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Toyota Supplier to Reduce Capex in Emerging Markets Push

Toyoda Gosei Co. (7282), a supplier to Toyota Motor Corp. (7203), plans to reduce its costs to compete with lower-priced providers of car parts in emerging markets.

The maker of auto parts including steering wheels and air bags plans to cut capital expenditure by 20 percent to 30 percent, Tadashi Arashima, president of Toyoda Gosei, said yesterday in an interview at the company’s headquarters in Kiyosu, Aichi Prefecture. He didn’t give a timeframe for reaching the target.

Toyoda Gosei spent 37.6 billion yen ($416 million) in capital expenditure in the 12 months ended March 2012. The parts maker, 43 percent owned by Toyota, expects net income to more than double to 17.5 billion yen, after the automaker recovered from natural disasters and reclaimed the title of world’s biggest carmaker last year.

The auto parts company will continue working on cost reduction even as the Japanese currency’s decline helps improve competitiveness, Arashima said.

“We are competing with makers from emerging countries, so we can’t be relaxed just because the yen is weakening,” he said.

The yen has fallen more than 5 percent in the past month, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The Japanese currency reached as low as 91.26 on Jan. 28, the weakest since June 2010.

Toyota is targeting 50 percent of sales in emerging economies and expanding the use of common parts to improve production efficiency. Arashima said his company is affected partly by Toyota’s cost cutting.

Toyoda Gosei will consider using local equipment makers or mold makers in emerging markets as long as they meet quality and price requirements, he said.

To contact the reporter on this story: Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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