Toyota aims to double profit under new strategy

Toyota aims to double profit under new strategy

Tokyo: Toyota Motor Corp said it would accelerate a push into emerging markets and launch more hybrid models as it aims to nearly double profits under a new long-term strategy.

The world’s largest car maker, trying to move on from a massive global recall, also unveiled plans to slim its board to 11 members by June from 27 to speed up decision making as part of a new plan unveiled on Wednesday.

Toyota has been struggling to improve its profit margins, which are weaker than those of Japan’s No. 2 Nissan Motor Co Ltd and third-ranked Honda Motor Co Ltd . Toyota stayed ahead of General Motors Co as the world’s biggest automaker but by a thinner margin last year.

Although Toyota’s loss-making, export-dependent Japanese operations remain a major drag because of the strong yen, its shares have outperformed recently as some analysts expect profitability to improve with the adoption of efficient manufacturing technologies and further cost cuts.

Under its “global vision" strategy, Toyota said it would aim for an operating profit of ¥1 trillion ($12 billion)and a profit margin of 5%, against an estimated ¥550 billion and 2.9% in the current financial year ending this month.

It did not give an exact time frame for the targets.

The plan, unveiled by President Akio Toyoda, also called for Toyota to launch about 10 more hybrid models by 2015. It expects emerging markets to make up half of its sales by 2015, up from 40 percent now.

Since taking the job in June 2009 in the aftermath of the global financial crisis, Toyoda, grandson of the company’s founder, has often spoken of the need to go back to the basics of “making better cars and contributing to society".

That vision became a directive as a recall of millions of cars, mainly for complaints of unintended acceleration, damaged Toyota’s once-impeccable quality image, especially in the important US market. Toyota has recalled nearly 20 million vehicles worldwide since 2009.

Toyota shares have risen 13% over the past three months, however, outperforming its rivals.

“It looks like it is finally catching up with Nissan and Honda in recovering (profitability) and I think that is being reflected in the share price," said Makoto Kikuchi, chief executive of Myojo Asset Management Japan.

“It’s clear that Toyota’s biggest mistake was to add too much production and the question (now) is how Toyoda is going to tackle that," he added.

Executives say that, under Toyoda’s leadership, the company has veered away from market share targets that used to be a major driver for growth during its boom years in the past decade.

While many, including Toyoda, blamed the rapid, unchecked growth as part of the problem behind the recalls, the chief executive is caught between his drive to focus more on customers — even if that means slowing down vehicle development — and shareholders’ desire for profit growth and returns.

Shares of Toyota closed up 0.4% ahead of the announcement, roughly in line with the market.