Toyota, Honda pledge cost reductions

TOKYO, May 08 (Reuters): Two top Japanese automakers said they planned to tighten their belts in the years ahead to free up cash to develop electric cars and ride-sharing services, underscoring the hard task ahead as traditional automakers face a rapidly changing industry.

Toyota Motor Corp, the country's top automaker, said that higher costs to develop new technologies like connected cars was ramping up pressure to generate savings wherever possible, while Honda Motor Co said it would strip down its vehicle lineup to cut production costs.

"We still weren't able to improve our costs enough last year," Toyota CFO Koji Kobayashi told reporters, adding that mounting investment required for new technologies and other R&D costs was making cost-cutting efforts more challenging.

"We need to work to find new ways to reduce costs this year," he said, adding that penny pinching would apply to all aspects of the business, from producing lower-cost prototypes to limiting the number of pencils employees use at any given time.

Honda CEO Takahiro Hachigo said Japan's No. 3 automaker would cut the number of car model variations to a third of current offerings by 2025, reducing global production costs by 10 per cent and redirecting those savings toward advanced research and development.

"We recognise that the number of models and variations at the trim and option level have increased and our efficiency has declined," he told reporters at a briefing.

Toyota expects cost reduction efforts will help to lift operating profit by 3.3 per cent to 2.55 trillion yen ($23.20 billion) in the year to March 2020. In the year just ended, Toyota posted an operating profit of 2.47 trillion yen.

The profit outlook for one of the world's biggest car makers was slightly lower than the 2.61 trillion yen average of 23 analyst estimates compiled by Refinitiv. Toyota also announced a 300 billion yen share buyback.

Honda forecast cost reductions would help boost operating profit by 6.0 per cent to 770 billion yen in the year to March. That is less than the 834 billion yen average of 22 analyst estimates compiled by Refinitiv.