With sales down 38 percent for the first half of 2009, Toyota executives are preparing themselves for a year of losses in North America. Despite cost-cutting efforts, Toyota says it will not be profitable in North America this year--but hopes to get back in the green by the next fiscal year.
In order to get back to profitability, the company says it cannot rule out job cuts and capacity reduction. Among the most immediate issues for the Japanese auto giant is what to do with its New United Motor Manufacturing Inc. plant, in Fremont, California. The future of the former joint-venture with General Motors is uncertain, now that the American automaker has abandoned the pact.
Yoshimi Inaba, president and chief operating officer of Toyota Motor America and chairman and CEO of Toyota Motor Sales USA, says the situation has put Toyota "in a very difficult position."
Inaba said a decision would be made "quite soon," although he declined to give specific timetable. He said Toyota has not received an incentive package from California, and that the automaker was considering the negative effects dropping the plant would have on its image in its biggest market in the U.S. The plant employs 4700 people.
Toyota is also stalling on any decisions regarding its brand new Mississippi plant. Although the facility is completed, Toyota has not brought in equipment because it is unsure what model it will build there. Although it was scheduled to open next year and build Prius hybrids, Inaba said those plans are unclear now because of depressed auto sales. Inaba said he hopes the plant will not be closed permanently, and he isn't pessimistic about the plant's future. He refused to rule out layoffs or plant closures at other North American plants.
So far, Toyota has managed to avoid permanent layoffs and plant closures, but if auto sales don't pick up soon, the world's biggest automaker may find itself succumbing to the pressures of unprofitability.
Source: The Detroit News