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Toyota Looking To Scale Back Production By 700,000 Or More

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Toyota has temporarily pulled the plug on a production line in Japan in an effort to scale back global production by 700,000 vehicles, or 7% of the company's annual output of 10 million units. Other potential cuts include the off-mentioned shuttering of the NUMMI plant in California and a temporary shutdown at a U.K. facility.

The cutbacks come in response to the shaky worldwide economy. "Though sales in some countries have been picking up, the outlook for global car demand is still uncertain," said an unnamed representative at Toyota. The company finds itself in a slightly more precarious position than some of its Japanese rivals like Honda and Nissan, both of whom turned profitable in the second quarter of 2009. This is generally attributed to Toyota's slower response to the economic crisis -- at least as far as staffing and production cutbacks are concerned.

Japan's Nikkei newspaper had suggested that Toyota would institute deeper cuts, up to 1 million vehicles, or 10% of the company's output. So far, that figure seems to be a bit of an overstatement. However, given Toyota's reluctance to idle or close production facilities, now that Japanese, British, and U.S. scalebacks are all but certain, it would seem that all options are on the table. On the plus side, the fragile but gently rebounding global economy may prevent Toyota from instituting deeper cost-cutting measures.

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Comments (2)
  1. So, is Toyota prescient? What are the American planners forecasting, and what are their average days-on-the-lot now that CFC is over? Getting these operational nuts and bolts right distinguishes the winners from the losers. This isn't rocket science, but why aren't car companies better at this?
     
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  2. I don't think anyone knows what days-on-the-lots stats are going to be now. All we know is that Toyota has been reluctant to make drastic changes to its backend. Personally, I'd guess that the company thought its strategies were adequately conservative to weather the storm, and it didn't want to rock the boat unnecessarily.
    _
    As far as car companies and their ability to adapt, I think most retail businesses are kind of bad at seeing alleged patterns and guessing demand. It's always a gamble, and things rarely turn out as expected (cf. the book THE BLACK SWAN).
     
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