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Toyota’s ‘back to basics’ plan

Toyota has outlined a cost-saving strategy that will rely on a shake-up of how it produces its cars.

Mitsuo Kinoshita, senior managing director and chief purchasing officer, says: “Take nuts and bolts, for example. What if we were to develop components that don't require screws? That's the kind of thinking we're after.

“We've pretty much reached the limits of what we could do under the previous strategy. Under the next method, we're taking a brand new approach and asking our engineers - and suppliers - to go back to the basics of vehicle development.”

The new strategy has been named, “VI” for Value Innovation, and was drawn up in March, at a time when per-vehicle cost savings at Japan's top automaker have more than halved from just two years ago, hit by a surge in steel and other materials prices.

Kinoshita said there were no numerical goals under VI. But he hopes the steps to be taken, which will be reflected in cars sold from 2007, will help bring per-vehicle savings beyond the low levels of last year.

“For the next few years, the best we can hope for is to offset the high materials prices,” he said at Toyota City in central Japan. “But we have very high hopes for VI beyond 2007, and eventually we'd want to do better than that.”

Along with the VI framework, Kinoshita, who will become an executive vice president next month, said Toyota would aim to cut costs by manufacturing cars in a way that would raise the utilization rate of steel when cut into various parts.

“Right now we only use about 60 to 70%. If possible, we'd like to raise this by another 10 percentage points.'' Even a one percentage point increase would translate into huge cost savings, he said.

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