Toyota to save over $2.7B annually starting next year

Toyota’s march to the top of the world’s sales lists continues and at the same time the Japanese mega-maker is looking to cut costs at every possible point. The savings will come from improved quality, reduced waste and human resources development in addition to their new “Value Innovation” (VI) plan.

Toyota’s previous cost-cutting plan, somewhat awkwardly labeled “Construction of Cost Competitiveness in the 21st Century” (CCC21), saved $9 billion over five years. In an interview with Toyota Motor Corp. President Katsuaki Watanabe, Reuters quoted the leader as saying that he expected savings to be at least 300 billion yen ($2.7 billion) per year, and that less savings would be “meaningless.” Watanabe believe the plan will not only achieve the $2.7 billion annual savings goal, but exceed it. What exactly the plan comprises is still a corporate secret, but it does include using lightweight materials and designing the cars for not just fuel efficiency but also cost efficiency.

The need for cost cutting is growing as new environmental and safety standards push new-car requirements ever higher while parts costs climb and consumers move toward smaller (and hence lower-margin) cars, reports Automotive News. The forces in the market are all converging to make it harder and harder to profit from current cars, so the only way to improve profitability is to cut costs. Toyota expects early showing of its new VI initiative by next year, but doesn’t expect the full impact until 2010.

Toyota also sees improved quality as a way to reduce waste and save costs. Better manufacturing processes and human resources training will also cut back on lost time and profits, reducing waste and thereby reducing costs.