In fact, a coalition of automakers has begun to suggest it might be more lucrative to cut production, reduce overhead and focus on achieving wider margins per car. Although this is not necessarily true for all markets. While automakers have tried to figure out how to adjust business for Western markets, most have continued to increase volume in China (which is considered a growth region). We just saw Volkswagen announce its intention to prioritize assembly in Asia for this very reason. But Toyota has also seen better sales growth in China than in other parts of the world.
That’s not to say China isn’t a problem, though. When Toyota announced plans to cut production in Japan, Chinese suppliers who had to be closed due to ongoing pandemic restrictions were said to have played an important role. Although its discussions of the launch of the planned reductions remained vague and focused on the big picture, the company would remain uncertain.
“In addition to the shortage of semiconductors, the spread of COVID-19 and other factors make it difficult to forecast several months ahead, and the production plan may be lower,” the company explained. “However, we will continue to closely monitor the situation of parts supply and suppliers, and do our utmost to reduce the magnitude of sudden production cuts as much as possible, to standardize the production plan and to reduce supplier’s burden.
Under these circumstances and in light of a review of past developments, we have revised production plans to be more reasonable in light of recent realities. Specifically, we have positioned the three-month period from April to June as an “intentional break” and will create plans based on staffing structures and vendor facility capabilities. In doing so, we will establish healthy work environments that place the highest priority on safety and quality, rather than overextending facilities, pushing people to their limits and settling for overtime. We will then notify our suppliers of plans that incorporate production reduction risks and other factors up to three months in advance, review production plans on a monthly and quarterly basis, and share these plans with our suppliers.
Based on the above, our global production plan for April, including overseas production, is approximately 750,000 units (250,000 units in Japan and 500,000 units overseas). Although the number of units we supplied to our suppliers at the start of the year includes the recovery of previous production cuts, due to the impact of semiconductor shortages, we have adjusted our production plan to around 150,000 units worldwide. The global average of the production plan from April to June is around 800,000 units.
So far, these cuts will only target Japanese facilities, specifically factories in Tsutsumi, Tahara, Kyushu-Miyata, Iwate and Fujimatsu. But the company has repeatedly said further reductions may be forthcoming, and there are credible rumors to suggest there is already a plan to slow down facilities in other countries, if existing reductions are found to be insufficient. Considering how often Toyota’s release mentions global production, these rumors probably shouldn’t be ignored.
However, even if Toyota’s production remains completely unchanged in other regions, there will still be ramifications for North America. Although the overwhelming majority of its lineup is produced locally, its luxury arm still has a slew of models that need to be shipped from Japan. While Lexus has the RX and ES produced in Ontario and Kentucky, respectively, other models must be imported from the aforementioned Miyata and Tahara plants.
“We would also like to once again extend our sincere apologies to customers who have been awaiting delivery of vehicles,” the company said. “By standardizing the production environment, we hope to deliver as many high-quality vehicles as possible. We continue to make every effort with relevant parties such as production, supply and sales. »
[Image: Andrii Medvediuk/Shutterstock]
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