Topic: Toyota to cut parts spending by 30 percent

[Leviathan]

http://www.leftlanenews.com/toyota-to-cut-parts-spending-by-30-percent.html

By Drew Johnson

Toyota – the world’s largest automaker – is forecasting its second consecutive year of operating losses, prompting the Japanese automaker to request heavy discounts from its parts suppliers. Toyota is looking to cut about 30 percent from its annual parts costs.

In order to return the company to profitability, Toyota is asking its parts suppliers to cut the prices of some parts by 30-40 percent, according to Japan’s Asahi daily. The price cuts are beig request for vehicles scheduled to hit the market by 2013.

Additionally, Toyota will make the switch to less expensive parts and materials. It remains to be seen how the less expensive parts and materials will affect the automaker’s overall quality, but cheaper rarely equates to better in the automotive world.

The price cut request is Toyota’s largest in 10 years. Although price reductions will be seen in vehicles headed for established markets, Toyota’s main reason for the cuts is to remain price competitive in developing regions.

[drederick]

If they can get floor mats wrong..... what will they think of next to cut costs? lets see:

- engine sludge
- rusty frames
- brakes that won't work in the cold (speaking of which I passed by a Toyota dealership and it said all Toyotas are tested in extreme conditions or something like that - I had a good laugh at that  one because I guess they forgot about the Matrix)

oh wait - these things already have gone wrong!

My best guess is killer airbags (sorry Artic Honda Owner, I think Artic Toyota will out do you on that one in 2010) lol

[carcrazy]

Doesn't this sound like GM/Ford/Chrysler of 10 years ago?

[DockMan]

Doesn't this sound like GM/Ford/Chrysler of 10 years ago?

I was thinking the same thing....

"Knock 15% out of your price or we go out for market test!" Used to hear it all the time....from GM!!!!

That is exactly the kind of blanket, stupid crud that led GM down the garden path of crappy quality and crappy market share. Good luck with that.

[Julie]

This doesn't sound good..... 

[articsteve]

Reuters UK   
* Toyota: made "various suggestions" to suppliers on Monday * Toyota shares up 1.6 pct vs 1 pct Nikkei rise TOKYO, Dec 22 (Reuters) - Toyota Motor Corp (7203.T Toyota has asked its suppliers to cut prices of some parts by 30-40 percent for cars that will hit the market by 2013, the Asahi daily said. 



TOKYO (Reuters) - Toyota Motor Corp. (7203.T) aims to start selling robots that can help look after elderly people or serve tea to guests by 2010, the Asahi daily reported on Tuesday.

Japan's top automaker sees a declining birthrate and aging population leading to growing demand for robots that can help in tasks such as child care and nursing
care, the report said.

 

[Leviathan]

http://www.businessweek.com/globalbiz/content/nov2009/gb2009115_034172.htm

Even if sales take time to recover further, some other factors could aid profitability. Indeed, perhaps one of the more impressive aspects of today's announcement was an upward revision to the amount of money Toyota expects to save from cost-cutting. When sales plunged last fall, the company formed an "Emergency Profit Improvement Committee" to ferret out an extra $1.4 billion in savings through the end of March.

For the current term, the target is far more ambitious. Toyota today said it is now seeking savings of $13.9 billion, a rise of $3.9 billion over a previous projection. Putting that $13.9 billion number into context, it's only $3 billion less than Mitsubishi Motors' annual sales forecast.

[carcrazy]

Another thought .... perhaps the first place to cut cost will be the interior quality/materials. Toyota is already mid-pack at best in terms of interior materials quality so if they cut even more, by 2013 their interiors will be what, made out of cardboard? I guess they'll put a marketing spin on it and call them eco-friendly... 

[rrocket]

I was personally involved in a parts cost reduction program about ten years ago with one of Toyota's suppliers.  It was pretty interesting, since I had never seen it done this way before.  Compared to the way the Big 3 had been doing it, this was a breath of fresh air.

First Toyota went to the part supplier and asked for a reduction in part cost while also maintaining part quality.  So they wanted to pay less per part but maintain, and if possible, improve quality.  Obviously the first thing that was said was "impossible!".  And here was the interesting part.  Toyota said they not only would help, but they would "give" the part supplier a couple of their engineers to help them during the process.  This was unheard of...at least from my experience in doing similar projects with the Big 3.  Not only did Toyota supply the engineers, but they did so at no cost to the supplier.  At the time, Toyota really seemed to understand how important their suppliers were to their overall operation.  They helped the company introduce a Lean Manufacturing model based on Toyota's own system and implemented their "kaizen" mindset.  Kaizen basically means "continuous improvement".  It was a very interesting project and I had never seen one like it since then.

I'm not sure how they'll do it this time around.  But they would be wise to avoid taking the route the Big 3 have done in the past which was to simply bark at your suppliers to reduce cost at any cost.

[Julie]

I was personally involved in a parts cost reduction program about ten years ago with one of Toyota's suppliers.  It was pretty interesting, since I had never seen it done this way before.  Compared to the way the Big 3 had been doing it, this was a breath of fresh air.

