Troubled times at Toyota

TOYOTA Australia has put production output at its Altona plant under the microscope after a 10 per cent sales downturn in its key export market, the Middle East, and close to a 30 per cent sales decline domestically so far in 2009, which undermines its ambitious 25 per cent market share target this year.

And while Australia’s top-selling vehicle brand says all 2009 model launches – as well as the first locally-built petrol-electric vehicle in next year’s Camry hybrid – are safe, it concedes the chances of achieving its long-held dream of a producing third model line are now slimmer.

Toyota Motor Corporation (TMC) this week forecast a larger-than-expected $A12.6 billion operating loss forecast for its current financial year.

It also revealed it would sell about one million fewer vehicles than expected, proving that not even the world’s largest auto-maker is immune to the global market downturn.

The news follows an uncharacteristically sharp 37.5 per cent month-on-month sales slump in April by the Japanese company’s Australian subsidiary, whose calendar year-to-date (YTD) sales decline is worse than the overall market’s at 29.3 per cent.

Toyota continues to forecast an Australian new-vehicle market volume of 850,000 units, of which it plans to sell 195,000 vehicles, giving it a 23 per cent share.

Left: Toyota Camry, Aurion, Camry export, Camry Hybrid, Kluger.

While that is well up on the 20.7 per cent YTD share it currently enjoys, and remains in line with its 2008 YTD share, it will be down on the 23.6 per cent share it achieved last year and well down on its widely publicised ambition of 25 per cent.

Senior executive director of sales and marketing David Buttner told GoAuto Toyota Australia’s sales will improve over April levels in May and June.

But he admits sales numbers will remain down on the record figures experienced in the same months in 2008, when Toyota says its sales slide began a few months later than its rivals due to a glut of forward orders.

“We expect actual sales in May and June to improve over April. However, the year-on-year figures in those months will continue to involve comparisons against a period of record sales.

“From an industry viewpoint, the changed market conditions began to appear from July. For Toyota, it was a month or two later due to the carry-over orders we were filling.

“For May-June, we have embarked on strong offers, both from ourselves and the dealers, as well as significant advertising. From January 1, we were at the forefront of price increases. Since then, other Japanese manufacturers have moved their prices. This has improved our competitive position,” he said.

Mr Buttner revealed Toyota had around 30,000 unsold vehicles in factory and dealer stock combined, which he said was an “appropriate level in the prevailing market conditions”, and indicated there were signs of a market recovery.

“This (Toyota’s public industry forecast of 850,000 vehicles) is on the back of improved order intakes being reported by our dealers as well as some signs of general economic improvement, including higher retail sales in March, recent strengthening of the dollar against the yen, and expected growth in China of at least six to eight per cent,” he said.

“For the calendar year, we expect our share to be around 23 per cent. We constantly strive to grow our marker share. We expect growth to occur over time as we continue our focus on customer centricity on every aspect of our business.”

Mr Buttner said there would be no change to Toyota’s policy of producing a V6-only Aurion and a four-cylinder-only Camry to potentially boost sales to private buyers.

Asked if TMCA expected Australia’s large-car market to recover, to what level and when, Mr Buttner said: “TMCA remains committed to its local manufacturing plans. Our goal is always to have a vehicle and be competitive in each market segment.”

Toyota Australia says it remained on target to launch the new Prius in July, facelifted Camry and Aurion models in the third quarter of 2009 and a redesigned Prado in the fourth quarter, while Mr Buttner confirmed Toyota’s iQ city-car remains under consideration for sale in Australia.

However, Toyota has confirmed its prospects of securing the right to produce a third model line (the next-generation Kluger, production of which will not take place in Japan, which builds Australia’s current Kluger), have been reduced due to Toyota’s global over-capacity problems stemming from slower worldwide demand.

“Toyota Australia is always interested in projects that will help its long term growth,” Toyota Australia public affairs manager Glenn Campbell told GoAuto.

“However, in these unprecedented economic times, it will be much harder to attract parent company investment for expansion projects as the global economic crisis has led to global parent over-capacity.”

Despite that, Toyota says there is no change to the hybrid Camry manufacturing plan it announced in mid-2009, which will see Altona become one of just four plants in the Toyota world to produce the petrol-electric Camry in the first quarter of 2010.

“Toyota Australia is still fully committed to production of the hybrid Camry,” said Mr Campbell. “There’s no change to the plan announced mid last year.

“The production for Australia’s first locally-built hybrid, the hybrid Camry, is still on target and the cars will be rolling off the line from the beginning of early next year.

“We are currently preparing for the production the hybrid Camry (and) we are encouraged by the prospect that the hybrid Camry will help re-energise the local market.

“Toyota outlined as part of its financial results that it will accelerate its next generation technologies, especially hybrid.

“Toyota Australia is in a good position, having secured hybrid production for our Altona plant last year. We’re one of only four plants in the Toyota world producing hybrid Camry,” he said.

Like its local manufacturing counterparts in GM Holden and Ford, Toyota has scrambled to cut costs and adjust production levels to suit falling demand, as well as freezing executive salaries and bonuses.

“The economic crisis has severely impacted global car markets for this period,” said Mr Campbell. “Toyota Australia is experiencing the same difficulties as other Toyota operations around the world. It’s a global situation.

“We’re doing the best job that we can. We’re already taking measures to support our operations and ensure we’re in a stronger position when the market returns. The company is training all of our 3500 manufacturing employees at Altona, adjusting the days we are building cars, frozen executive pay and incentive bonus, intensified supplier development and reduced costs.

“We are partnering with our people, our suppliers and dealers so we can transcend the turbulence that’s impacting the local and global auto industries.”

Mr Campbell said sales in Toyota’s largest export market, the Middle East, remained difficult to forecast, despite showing signs of stabilising following a sharp “softening”, and would be significant lower in 2009.

“In terms of the Middle East, the Altona-built Camry and Aurion are extremely successful. We exported more than 100,000 vehicles to the Middle East last year ... an all-time record for exports.

“However, as a result of the tough economic conditions we have seen a softening in demand in both our export and domestic market … (which) is reflective of the tough conditions being experienced by auto-makers across the world.

“Toyota Australia believes that we are starting to experience stabilising of the market for exports to the Middle East, but this market is extremely difficult to forecast.

“Toyota Australia exports the Camry and Aurion vehicles to about 20 countries – mainly the Middle East – and this remains unchanged. Predicting the volume of vehicles is extremely difficult (and) global economic conditions will result in exports being significantly lower in the year ahead.”

Mr Campbell said Toyota would continue to monitor production at its Altona plant – which operates two shifts, five days a week, to produce 400 cars a day – on a monthly basis, but denied it was stockpiling components in the event of supply chain problems, as TMC is reported to have done elsewhere.

“In relation to the economic conditions, our suppliers are under significant pressure in these tough times. It’s critical that not only car-makers but also government continue to provide immediate support to suppliers.

“Toyota Australia has been helping with ‘on site’ process improvement, supplier capability programs, benchmarking and risk management programs. In recognition of the deterioration of the economic conditions we’ve provided better payment terms, emergency funding and facilitated access to government support schemes.

“We have a history of working in partnership with suppliers for mutual benefit in the good times and the difficult times.”

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