Toyota sees cost savings over $2.7 billion annually

CRUCIAL 10 PERCENT

Slashing production costs is even more important as commodity prices keep climbing, environmental and safety standards rise and consumers migrate towards smaller and lower-margin compact cars to get better mileage.

At the same time, Toyota has promised to reach and sustain a 10 percent operating profit margin. Already its margin is the highest in the sector, at 9.3 percent in the year to March 2007.

Watanabe said reaching the 10 percent margin was "crucial" to be able to invest to the tune of 1.5 trillion yen a year each on facilities and R&D to develop safer and more environmentally friendly cars.

The VI project will be incorporated into each new model that Toyota rolls out from early next year, meaning the effect will grow from year to year, Watanabe said.

"The full impact will be seen probably around 2010," he said, adding that Toyota would step up its cooperation with North American and European suppliers to expand the cost-cutting activities beyond Japan.

TARGETING WEIGHT

Watanabe, known in the company for his "big-picture" vision, is looking beyond the ambitious VI project.

By 2010, the 65-year-old executive said, Toyota will likely have crafted a new scheme to replace the VI plan.

"By then we'd be looking at the car's design as a whole, for example by using lightweight materials," he said.