Toyota to cut UK costs as sterling takes its toll

Toyota, the Japanese car maker is redoubling efforts to cut costs at its Burnaston plant in Derbyshire after its UK operations plunged into loss last year because of the strong pound.

Three quarters of Burnaston's output is exported to the Continent and the strength of sterling is thought to have wiped out profits in 1997. In 1996, Toyota Motor Manufacturing UK made pounds 10m, up from pounds 1m the year before.

The cost-cutting measures are likely to take the form of raising productivity levels further at Burnaston and driving down component costs. Bryan Jackson, the director of TMMUK responsible for finance, declined to give details of Burnaston's financial performance last year.

But he said: "Like many exporters, we have been hit by the strong pound. Because we cannot raise prices we have to tackle our production costs.

Production costs at Burnaston are 10 per cent higher than those of Toyota's car plants in Japan and the US and a priority will be to reduce this gap.

Last year Burnaston, which employs 2,650, raised productivity levels by 5 per cent. Production will increase from 105,000 to 160,000 this year with production of a second Corolla model beginning in September. But Toyota only plans to take on an extra 300 workers to cope with the increase. Output from the plant next year will rise to 220,000.

Burnaston's component purchases will double from pounds 500m last year to pounds 1bn in 1999. Half of its 200 suppliers are British and they account for 60 per cent of the components bought by value.

Toyota said it did not expect this ratio to change even after the introduction of the single European currency. Mr Jackson said TMMUK had not yet decided whether to follow Rover's lead by requiring all its suppliers to deal in euros from 1 January next year. A study team is examining the impact on Burnaston of the launch of the single currency.

Toyota aims to raise total European sales to 520,000 this year from 470,000 in 1997 as part of a global strategy of increasing world wide sales to five million.

It expects the overall European market to grow by only 2-3 per cent this year but expects its own sales to grow much more strongly in Germany, France, the UK, Italy and Spain.

Meanwhile, Toyota appeared to rule out joining the auction for the luxury car maker Rolls-Royce, which has been put up for sale by its parent company Vickers. Asked whether Toyota had requested a copy of the memorandum of sale from Rolls' financial advisers, Lazards, the president of Toyota Motor Europe, Tatsuo Takahashi, said: "To my knowledge we have had no discussions, no negotiations, nothing."