Toyota Europe's profit rebound built on hybrid sales, cost-cutting

Leroy said nearly 20 percent of Toyota's European sales were hybrids such as the Auris, shown.
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BRUSSELS -- Toyota is now solidly profitable in Europe on the back of rising hybrid sales and aggressive cost-cutting across its operations, head of Toyota Europe Didier Leroy told the Automotive News Europe Congress in Brussels today.

Toyota Europe’s car business, excluding financial services, lost money from its 2008-2009 fiscal year until 2011-2012.

Leroy was told when he took over the unit in July 2010 that the car business was forecast to be in the red until 2013-2014 as the company dealt with the repercussions of the 2008 financial crisis and its global recall in 2010. Then the company was forced to cope with the effects of a massive earthquake and tsunami that hit Japan in 2011.

He returned the car unit to profit in 2012-2013. Including financial services, Toyota Europe increased profitability in 2013-2014 by 75 percent compared with the year before.

To achieve this Leroy reduced employee headcount by 2,500 between 2009 and 2012 from both its factory operations and Brussels headquarters.

"Our first focus was to return to profitability as soon as possible," he said.

The company also streamlined factory operations, cutting one of two production lines at the firm’s UK plant in Burnaston, and centralizing model production. “It was a Toyota standard to have a model produced in more than one factory. We changed that,” he said. Production of the Auris compact is now focused in the UK, while the Yaris subcompact, including the North American version, is built at the firm’s French factory in Valenciennes.

The return to profitability cannot just be attributed to the weakening Japanese yen, Leroy told the Congress. “One of the key success factors was our focus on hybrids,” he said. “Today nearly 20 percent of our sales are hybrids and 70 percent of those are made in Europe.” Toyota builds hybrid versions of the Auris hatchback and station wagon in the UK, as well as a hybrid Yaris in France. Leroy said number of hybrids the firm offers “would continue to grow”.

He said the growth of hybrid sales would help push the combined sales of Toyota and Lexus to above one million again, without giving a timeframe.

The Japanese carmaker counts 56 countries, including Israel, Russia and Turkey, as part of its European market. He said sales in those countries reached 847,500 in 2013, up from 808,000 in 2010.

According to JATO Dynamics, Toyota and Lexus sales for the EU and EFTA markets are up 8 percent this year.

Leroy has previously said he wants to hit sales of one million by 2015. “I don’t believe we have any business being in Europe if we don’t sell at least 1 million vehicles annually,” he told the Congress.

He added that the company would “refocus” the company’s research and development to focus solely on the minicar, subcompact and compact segments.

Toyota in Europe would “define and plan the next generation small cars, and do it for the rest of global Toyota,” he said. The company would also have more responsibility in Europe “to make more sexy products,” Leroy added.

You can reach Nick Gibbs at nick.gibbs@btinternet.com.

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