Yen strength pushes Toyota abroad

Toyota, the Japanese car giant, said yesterday that the impact of the high yen was forcing the company to accelerate plans to build more manufacturing capacity abroad.

The company said it was aiming to sell around 6 million cars and trucks a year by the end of the decade, a strategy that would mean a significant globalisation of its operations.

Toyota, which earlier this year announced a doubling of capacity at its UK plant to 200,000 cars, is looking to expand or open factories in Canada, Argentina, Thailand and the Philippines within two years.

Yoshio Ishizaka, director of Toyota Motor Corporation, warned that the overvalued yen had diminished the price competitiveness of Japanese cars in Europe.

The European car market expanded 6 per cent last year, but European sales of Japanese cars declined 5 per cent. The Japanese share of Europe's market declined 1.5 per cent to 11 per cent, though Toyota was not as badly affected as rivals. Profitability of Toyota's European operation remains "poor", though the company does not disclose details.

The company's aim is to produce 2 million cars a year outside Japan by 1998. This will also mean raising spending on component purchasing outside Japan.

Mr Ishizaka said: "Globalising production will do more than simply insulate us from fluctuations in exchange rates. It will position us to use those fluctuations to our advantage." Toyota's net income rose last year for the first time in five years. Earnings were up 40 per cent to more than 50 billion yen.

The company said it might eventually begin production of diesel engines at its UK plant at Deeside, though there were no immediate plans. Deeside has begun exporting 1.6 litre engines for installation at Toyota's factory in Turkey. About 15,000 engines will be supplied in 1995, and that figure is likely to increase.

Toyota is developing a new mid-range car for the emerging Asian markets, and this may eventually be introduced into eastern Europe. Production of the model at the Derby factory was not ruled out, though the project is far into the future.

Asian car demand is this year helping to mitigate the fall in Japanese vehicle exports caused by large drops in shipments to the US and Europe. Japan's total vehicle exports in the first half of 1995 fell 8.1 per cent from a year ago to 2,054,443 units - the third successive year-on-year decline.