First Toyota went to the part supplier and asked for a reduction in part cost while also maintaining part quality.  So they wanted to pay less per part but maintain, and if possible, improve quality.  Obviously the first thing that was said was "impossible!".  And here was the interesting part.  Toyota said they not only would help, but they would "give" the part supplier a couple of their engineers to help them during the process.  This was unheard of...at least from my experience in doing similar projects with the Big 3.  Not only did Toyota supply the engineers, but they did so at no cost to the supplier.  At the time, Toyota really seemed to understand how important their suppliers were to their overall operation.  They helped the company introduce a Lean Manufacturing model based on Toyota's own system and implemented their "kaizen" mindset.  Kaizen basically means "continuous improvement".  It was a very interesting project and I had never seen one like it since then.

I'm not sure how they'll do it this time around.  But they would be wise to avoid taking the route the Big 3 have done in the past which was to simply bark at your suppliers to reduce cost at any cost.

Interesting.  *How* they approach this issue will be very important...

[rrocket]

Interesting.  *How* they approach this issue will be very important...

Indeed.  Pissing on your suppliers never yields positive results.

[Julie]

Interesting.  *How* they approach this issue will be very important...

Indeed.  Pissing on your suppliers never yields positive results.

It's like being rude to the waiter/waitress or cook who makes your food in a restaurant, eh?   

[rrocket]

Interesting.  *How* they approach this issue will be very important...

Indeed.  Pissing on your suppliers never yields positive results.

It's like being rude to the waiter/waitress or cook who makes your food in a restaurant, eh?   

For some, sort of....but for us, not at all.  In one of our industry magazines, only 12% of companies had a "favorable" relationship with the Big 3.  This mostly stems from how difficult they are to deal with, but mainly how long/how slow they are to pay their bills.  Unfortunately, it's mostly the norm to have to wait 1-3 years to be paid in full for a project. 

However, despite the Big 3 at times being PITAs to deal with, we would NEVER deliver anything but the best product we can make.  Especially with our products....it's one of the parts you first see when looking at a car..  So we make sure to always deliver the highest quality possible for whichever customer. 

[EV Dan]

PR BS. The only way Toyota is gonna get what they are asking for is by having the part makers relocate to China or simply by buying Chinese parts. A few years after they start doing so the market will be entirely surrended to Koreans.  

[rrocket]

PR BS. The only way Toyota is gonna get what they are asking for is by having the part makers relocate to China or simply by buying Chinese parts. A few years after they start doing so the market will be entirely surrended to Koreans.  

Disagree completely.  I've been in many of these places (suppliers for both domestic, imports) and some of these places look like they're stuck in the 70's.  There can be vast improvements, but money will have to be spent to achieve this.  Unfortunately,  many owners hate spending money.   Even in hard tool suppliers some of the companies use stuff that are decades old.  I've been in shops that have lathes and other machines that are 60 years old.  I'm fortunate to work in a cutting-edge technology shop where they spend money on modern tooling and machines.  But you're mistaken if you think all places are like this.

[Mitlov]

I'm not inclined to believe that Toyota will be able to reduce parts spending by 30% without losing quality, regardless of "kaizen" and loaned engineers and all that.  You can only increase efficiency so much, and I sincerely doubt that Toyota is going to inefficient parts manufacturers at the current time.

[toolatecrew]

I'm not inclined to believe that Toyota will be able to reduce parts spending by 30% without losing quality, regardless of "kaizen" and loaned engineers and all that.  You can only increase efficiency so much, and I sincerely doubt that Toyota is going to inefficient parts manufacturers at the current time.

x2

If these guys had so much inefficiency that their part costs were 30 40% high then Toyota should not have been using them before.

I mean what kind of margins are in this stuff to start?

[rrocket]

I'm not inclined to believe that Toyota will be able to reduce parts spending by 30% without losing quality, regardless of "kaizen" and loaned engineers and all that.  You can only increase efficiency so much, and I sincerely doubt that Toyota is going to inefficient parts manufacturers at the current time.

x2

If these guys had so much inefficiency that their part costs were 30 40% high then Toyota should not have been using them before.

I mean what kind of margins are in this stuff to start?

Except that's not how it works.  Very rarely does Toyota (or anyone else for that matter) choose who builds their tools or shoots their parts.  Although there are certain criteria that some manufacturers require, almost anyone can build their tooling.  Just like anything else there is a "middle man" who decides who builds what.  And just like anything else, it's not always the best shop who gets the work.  Remember...the middle man has to make a profit too.

 The manufacturer says "Do this project for $5 million".  And the Tier 1 finds someone to do the work...leaving enough cushion to make a profit.  More recently, however, the manufacturers are getting much pickier about who does their work and the shop that ends up having to do this work have to be "certified" by whatever manufacturer guidelines are required.

Trust me...there are some absolute dives that do work for manufacturers.  And if anyone ever wants a tour of a high tech place and then to see a dive, please let me know the next time you're in town. 

[carcrazy]

I have no experience in auto manufacturing industry, but in other industries (healthcare for example) they use certified suppliers. You cannot even buy a bolt that would go into a medical device unless the vendor is certified.
Arguably a car is different from an infusion pump for example, but still, there are major safety concerns around cars as well.

[rrocket]

I have no experience in auto manufacturing industry, but in other industries (healthcare for example) they use certified suppliers. You cannot even buy a bolt that would go into a medical device unless the vendor is certified.
Arguably a car is different from an infusion pump for example, but still, there are major safety concerns around cars as well.

Indeed.  But it's not that way for car parts.  For instance, we have very strict policies, because we make lighting components.  Makes sense, right?  But the people who make that little teeny scuff plate that covers the bolts that hold your seat to the floor pans?  Not so much.   

We once did a small mold for an angioplasty part.  The tolerances were out of this world!!