Toyota to slash new range costs

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The Independent Online
Toyota, Japan's biggest car manufacturer, plans to slash manufacturing costs by 30 per cent on a new line of cars to counter the effects of the inexorably rising yen.

Dubbed 'the world car of the 21st century', the new models are planned to be on the market by 1998, according to reports in Japan.

The yen, which at the beginning of last year was coasting at 120 to the dollar, is now below 97 to the dollar, and with Japan's continuing trade surplus with the US few economists see the pressure on the yen letting up.

Many other Japanese companies are responding by relocating plants overseas, particularly in Asia, but Toyota seems determined to maintain a manufacturing presence in Japan, close to where it does most of its research and development.

Toyota gave no indication of what effect the plans would have on its UK plant in Derby. It has made no official comment on the reports, but a source inside the company said: 'We are trying like hell to cut costs,' and admitted that the 30 per cent cheaper range of cars was on the drawing board.

Since the yen began its recent rise against the dollar, Japanese cars in the US have become dollars 2,000 to dollars 3,000 more expensive than comparable American models The new cars would be no- frills 1300-1500cc units with simpler designs and streamlined assembly methods. Toyota plans to make them competitive even if the yen rises as far as 80 to the dollar.

According to the source in Toyota, the company has undergone a revolution in its thinking about how much added value it should put into cars. This was inspired by the launch in the US earlier this year of Chrysler's cheap Neon car, which was instantly dubbed 'Japan killer' by the Japanese press.

'When Chrysler launched the Neon, Toyota mechanics took one of them apart and drew up a report which criticised much of the design and workmanship.

But now the view inside the company has changed, and Toyota is wondering whether it is not putting too much into its cars - more than the customer wants,' the source said.

The Japanese car industry has been badly hit by the domestic recession as well as the appreciating yen, and although Toyota managed to squeeze a small operating profit out of its operations last year, executives are now facing up to the need for sweeping changes in the way it makes cars.