Toyota to cut global capacity to match lower sales image

Toyota Motor Corp will cut its global production capacity to match lower sales, a company source with direct knowledge of the matter said on Wednesday.

The Nikkei business daily said Toyota planned to cut its global capacity by 10 percent, or 1 million vehicles, as early as the current financial year to March 2010, but the source said the extent and timing of the production cuts had not yet been set.

Toyota, the No.1 carmaker, has begun restoring some production cut in the wake of the global financial crisis, as inventories shrink and government stimulus efforts kick in, but it has yet to announce whether it plans permanent cuts in factory capacity.

Many car plants around the world are idle or running below capacity as the industry tries to work out how much sales will recover after the crisis passes and how U.S. firms General Motors Co and Chrysler Group LLC emerge from their deep woes.

Toyota has decided to halt a production line in Japan for about a year and a half from next spring and is considering halting a line at a U.K. plant, said the source, who declined to be named because the matter was not public.

Toyota has said it will decide this month whether to pull out of New United Motor Manufacturing Inc, a California joint venture with General Motors.

Those three moves would cut capacity by 700,000 vehicles, based on Toyota factory data, from Toyota’s annual output capacity of 10 million vehicles.

The Nikkei said Toyota would cut capacity to 9 million cars in a bid to return to an operating profit in fiscal 2010, but the source said decisions had not been taken on such deep cuts.

Toyota forecast this month a slightly shallower annual loss, relying on deeper cost cuts and government-backed sales stimulus around the world, but there remain doubts about a sustainable recovery in demand.

Source: Gasgoo