By TAKESHI NARABE/ Staff Writer
February 13, 2023 at 14:12 JST
A plant in Inabe, Mie Prefecture, manufactures a Toyota vehicle in June 2022. (Takeshi Narabe)
Toyota Motor Corp. will resume pressing its suppliers to lower their prices for the first time in almost a year now that its production volume is recovering.
“This is an effort to increase competitiveness so that we can coexist and co-prosper with our suppliers,” a Toyota official said.
The automaker reviews its purchase prices every six months and negotiates with parts suppliers as part of its cost reduction efforts, and it had asked suppliers to cut prices by around 1 percent in every negotiation based on their performance.
But Toyota had suspended those requests in fiscal 2022 due to production cutbacks. Now, it plans to reintroduce them for some firms starting in the first half of fiscal 2023.
It will exempt small and midsize companies, though, which account for 10 to 20 percent of the about 500 tier-one suppliers that deal directly with Toyota.
Toyota has been bearing some of the burden placed on suppliers by the soaring costs of energy and raw materials and said it plans to continue to do so to shore up the supply chain.
“If the supply chain is hit hard, the auto industry cannot sustain itself,” a Toyota official said.
The company said its suppliers will benefit overall since “the price (for auto components) will go up by adding energy costs that our company bears.”
Reaction to the news was mixed.
An executive from one parts supplier said it aims to meet Toyota’s requests but said it wants a secure production volume to ensure stability.
“We would like to cooperate in regular price reductions as long as (Toyota) bears enough of the burden of rising energy costs,” the executive said.
But an executive at another tier-one supplier said it is difficult to afford the cost reductions.
“We are still recovering from the damages caused by the production cutback,” the executive said.
Toyota only supports tier-one suppliers with their energy costs, while lower-tier subcontractors face even harsher business conditions.
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