As Toyota delays new Prius plant, will exec bonuses be next next to go?Ian Rowley
As expected, Toyota is delaying the opening of a new Prius plant in Mississippi, highlighting that even gas sippers aren’t immune to collapsing auto sales. The plant, near Tupelo, was originally going to make Highlander SUVs from late 2009. Then, as part of a big shakeup of the company’s U.S. production, Toyota decided it would begin making the new Prius at the site from 2010. Now, Toyota will wait until the market starts picking up. According to reports, Toyota will complete the construction of the plant’s building but will delay installing machinery.
The move looks like the handiwork of Toyota’s recently formed Emergency Profit Improvement Committee which, led by CEO Katsuaki Watanabe, is searching for ways to trim costs and reevaluate the size and timing of all new projects. Among other cutbacks, Toyota and Isuzu have shelved plans to develop a new diesel engine together, while Toyota may hold off planned capacity increases in India, Brazil and China and the revamp of a production line at its Takaoka plant in Japan.
The savings could help Toyota avoid falling into loss during the second half of its financial year which runs through March. At its most recent results announcement in late October, Toyota said it would make around $6 billion this year, but it had already booked all but $200 million of that during the first half. Since then auto sales have continued to struggle and the yen has risen to around 90 to the dollar, further hurting earnings.
In another sign of how seriously Watanabe and his team are taking the current crisis, reports over the weekend say Toyota may cut board member bonuses to zero for the current financial year, saving a further $11 million. While that seems reasonable, given the circumstances, it’s notable that Japanese execs earned far less than counterparts at Detroit rivals during the good times. Last year, Toyota says it paid its 25 most senior executives a combined $33 million in salary and bonuses. Ford paid its CEO Alan Mulally alone over $20 million in 2007 in salary, bonuses and stock options while GM chief Rick Wagoner pocketed $15.7 million (GM points below out that the cash portion of Wagoner’s income was $3.3 million with the rest made up of stock options and other benefits).
Still, while not exactly light at the end of the tunnel, there is at least some better news for Japan’s automakers. Reports reckon that, as global demand falls, Toyota is seeking a 30% cut in the price it pays for steel for the year ahead. That would save a further $3 billion.