Toyota Motor stresses commitment to SE Asia

Toyota Motor stresses commitment to SE Asia

TOKYO (Dow Jones): Toyota Motor Corp., Japan's biggest automaker, considers Southeast Asia's slump over the past year as mostly cyclical and has no plans to shut factories in the region, said top officials in a recent interview.

In fact, it is significantly lifting the number of parts sourced by its Japanese factories from the Southeast Asian operations, and will shift some product lines into the region and out of Japan.

Production levels around Southeast Asia are so low that Ryoichi Sasaki, a general manager of the Asia division, doesn't hesitate to use the word "rescue" when describing what Toyota is doing with its vast production capacity.

"No doubt, all the manufacturing plants are having a very difficult time at the moment," he said. "There are a number of suppliers very close to Toyota (operating) in Asean countries, therefore we also try to rescue their local counterparts."

By "rescue," Sasaki said he means keeping Toyota's assembly lines running, even though demand is falling short of supply, and frantically trying to generate economies of scale by better allocating manufacturing between plants in the region and those in Japan.

Plants that were designed to serve domestic markets are being re-assigned to satisfy export markets outside Asia. That means making pickup trucks destined for Australia in Thailand instead of Japan, as Toyota will start doing in September, and shipping unused casting dies from Southeast Asian plants to ones in Eastern Europe.

Toyota has factories in virtually all Southeast Asian nations, set up as far back as the 1960s to cater to what the company had expected to be a booming regional market for its products.

Expansions also occurred in the late 1980s and 1990s.

But the Asia crisis has led to a sharp fall in demand for automobiles. Sakaki said Toyota's regional plants are now running at only 20 percent to 30 percent of capacity and in many places, production runs have been reduced to less than one full shift a day, and sometimes only two weeks a month.

Aside from Japan, Southeast Asia has the largest geographic concentration of Toyota plants, including many parts makers.

Toyota officials said that they have been formulating plans since late last year to keep these assembly lines in motion, including retooling the plants for export.

The company produced 244,400 vehicles in Asia last year, about 18 percent of the overseas total, and compared with the 1.5 million it exported from Japan during 1997. Exports from Japan and elsewhere, however, are down this year.

But Toyota officials said the company intends to boost production in the region of some products, sometimes at the expense of Japanese facilities. "We don't have such a concern about it, because Japan Toyota operations are so huge we can absorb that (possible dent to domestic revenues)," Sasaki said.

Export of parts from Southeast Asian plants to Japan will be boosted by at least five times the 1997 levels by 2000, Sasaki estimated. Many of those parts will be installed in cars being assembled in Japan and destined for elsewhere.

Another business plan was decided at a board meeting last November that aims to de-emphasize the strategy Toyota has employed for decades. Instead of looking at Southeast Asian nations as stand-alone markets, Toyota is breaking operations down by business line.

For example, diesel engine production is being concentrated in Thailand, gasoline engines will be produced in Indonesia and transmissions are to be handled in the Philippines. Aside from parts and component manufacturing, most of Toyota's factories in Southeast Asia do assembly.