Toyota bets on emerging markets to double profit


TOKYO – Toyota Motor Corp will rely more on emerging markets for sales and launch about 10 new hybrid models under a long-term strategy aimed at nearly doubling profits before 2015, its president said on Wednesday. The world’s largest car maker, trying to move on from a massive global recall of vehicles a year ago, will cut its board to 11 members by June from the current 27 to speed up decision-making as part of the blueprint.
Outlining his “Global Vision”, Toyota President Akio Toyoda said the company would also eliminate one layer of management, while giving each geographic region a bigger role to bring the automaker closer to its customers after a recall of nearly 20 million cars since 2009 dented its reputation for quality.
“From now we aim to build a strong base for generating profits … so that even under tough conditions with the dollar averaging 85 yen and sales of 7.5 million units, we can book an operating margin of five percent and an operating profit of about 1.0 trillion yen,” Toyoda said.
“This means that even if we are hit with a major economic downturn again and sales fall about 20 percent, we will still be able to post profits. This is the bottom line of our sustainable growth plan.”
Toyota said it would aim for an operating profit of $12 billion and a profit margin of five percent “as soon as possible” before 2015 assuming parent-only vehicle sales of 7.5 million units and a dollar of 85 yen. That compares with Toyota’s forecast for a profit of 550 billion yen and margin of 2.9 percent in the financial year ending this month. “Investors are looking for a slightly more specific plan,” said Yoshihiro Okumura, general manager at Chibagin Asset Management, noting the lack of profit and margin target dates. “With the intense competition in global markets against the likes of Hyundai Motor and Volkswagen it’s not clear what Toyota’s specific strategy is for staying ahead,” Okumura said.
Toyota has struggled to improve its profit margins, which are weaker than those of Nissan and Honda. Last year Toyota stayed ahead of General Motors Co as the world’s biggest automaker but by a thinner margin, while Volkswagen has mapped out a long-term plan to be world number one and sell over 10 million vehicles by 2018. Executives have said that under Toyoda’s leadership, the company has veered away from market share targets, previously a major growth driver during its boom years in the past decade. New product launches, especially of hybrids, will be a key part of the battle to fend off Volkswagen, but quality is more important, said Metzler Equities analyst Juergen Pieper. Metzler’s Pieper.
“Quality is their selling point. It’s more important to overcome this quality issue than to bring out new products.” Sales outside mature markets would make up half of Toyota’s sales by 2015 from 40 percent echoing the strategy of cutting a dependence on mature markets which France’s Renault set out in its new plan last month.