Toyota Targets Big Savings in Factory, Product-Development Spending

Toyota Motor Corp. outlined massive new savings in factory investment and vehicle development, along with fuel efficiency gains, it aims to achieve through an aggressive companywide restructuring being launched this year.

The overhaul, part of a switch to new modularized product platforms, has been years in the making and is designed to fuel the automaker’s expansion beyond 10 million units in global sales annually.

By grouping bigger families of vehicles for production and development, the world’s largest automaker is targeting a 20 percent reduction in the resources needed to churn out new vehicles.

And by using more common parts that require less complex manufacturing configurations, the company aims to slash in half the amount of capital investment needed to prepare a new production line, compared with levels in 2008 before the financial crisis.

The changes will cut the amount of investment to build a new plant by 40 percent, the company announced today in Japan.

New engines

A new generation of engines will be up to 25 percent more fuel efficient than those in today’s Toyota vehicles while generating 15 percent more power, the company added. The company’s next-generation hybrid drivetrain, to debut on the redesigned Prius as early as year-end, will deliver a 15 percent boost in fuel economy.

Toyota President Akio Toyoda is banking on the overhaul in r&d strategy to kick the company his grandfather founded into growth mode after taking a pause on new production expansion.

“This is a period to rework our development and production sites,” said Mitsuhisa Kato, Toyota’s executive vice president in charge of r&d. “We will make a comprehensive new start.”

Toyota executives are counting on the changes in product development to deliver stable growth in an era in which rivals such as Volkswagen AG and Nissan Motor Corp. are rolling out their own modular-based product plans.

Kato, in an update on the plans, said the first cars based on the Toyota New Global Architecture, or TNGA, will be C-segment, front-wheel-drive models debuting later this year. The family of cars includes the Prius hybrid, Corolla and Lexus CT.

New platform

He declined to identify the exact nameplates, but the Prius is expected to be the lead-off vehicle for the new platform.

Toyota’s new TNGA approach focuses on the simultaneous development of multiple models and a heavy reliance on common modular components.

The shift in the company's approach to product development represents the biggest operating change of Toyoda's tenure, which so far has been hobbled by the global 2008-09 financial crisis, a string of worldwide recalls, the 2011 earthquake in Japan and the yen's soaring exchange rate.

Toyota unveiled the product-development strategy in broad terms in 2012 and has since provided periodic updates and details.

The approach will be applied first to three front-wheel-drive vehicle platforms that account for about half of the company's global production volume. Roughly half of the company’s vehicle lineup will be converted under the new strategy by 2020, Kato said.

Streamlined costs

The goal is to cut costs and improve the appeal of Toyota and Lexus vehicles through streamlined engineering.

Kato said savings in time and money will be plowed back into new technologies, better manufacturing processes, slicker designs and more attention to detail and quality.

“The aim is not just cost reduction,” Kato said. “It is making better cars.”

In a major change, Toyota also will use more components designed, engineered and manufactured to global standards instead of proprietary Toyota specifications.

This should aid worldwide procurement from big global suppliers and reduce costs, Kato said.

The company eventually aims to reduce the variety of parts across multiple nameplates by as much as 75 percent, he added.

Leaner manufacturing practices will help deliver some of the efficiency gains targeted.

Toyota’s will switch to “simple and slim” production lines that utilize downsized paint booths and more compact equipment that can be installed on top of the floors. Today’s factories, company executives say, often require large equipment that must be suspended from the ceiling or fixed to the plant floor.

Kato said the manufacturing upgrades will require new investments, but he declined to put a dollar figure on it.

But Toyota said that the new wave of investments will be, on average, lower than similar capital outlays made in 2008.

Risks and rewards

Global standardization of parts and platforms, however, can also create huge headaches when things go wrong.

No company is more aware of this than Toyota, which has been rocked by multiple large-scale recalls in recent years.

But Toyota says that simplifying parts and vehicle design and using fewer variations means more resources can go into developing better designs with less chance of defects.

Toyota’s global vehicle lineup has inflated to some 100 model platforms and 800 engine types, resulting in unnecessary complexity, Kato noted.

“Such increases,” he said, “have made it difficult to make each individual model ever better.”