2015.
But the first of the fresh engines debuted in April in the Toyota Passo, a Japan-market hatchback. That 1.0-liter powerplant, equipped with stop-start technology, delivers 30 percent better fuel economy than the outgoing engine.
It is one of 14 engines to be introduced through next year, covering 30 percent of Toyota's global nameplates.
Other nameplates in line for the new engines: the next-generation Prius hybrid, due at the end of 2015, and the next-generation Camry, which could arrive around 2016.
The goal is to cut costs and maximize performance by standardizing the basics: bore, stroke, combustion cycle, valve timing and components such as engine blocks, cylinder heads, cam-shafts and crankshafts. After that is where the hair ornaments come in.
"First, we have to improve the performance of the base engine itself, then on top of that we will be utilizing kanzashi as occasion demands," Saga said.
"Just like putting something beautiful on top of your hairdo, by using kanzashi through such things as turbocharging or downsizing, you can improve the performance of the engine."
Kanzashi add-ons may include direct fuel injection, exhaust gas recirculation systems or stop-start technologies that turn off the engine when the vehicle stops.
"We have a wide variety of kanzashi," Saga said.
The usual downside of kanzashi is added cost. But Toyota aims to rein in cost by standardizing the base engines, thereby freeing funds to invest in customized tweaks. After the overhaul, the number of engine families should remain the same at seven. But the number of variants will be greatly reduced, Saga said.
By simplifying the lineup, Toyota expects to generate two to three times the cost savings over previous engine overhauls. The cost of some components will fall by half, he said.
"Traditionally, when you add new kanzashi, that increases cost, and we struggled to absorb it and profit margin deteriorated," Saga said. "But by improving our design and bundling volume, in some cases we were are able to reduce costs by half."
The first wave of engines is being manufactured on existing engine lines. But future engines, including those for the next-generation Camry, will get retooled engine lines.
The engine architecture will underpin Toyota's lineup for 10 to 15 years, Saga said.
The EPA's annual report on fuel economy trends, which calculates automakers' fleet average fuel economy based on sales, shows Toyota losing ground to rivals such as Nissan and Mazda. For example, in 2010, Toyota's U.S. fleet average fuel economy was 25.4 mpg. In 2013, it was 25.2 mpg.
Meanwhile, Mazda improved from 24.4 mpg in 2010 to 27.5 mpg in 2013, and Nissan rose from 23.3 mpg to 24.6 mpg during the period.