Toyota to seek price cuts from suppliers after 1-year pause
NAGOYA — Toyota Motor plans to ask its parts makers to cut prices for the first time in about a year, perceiving that it needs to gain competitiveness independent of a weak yen and other tailwinds.
The automaker made the decision even as it expects to report a record 2.8 trillion yen $22.3 billion in consolidated operating profit for the year ending March 2016. Toyota negotiates prices of autobody and engine components every six months with about 450 suppliers, including members of the Kyohokai organization consisting of its key vendors. Generally, Toyota would ask the suppliers that they cooperate with cost-cutting, and request that part of the savings be returned to the automaker in the form of lower prices. Often, Toyota asks discounts ranging from 1% to 1.5% depending on the progress of streamlining efforts. But in an unusual move, Toyota withheld the request for the second half of fiscal 2014 to help vendors gain strength and increase wages following rises in electricity and raw material costs. The move seems to have been effective. The Japan Auto Parts Industries Association said the 82 major autoparts manufacturers saw their consolidated operating profit rise 6% on the year in fiscal 2014. This spring, the average wage increase rate in Aichi Prefecture, home of many Toyota suppliers, reached a 17-year high.