Toyota boss puts squeeze on Aussie parts makers

The future of Toyota Australia's manufacturing operations is looking increasingly grim as the company's most senior executives in Japan hit local suppliers with cost cutting targets so drastic they are doomed to fail.

The global CEO of Toyota, Akio Toyoda, and the executive vice president and member of the board of Toyota, Nobuyori Kodaira, told Australian media in Japan overnight that supplier costs were key the survival of the Altona factory on the outskirts of Melbourne that makes the Camry.

"In Australia currently we are having a difficult situation," said Mr Kodaira. "Because this is a business we need to have economic viability.

"In order to continue the manufacturing there, we are cooperating with our suppliers on activities such as rationalisation and also cost reduction. We definitely think those activities are necessary."

Mr Toyoda, the great grandson of company founder Sakichi Toyoda, said: "We have a very long history in operating in Australia. So going forward, working closely with our suppliers in Australia, we would like to aim at achieving sustainable growth."

But "sustainable growth" is regarded by industry observers as an overly ambitious target. Toyota Australia has already stated publicly that it is trying to slash $3800 from the production cost of each Camry, about 15 per cent of the manufacturing cost, which equates to $400 million a year.

Local suppliers will find it difficult to achieve this target because their economies of scale will be adversely affected by the closure of Ford's  factories in 2016, and the declining volumes of Holden, which is due to use more imported parts on its future models.

However, the executive director of sales and marketing for Toyota Australia. Tony Cramb, believes the cost reductions are not "an impossible target".

"We have to make changes ourselves, and so do our suppliers," Mr Cramb told News Corp Australia at the Tokyo motor show. It's a big challenge (but) I don't think it's an impossible target."

Toyota Australia currently loses about $2500 on each car it exports because of the strong Australian dollar, according to company insiders.

Last year Toyota Australia shipped more than 70,000 Camrys to the Middle East at an estimated loss of $175 million.

However, the loss-making export deal is crucial to the survival of Toyota Australia's manufacturing operations because it only sells about 35,000 locally-made cars in Australia, and the break-even point for the factory is 80,000 units per year.

The Toyota executives would not say whether its Australian manufacturing operations could survive without Holden, but Mr Kodaira did say continued government support was needed.

"We hope that together the central government of Australia and the country as a whole can also together cooperate to make an improvement to the (economic) environment," said Mr Kodaira.

"Of course we have been having communication and discussions with the government. I can't give you any concrete plans right now, but we have been working together."

Last week, Toyota Australia said export sales were key to the survival of Altona. "Exports are absolutely critical," said Mr Cramb. "If we can maintain exports, we're all good."

Domestic demand for the Camry is down 7 per cent year-to-date and demand for the Aurion V6 sedan built alongside it is down by a massive 24 per cent.

Toyota Australia says it won't know until some time next year whether or not it will have made enough savings to secure the 2018 car and the future export deal.

"Exports play a vital part in our balanced business model and we will do everything we can to continue to support our export customers," said a media statement from Toyota Australia Executive Vice President and Chief Operating Officer Dave Buttner.

Mr Buttner said the company was well progressed with a five-year plan to save $3800 in the production cost of each car, or about $400 million each year.

But the next round of cost-savings over the next three years are proving difficult to achieve, the company says.

Last month, Toyota Australia announced it was seeking a variation to its current workplace agreement and cut factory worker bonuses and overtime to save $17 million a year.

Toyota Australia's Altona facility on the outskirts of Melbourne is one of nine factories where the Camry is made, including two in North America and one each in Japan, China, Russia, Thailand, Taiwan and Vietnam.

This reporter is on Twitter: @JoshuaDowling