TOKYO -- Toyota Motor Corp. is making two of its domestic body-making units fully owned subsidiaries in a bid to streamline Japanese production as the automaker fights to bolster profitability amid a strong yen.
Under the plan announced today, Toyota Motor Corp. will take full ownership of Toyota Auto Body Co. and Kanto Auto Works Ltd. The two so-called body makers produce nearly 1 million vehicles year, or nearly 30 percent of the Toyota brand's domestic output.
The overhaul separately calls for Kanto Auto to begin discussing a merger with Central Motor Co., a wholly owned auto assembler, and Toyota Motor Tohoku Corp., a parts-making unit.
The new organization aims to strengthen centralized leadership over Toyota’s far-flung network of subsidiaries, which manufacture hundreds of thousands of vehicles yet maintain nominal independence. Bringing them under direct control of executives in Toyota City could help the company coordinate big-picture strategy. The realignment is seen as giving the subsidiaries a bigger role in research and development at home and abroad.
It may also give Toyota more control over costs as the company struggles to boost profitability of its export operations amid a soaring yen. Toyota has warned it may have to move some operations overseas because the strong yen erodes profits on cars exported from Japan.
Executives say the Toyota group has to build at least 3.1 million vehicles in Japan for its domestic operations to turn a profit. Last year, Toyota made 4.05 million vehicles in Japan, including its Hino truck-making and Daihatsu minicar subsidiaries.
Local production of Toyota-badged vehicles, however, dipped to 3.28 million vehicles, down from a peak of 4.23 million units in 2007.
Executive Vice President Atsushi Niimi said the restructuring will ensure that Toyota can maintain a healthy production base in Japan.
"We are totally committed to producing at least 3 million vehicles a year," he told reporters. "There will be no negative impact on employment because of this consolidation."
Toyota's domestic production was hammered by the March 11 earthquake. Globally, the company expects to lose more than a half-million units of production to the quake.
But Toyota plans to accelerate output starting in October to produce more than originally planned and finish the fiscal year ending March 31 ahead of the previous year in terms of global output.
Toyota aims to take control of Toyota Auto Body and Kanto Auto in January through a share swap. Toyota did not assign monetary value to the deal, still subject to shareholder approval.
Toyota Auto Body manufactured 667,121 units last year, mostly large-size vehicles such as vans and SUVs. Its products include the Land Cruiser 200, the Lexus LX570 and the Prius.
Kanto Auto made 314,000 units, mostly mid-sized sedans and small cars, including the Crown sedan, the Corolla and Blade small cars and the Century limousine.
Toyota Motor now owns 56 percent of Toyota Auto Body and 50 percent of Kanto Auto.
Additionally, Toyota aims for the merger of Kanto Auto with Central Motor and Toyota Motor Tohoku to be completed by July 2010. That combination would create a subsidiary based in northern Japan, mainly as a manufacturing hub for smaller cars such as the Corolla and Yaris.
Toyota already owns 100 percent of Central Motor and Toyota Motor Tohoku.