1st new Toyota group factory in Japan in 18 years

OHIRA VILLAGE, Japan, Feb 16 (Reuters) - Toyota Motor (7203.T) inaugurated its first new factory in Japan in nearly two decades on Wednesday, betting that advanced, low-cost Japanese production techniques can prevail even as a strong yen drives many manufacturers abroad.

You read in the newspapers these days that with the strong yen, it's difficult to make cars in Japan and export them," Toyota Chairman Fujio Cho said in remarks to guests and company officials at the plant's opening ceremony on Wednesday.

"But if you go back to our roots, Toyota was founded in the hope that we could contribute to Japan and its industrial progress. We shouldn't be short-sighted in our actions," said Cho, who is among the few remaining proteges of the late Taichi Ohno, known as the father of the Toyota Production System.

But the factory, which employs 900 people and boasts production capacity of 120,000 vehicles a year, is part of Toyota's promise to keep "made in Japan" alive by maintaining vehicle production in Japan of at least 3 million vehicles a year. That's about 40 percent of the 7.5 million vehicles it produces around the world.

The factory is set to start producing the Corolla for both the Japanese and North American markets in April.

It is designed to be more compact and energy-efficient than comparable old-style Toyota plants. Reporters were given a tour of some of the innovations Wednesday.

Instead of hanging from above on the assembly line, the cars move on a conveyor belt side by side, instead of one after the other, so that the line can be shorter and workers don't have to move around as much.

Robotic arms lifted cars from one work area to another, also shortening the line. Smaller factories also consume less energy -- being green while cutting costs.

Such penny-pinching innovations will be introduced in other plants, including overseas, and become central toToyota quality production, Niimi said.

"We want to make cars that can compete in pricing and quality in the world, and we are confident we can do it," he said.

Toyota Motor Corp., reorganizing its manufacturing operations to cut costs, will add production of the best-selling Corolla car at a new plant in northern Japan as part of efforts to make domestic output more competitive.

The factory will eventually also make cars for sale in Japan, Chairman Fujio Cho said.

“Because of the yen's strength, it's been said exporting from Japan doesn't make sense financially,”Cho told 300 reporters, local officials and other guests attending the inauguration of the new factory Wednesday. “But we shouldn't be hasty in responding to immediate trends. Manufacturing in Japan should be protected.”

Lower labor costs relative to Aichi prefecture, Toyota's primary domestic production center, may make Tohoku attractive, said Satoru Takada, an analyst at TIW Inc. in Tokyo.

Toyota launches small-car hub in Japan's beef-tongue capital

A worker makes a final inspection of Toyota Yaris models on the production line of Central Motor Co.'s Miyagi plant in Ohira Village, Japan on Wednesday.

Photo credit: BLOOMBERG

February 16, 2011 - 12:36 pm ET

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(Bloomberg) -- Toyota Motor Corp., reorganizing its manufacturing operations to cut costs, will add production of the best-selling Corolla car at a new plant in northern Japan as part of efforts to make domestic output more competitive.

The plant in Miyagi prefecture is initially making Yaris compacts and will add Corolla production beginning in April, said Yasuyoshi Shirai, executive vice president of Central Motor Co., the Toyota unit that runs the facility.

The factory will eventually also make cars for sale in Japan, Chairman Fujio Cho said.

“Because of the yen's strength, it's been said exporting from Japan doesn't make sense financially,” Cho told 300 reporters, local officials and other guests attending the inauguration of the new factory Wednesday. “But we shouldn't be hasty in responding to immediate trends. Manufacturing in Japan should be protected.”

Toyota, the world's largest automaker, is making the northern Tohoku region, which includes Miyagi, a small-car hub as the company's Japanese plants grapple with falling domestic demand and a strong yen that's eroding the competitiveness of exports.

Lower labor costs relative to Aichi prefecture, Toyota's primary domestic production center, may make Tohoku attractive, said Satoru Takada, an analyst at TIW Inc. in Tokyo.

Lower wages

The minimum wage in Miyagi, 230 miles north of Tokyo, at 674 yen ($8.05) an hour is 10 percent lower than that in Aichi prefecture, according to the Ministry of Health, Labor and Welfare.

The region benefits from an abundance of skilled workers, Toyota's Cho said.

Key Toyota suppliers have also built new factories in Miyagi. Affiliate Toyota Boshoku Corp. began production of seats at a plant last month. Primearth EV Energy Co., a joint venture between Toyota and Panasonic Corp., started producing batteries for hybrid cars at a new plant in Miyagi in January 2010.

Manufacturing makes up about 12 percent of Miyagi's economy, according to Governor Yoshihiro Murai. He aims to increase that ratio to 20 percent as a declining population and e-commerce undercut service industries, which account for 80 percent of the economy, he said.

‘Attracting manufacturers'

“Attracting manufacturers here is my first priority,”

Murai said in an interview in his office in Sendai, the prefecture's capital. “We want to try to compete with South Korea and China.” Among Japanese, Sendai may be best known for its grilled beef tongue and pickles plate, with almost 100 so-called “gyutan” restaurants dotting the city. Seishiro Sano, who opened Aji Tasuke in 1948, is credited with introducing tongue to Japanese cuisine.

Murai is in talks with five other suppliers who may start production in Miyagi within two or three years, he said.

Hybrids

Toyota's new factory is initially exporting to markets including the U.S. and the Middle East, the company said. It may also build compact hybrid models, according to a person familiar with Toyota's plans.

Other Toyota compacts such as the Ractis and ist are also built at Kanto Auto Works Ltd.'s plant in Iwate prefecture, just north of Miyagi.

“Toyota's main problem right now is overcapacity and how it can reduce it,” said Kohei Takahashi, an analyst at JPMorgan Chase & Co. in Tokyo. “Even with Toyota reorganizing and consolidating production, this won't result in any vast improvement in operating profit or consolidated earnings.”

Toyota's larger reliance on domestic production makes it harder to absorb the impact of the strong yen compared with rivals. Toyota built 43 percent of its vehicles in Japan last year, compared with 27 percent at Honda Motor Co. and 28 percent at Nissan Motor Co.

Toyota President Akio Toyoda has said the company will protect jobs in Japan by maintaining domestic production of about 3 million cars. Toyota built 3.2 million cars in Japan last fiscal year out of 7.3 million worldwide.