UPDATE 1-Toyota aims to lower break-even point for Japan ops

* Wants Japan to break even at 85 yen dlr, 70 pct utilisation

* Sees next 5 years’ annual capex around Y700 bln

By Chang-Ran Kim, Asia autos correspondent

NAGOYA, Japan, Dec 24 (BestGrowthStock) – Toyota Motor Corp (7203.T: )
is aiming to significantly lower the break-even point for its
Japanese operations through a slew of improved manufacturing
processes, a top executive said on Friday.

Toyota President Akio Toyoda has said he wants to maintain
domestic production of at least 3 million vehicles a year in
Japan to protect jobs and the tradition of manufacturing, or
“monozukuri”, at home despite headwinds from a stronger yen.

Toyota is more exposed to a firm yen than rivals Honda Motor
Co (7267.T: ) and Nissan Motor Co (7201.T: ) since it produces a
bigger portion of its vehicles in Japan, and is under intense
pressure to lower costs or take the politically difficult step of
shifting more of its production overseas.

Nissan has especially been aggressive in pursuing ways to
shield itself against a strong yen by importing more parts, as
well as some cars, from overseas.

“We’re trying to be able to operate at 85 yen (to the dollar)
and 70 percent capacity utilisation,” Atsushi Niimi, executive
vice president in charge of manufacturing, told reporters.

As the global financial crisis hammered sales and left much
of its production capacity unused, Toyota embarked on efforts to
make its domestic factory lines more flexible and introduce other
changes to be able to break even at capacity utilisation of 70
percent, equivalent to daily production of 12,000 units.

But that had assumed a dollar rate of 90 yen, far more
favourable than the current 83 yen (JPY=: ) level.

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For graphic of Toyota’s Japan production trend:

http://link.reuters.com/qax43r

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Niimi said improvements in processes could reduce Toyota’s
capital spending by about 40 percent, limiting annual expenditure
to about 700 billion yen ($8.4 billion) for the next five years
or so. That is about half what it used to spend at its peak.

One measure Toyota is taking is to make its engine assembly
process more compact.

“We used to believe that the most efficient scale for an
engine assembly line was about 18,000 units a month,” Niimi said.
“But now we think half of that is better.”

He said that because emissions and fuel economy regulations
were evolving all the time, engine production would fall to half
in two to three years, hurting the pace of depreciation.

By changing the layout of the engine production process and
making other changes, Niimi said Toyota’s engine production could
be 20 percent more cost-competitive than Volkswagen AG
(VOWG_p.DE: ), which he said was probably the leader now.

“Depreciation-wise, Volkswagen’s engine (production) cost is
probably about 30 percent cheaper than ours,” he said. “But we
think we can win by 20 percent with our new processes.”

Last week, Toyota forecast its sales in Japan to fall 17
percent to a 37-year-low of 1.3 million units in 2011, worse than
a 9.9 percent drop predicted for the overall market by the Japan
Automobile Manufacturers Association. It plans to produce 3.1
million vehicles in Japan, meaning 58 percent would be exported.

Before the global financial crisis, management had talked of
sustaining minimum domestic output of 3.8 million vehicles.
(Editing by Edwina Gibbs)

UPDATE 1-Toyota aims to lower break-even point for Japan ops