Toyo Makes Radical Incisions

Following the release of Toyo’s latest financial results, the company has announced a host of measures to stem its financial haemorrhaging. The company reports being in the midst of business conditions that it expects will grow ‘more stringent’ and be reflected in further deteriorating earnings for the 2008 financial year. The sources of these woes, the company adds, are the global economic slowdown and the yen’s appreciation.

Toyo reports a review of its Japanese and international manufacturing systems is underway, and on the back of this it will reduce the number of employees at manufacturing operations to match current production levels. As part of its reorganisation, Toyo says it plans to transfer employees from administrative departments to manufacturing departments. The company’s organisational structure is also under review, and administrative departments will be integrated or eliminated. The sales divisions of the tyre and DiverTech groups are to be merged, and Toyo says one division and two departments will be removed from the tyre division. Four departments will go from the company’s DiverTech business, and five of the company’s administrative departments and three centres are to be cut. Toyo’s domestic and overseas replacement tyre divisions are to be amalgamated, and a greater emphasis will be placed upon spreading the Nitto brand globally.

Across its tyre and DiverTech businesses, Toyo reduced its workforce by around 300 employees by the end of 2008. These lay offs mainly affected part-time and casual employees. A further 500 jobs are now scheduled to be eliminated by the end of March 2009, with the future of another 800 jobs depending on the performance of the automotive sector in the 2009 financial year. A part of these personnel cuts is the company’s plan to eliminate around 200 managerial and administrative positions from Toyo Tire & Rubber by the end of March 2009; this will be accomplished, Toyo says, through the ‘reorganisation’ of full-time employees and the laying off of casual workers. Around 200 employees will also be laid off from the company’s Japanese and international sales subsidiaries by March 2010. On top of this, adds Toyo, a future additional reduction of staff from administrative personnel, assist manufacturing departments or short-term plant shutdowns “could be considered depending on the future demand trends”.

Personnel costs are, in total, to be reduced by about two billion yen (£14.7 million) compared with the 2008 financial year. This will not only be achieved through lay offs: additional measures include reducing conference costs, overtime work and holiday work. Compensation for directors will also be cut – this actually began in September 2008, however Toyo says reductions will increase as of February 2009. Salaries and bonuses for managers will also decrease along similar lines. Furthermore, the company will negotiate with unions representing employees regarding other actions.

In 2008 Toyo announced its three-year medium-term plan, which called for investments of 104 billion yen (£765.4 million). This sum has now been scaled back to 54 billion yen (£397.4). Plans to boost production capacity have been reviewed, and the company says it will instead maintain the current supply capacity. New work announced as part of the three-year plan has also been put on ice – Toyo informs that its North American capacity expansion is to be further delayed, while the company’s planned new Asian tyre plant has been postponed for the time being. In addition to holding off on new expenditure, Toyo also plans to reduce existing manufacturing costs. To do so, it will initiate a number of projects, such as how to rationalise materials, the use of automation and ways of reducing vulcanisation time. This will take place in both the tyre and DiverTech businesses.

Further cost reduction action is being taken in the form of reducing 4 billion yen (£29.4 million) from the company’s total global tyre inventory by the end of March 2010. Toyo plans to cash out surplus assets and businesses, plus integrate sales logistics and office sites in its Kansai, Japan region and sell off the older sites.

Advertising and promotional expenditure is also being slashed. Toyo says its participation in motor show events and investment in television commercials will be reduced, with a greater focused placed upon motor sport and related activities. Business travel for Toyo employees is also out; the company says “business trips with stays in Japan are prohibited in principle.” The use of executive company cars is also being reviewed.