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Toyota cuts North American production

  Toyota Motor Corp, the world’s largest car maker, said it would cut production at several North American plants over the next few months in a bid to halve its inventory of vehicles.


Toyota shares gained nearly 3% in Tokyo, outperforming the overall market. Automakers are grappling with slumping sales in the mature markets of North America, Europe and Japan as well as slowing sales in emerging markets such as India, China and Russia amid a spreading global recession.

Toyota’s announcement followed a newspaper report that Nissan Motor Co would move production of its key subcompact to Thailand from Japan as part of a structural overhaul to cut costs. Nissan announced further production cuts in Japan on Thursday and a source said it would post an operating loss in the financial year to March 31.

Toyota, which has warned it will post its first ever annual operating loss this business year, said its inventory of North American-built vehicles was 80-90 days, having doubled in the past year. It hopes to cut it by half in the Q2. Toyota said last week it would halt production at its Japanese plants for 11 days in February and March.

“The current inventory level is a record high for Toyota, though the market slump is unprecedented so rising inventories are unavoidable,” said Okasan Securities analyst Yasuaki Iwamoto. “Sales are falling 30-40% every month, and this pace of fall is unheard of for either Toyota or the overall industry,” he said. “Automakers have to cope with it through production cuts as quickly as possible.”

The industry downturn has caused inventories to build up even for Toyota, which is known for running lean and cost-efficient production where parts are delivered in a “just in time” system to be installed in vehicles on the assembly line.

It had already reduced North American production of its best-selling cars, including the Camry and Corolla sedans, and suspended work on a new plant in Mississippi that was due to start producing the popular Prius hybrid car from 2010.


A relentless sales slide and the yen’s sharp rise led Toyota to forecast its first-ever annual operating loss in December and prompted the company’s 2,200 general managers to voluntarily commit to buying its cars by the end of the business year.

Toyota’s sales in the United States, its key market, fell 37% in December. “This is a tough environment, and it may continue for a while,” Jim Wiseman, vice president of external affairs for Toyota Motor Engineering & Manufacturing North America, said in a statement.

In 2008, Toyota group, including truck maker Hino Motors and mini-vehicle maker Daihatsu Motor, expects to have produced 9.23 million vehicles globally, down from its earlier forecast of 9.5 million, Kaga said.

Its latest move sets non-production days at manufacturing facilities in Canada and in Kentucky, California, Texas, Indiana, West Virginia and Alabama in the United States. The number of non-production days varies by assembly line and model. Toyota’s US marketing head, Jim Lentz, said this week it would bring its US inventory of unsold cars and trucks in line with demand by May. (Reuters)