News of an escalating trade war with China has done little for the fortunes of automakers, and on Wednesday, both Toyota Motor Corp. and Honda Motor Co. announced that their profit and sales figures would likely fall short of original estimates. The announcement came only a few weeks after Nissan Motor Co. delivered similar news that it would miss its forecast estimates on earnings.
In a statement, Takahiro Hachigo Honda’s CEO, spoke of “abrupt changes in the global business environment surrounding the automobile industry,” as well as a need to cut production costs and reduce the global number of models the company sells by a third, according to Bloomberg. The need to do so has become more urgent.
“We recognize that the number of models and variations at the trim and option level have increased and our efficiency has declined,” he said. “We will realize our goals with a keen sense of speed.”
Both Honda and Toyota have been trying to cut costs for several years now.
“We still weren’t able to improve our costs enough last year,” Toyota CFO Koji Kobayashi told reporters in a statement. He noted that it’s not easy during a time when automakers are expected to invest in research and development for new technologies that will attract customers.
“We need to work to find new ways to reduce costs this year,” he said, vowing cuts to most business processes and in-house purchasing (even citing limiting the number of pencils employees would be allowed to purchase).
Toyota expects cost reduction efforts will help to lift operating profit by 3.3 percent 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, according to Reuters. Honda forecast cost reductions would help boost operating profit by 6 percent 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.