Toyota Keeps Its Low-Risk Growth Strategy Despite Increased Profit image

Although Toyota reached its mid-term profit target for the financial year ended March, the automaker will not give up its low-risk growth strategy.

Toyota reported 1.32 trillion yen ($13.32 billion) in annual operating profit and an operating margin of 5.98%, surpassing analysts’ predictions of 1.26 trillion yen profit. This means that the Japanese automaker managed to reach the target set two years ago by President Akio Toyoda to set an annual operating profit of 1 trillion yen and a 5% margin. But for Toyoda high profits are no assurance for a brighter future, as he learned from the losses which hit the company in 2008 after a period of rapid growth and expansion.

“I became painfully aware that the most important thing is to keep growing at a sustainable pace. Expanding vehicle volume does not equate with growth, because fixed costs also increase,” the 57-year-old grandson of the founder of Toyota’s automotive business said in March. “I want this year to think about what competitiveness really means for Toyota.”

Toyota has no plans of building new factories in the following three years, as it will focus on profitability, and not on market share and volume. The company’s previous plans are to build new plants in Indonesia and Thailand and to add capacity at its existing facilities, for example at the Kentucky plant. For this year Toyota expects record sales and it could become the first automaker with sales surpassing 10 million units annually.

Source: Reuters