Toyota Wants to Cut Domestic Car Production

Toyota Motor Corporation has announced it could scale back its automobile production in Japan, a move that could cost tens of thousands of jobs. The announcement was made on May 11th, when Satoshi Ozawa, executive vice president, said the company is finding it difficult to maintain its commitment to domestic production.

"I have no choice but to advise the president to reconsider the policy," Ozawa said. "We cannot simply act on our desire (to keep production at home) at the yen's current level."

The company official explained this is due to the higher labor costs in Japan, a strong yen and the lack of progress in debates on Japan's participation in the Trans-Pacific Partnership, a free-trade agreement among Pacific Rim nations.

Major Japanese automakers have been pinning their hopes on Japan's participation in the Trans-Pacific Partnership, which could cut tariffs on trade among members. But the administration of Prime Minister Naoto Kan has postponed its decision on whether or not to join negotiations on the trade pact.

Before the March 11th earthquake and tsunami, Toyota expected its global output this year to be 7.7 million units, of which 3.1 million were to be manufactured in Japan. More than half of those cars were destined for export, making them vulnerable to the yen's climb against other major currencies.

Toyota has maintained its domestic vehicle production above 3 million units mark - a level considered important for Japan's economy and job situation--for more than 30 years (except 2009, when its output fell to 2.79 million amid the global recession). However, Toyota has decided back off the policy and review its domestic manufacturing operations.