Toyota Takes a Plunge

It was a black day for Toyota Motor Corporation last week when it announced a 28 percent plunge in fiscal first-quarter profit from the previous year. It was the first such plunge since quarterly figures were introduced in 2002. The hitherto successful Toyota formula to reduce costs and expand on the most important market -- the United States -- seems no longer to be working.

Mitsuo Kinoshita, one of Toyota’s vice presidents, blamed the “problems of the American economy [which] are becoming increasingly noticeable” in Japan, adding that he hoped the next US government would “take appropriate steps”.

Kinoshita also put the plunge down to the rapidly changing business climate, exchange rate fluctuations -- especially the rise of the yen against the dollar -- as well as the rising price of raw materials worldwide.

But another significant factor is the sports utility vehicle -- SUV for short. Just last year Toyota made massive gains on the US market and attained huge profit margins with its four-by-fours.

However, increasingly high oil prices led to a dramatic plunge in the popularity of the gas-guzzling vehicles. Toyota was forced to make a swift change of course, deciding to place more emphasis on smaller cars and environmentally-friendly hybrid models.

Complacency number one enemy

Tokuichi Uranishi -- also a vice-president at Toyota -- recently said, almost prophetically,: “It makes sense to look at this position of number one from a different perspective -- it is important to look at each region separately and see how many cars are sold there. In Europe, for example, Toyota has 6 percent of the market and is at place number seven so we cannot be complacent even if we could potentially be number one. Complacency is our biggest enemy.”

In August 2007, Toyota’s president, Katsuaki Watanabe, announced Toyota’s goal to sell 10.4 million cars in 2009. Last month, the firm was forced to lower this goal by 350,000 cars -- to 9.5 million.

In the car industry, the magic 10 million mark seems almost impossible to attain. The world number one car manufacturer, General Motors, almost managed in 1978 but did not quite get there with only 9.55 million cars sold.

This year, despite the economic climate, Toyota is expected to overhaul General Motors and become number one, bringing to an end an 80-year reign by the US manufacturer.

Focus on Asia and the environment

The Japanese car firm wants to expand in South America and Asia, where it has already announced growth in the first quarter of 2008. Toyota will start construction of a second plant in India in August, which is expected to deliver 100,000 vehicles in 2010.

The greatest challenge now for the firm is the environment, said vice-president Uranishi: “Of course, we’re a company that makes cars -- that won’t change. But we’re also fully aware of the car’s negative contribution to pollution. Our most important task is to minimise this negative impact.”

With its research and development budget of about 5.5 billion euros a years, Toyota will surely play a significant role in determining how the next generation of green cars will turn out and thus secure a major part of the market.