Toyota sees European profit as revamp bears fruit

Toyota Motor Corp's logo is pictured on a clay model of concept vehicle NS4 at the company's design center building in Toyota, central Japan Nov 28, 2012. [Photo / Agencies]

Toyota Motor Corp will turn a profit in its European automotive business during the current fiscal year for the first time since 2007, a feat the company expects to repeat in fiscal 2013 as new models help seize market share from rivals.

"In 2013, we want to sell more than 2012, even if we don't know yet what the volume will be," said Didier Leroy, the head of Toyota's European operations. "Based on the market share, we can, we will make a profit."

Since 2010, Leroy has spearheaded a restructuring of Toyota's European business while the automaker faced a safety crisis in the United States and production halts after the March 2011 tsunami in Japan.

Those cost cuts, which included a 40 percent reduction in headcount at Toyota's headquarters in Brussels, helped boost its bottom line in Europe during fiscal 2012, which ends this month.

The Japanese automaker also is helped by its broad definition of Europe. Toyota counts 56 countries, including Israel and Russia, as part of its European market. By that definition, Toyota sales rose 2 percent last year.

Toyota's car sales in Europe, defined as 27 countries by trade association ACEA, fell 3 percent in 2012.

But that is still better than the 8.2 percent decline that the entire auto industry faced in Europe, where the economic slump has caused auto sales to shrink, ACEA data show.

Next year, Toyota expects sales and market share gains to be buoyed by new models, higher capacity utilization at its factories and further cost cuts.

The automaker sees benefits from the increased popularity of hybrids, which have reached a "tipping point" in Europe, Karl Schlicht, Toyota's head of European sales, said during a media roundtable before the opening of the Geneva auto show.

Toyota expects hybrids to account for at least 17 percent of its sales in Europe in 2013, up from 13 percent in 2012.

"(Toyota) is sort of pushing very hard with a renewed product range to make up for lost ground for the last couple of years," said Tom De Vleesschauwer, director of long-term planning and sustainability for IHS Automotive. "We do expect they will fight back quite well."

'All bets off' if Europe collapses

During the roundtable, Leroy reiterated that the company is aiming to sell 1 million vehicles in Europe by 2015, including Lexus brand cars. But executives also left open the possibility that if the market deteriorates sharply, Toyota would reconsider the sales target.

"If we can continue to reduce costs and rationalize, we think we can get there," Schlicht told reporters. "Our assumption, though, is if there is a complete collapse in the European market, all bets are off."

To support the goal of 1 million annual vehicle sales, Toyota aims to build in Europe 75 percent of the vehicles it sells in the region, Leroy said. That compares with about 63 percent at present.

Toyota is also reshuffling production plans in Europe and expects capacity utilization to increase to 80 percent by the end of the process. Toyota could not immediately describe its current utilization.

Analysts said the weak yen is now allowing the company to offer higher incentives on its models, while still maintaining a good profit margin. Leroy said the automaker is enjoying the benefits of the weak yen, but that this is not a long-term strategy.

"We don't want to build our business model on the currency situation," Leroy told reporters.