Toyota Europe reconfirms it will be profitable this year
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BRUSSELS – Toyota Europe's boss reconfirmed that the company's automaking operations will make money for the first time in five years.
"Despite a difficult market, we are on track to return our automotive operations to a profit in the current fiscal year," Toyota Europe CEO Didier Leroy told Automotive News Europe.
Leroy first made the profitability prediction early this year, before economic conditions in Europe worsened. Europe is Toyota's fourth-largest market, after North America, Asia (excluding Japan) and Japan.
The company credits a deep restructuring that started in mid-2010 with the financial turnaround of its European business. The cuts have made it possible for Toyota Europe to turn a profit at a volume of a little more than 800,000 vehicles, which is what the company expects to sell in Europe in its fiscal year ending in March 2013.
In the past, Toyota Europe sold more cars, but its automaking business remained in the red. The company's automotive unit last made a profit in 2007 when it sold a record of almost 1.3 million vehicles in its 56-country European region. But the auto division has been losing money since then.
For years, Toyota has counted on the success of its financial services unit to help the company report a combined consolidated profit in Europe. Leroy, a 55-year-old French manufacturing expert who joined Toyota in 1998, is expected to make all parts of the business successful, and he sees positive signs that will happen.
In its first half ended Sept. 30, Toyota Europe's vehicle sales were up 14.1 percent to 412,000 units and operating profit for the consolidated business rose to 12 billion yen (114 million euros) from a 1.9 billion yen loss in the same period the year before.
 | Toyota Europe CEO Didier Leroy has led a deep restructuring at the company that is expected to pay dividends soon. |
Without going into detail, Leroy confirmed that the auto unit turned a profit in the first half. "I'm confident we will keep this trend for the remainder of the current fiscal year," Leroy said.
To hit the financial target Toyota is relying less on boosting volume – the automaker only expects European unit sales to rise by 10,000 from the 822,000 vehicles sold in its 2012 fiscal year – than on streamlining costs.
An example is that Toyota has moved Turkey production of the Auris compact to the UK so that the Turkish plant can make the Corolla (from which the Auris is derived) for the local market as well as central and eastern Europe.
Previously, the compact sedan was imported from Japan and South Africa, which was a more expensive option not only because of logistics costs but also because of the strong yen. In Europe, Toyota can offset the rise of the Japanese currency but relying more on its six car plants, which have an installed capacity of 600,000 units, and three engine plants in the region.
While Toyota's European plants make about 67 percent of the vehicles it sells here, it still imports a high volume of parts from Japan. To further reduce its reliance on Japan, Toyota wants to boost its local plants to account for 75 percent of its European sales, Leroy said.
The Japanese automaker aims to boost European sales to 1 million vehicles as early as 2015. This includes sales at Lexus, Leroy said.
"We are aiming for profitable growth … but with the current high level of uncertainty [in the market], it is hard to predict when" we will reach the 1 million sales goal, he said.
The Japanese automaker also wants to increases its market share in Europe to 5 percent to 5.5 percent in the next five years from about 4.2 percent last year.
Reuters contributed
You can reach Luca Ciferri at lciferri@crain.com.
