Toyo rolls out cost-saving measures

ERJ staff report (TB)

Tokyo -- Toyo Tire & Rubber Co. Ltd. will reduce staffing, cut spending and optimise manufacturing in the coming months in an effort to control costs and lay the foundation for a business recovery by fiscal 2010.

Toyo disclosed its earnings recovery plan after acknolwedging it will report operating and net income losses in the fiscal year ending March 31.

The austerity program centers on three main actions, according to President and CEO Kenji Nakakura:

• Build an appropriate manufacturing system meeting reduction of manufacturing;
• Minimise spending with manufacturing selection at home and abroad, or selection of self-manufacturing or outsourcing; and
• Reform structure to survive even in the low-growth age.

In the tyre segment, Toyo is reviewing its manufacturing systems at home and abroad with an eye toward optimising production throughout the firm's network of six factories. This action likely will involve cutting jobs to meet reduced output levels, Toyo said, as well as transferring employees to manufacturing departments from administrative.

Toyo also said it is postponing indefinitely plans for an Asian tyre factory - a $250 million project slated for production start-up by 2012 - and will “hold down enhancement” of a third-phase expansion of its car and light truck tyre plant in White, Georgia. Toyo disclosed last May it intended to spend $270 million to double the capacity of that plant to 4.4 million units by 2010 and 5.2 million by 2011.

Other actions that will affect the tyre business are:

• Creating a global sales division that will integrate domestic and overseas replacement tyre units and support efforts to spread the Nitto brand globally;
• Integrating the OE sales activities of the tyres and non-tyre DiverTech divisions into one sales unit; and
• Reducing tyre inventories worldwide by nearly $40 million by the end of March 2010.

Toyo did not refer specifically to its joint manufacturing, purchasing and development pact with Bridgestone Corp.

Additionally, Toyo plans to halve its capital spending over the next three years to about $525 million, cut selling, general and administrative costs by about $39 million annually and reduce personnel costs by nearly $20 million.

Specifically, these measures likely will involve reduced spending on advertising and promotion and drastic reductions to executive expenses, including salaries and bonuses.

Longer term, Toyo is looking for cost savings in manufacturing efficiencies, such as shorter vulcanisation times, rationalisation of materials and shorter development cycles.

It also plans to cut about 500 jobs this year in the DiverTech business after trimming 300 last year and said another 800 could be in jeopardy before the end of the next fiscal year depending on the economy and the health of the global vehicle industry. The plans include spinning off a urethane products subsidiary.

From Tire Business (A Crain publication)