Toyota to start using S. Korean steel for vehicles made in Japan

BY NAOYUKI FUKUDA AND HIROBUMI OHINATA

THE ASAHI SHIMBUN

2009/1/12

Desperate to cut costs amid a deteriorating economic climate, Toyota Motor Corp. will for the first time use imported processed steel for vehicles built in Japan, according to sources.

Steel to be supplied by Posco, a major South Korean steelmaker, is several percent cheaper than that manufactured by Japanese rivals, the sources said.

Surging steel prices are among the factors behind Toyota's projected group operating loss of 150 billion yen for the year ending March.

Toyota will begin using Posco steel this spring for the inside of automobile bodies but not the outside, the sources said.

It has confirmed the quality of the South Korean steel through testing, they said.

Toyota is also considering buying Posco's steel for vehicles to be assembled in North America to diversify procurement sources, the sources said.

Posco is constructing a factory in Mexico, to be completed by the end of 2009.

Toyota plans to press Japanese and other steelmakers to lower prices around the world, citing Posco's competition, the sources said.

Some Japanese automakers, such as Nissan Motor Co. and Mitsubishi Motors Corp., have already used Posco steel in vehicles built in Japan.

Toyota, however, has limited the use of Posco steel to vehicles it manufactures in Thailand and sells in emerging markets.

Toyota had agreed to accept a price hike of more than 30 percent from the previous year for products it buys from major domestic steelmakers in the current business year through March.

The hike translates into a hefty increase of between 25,000 yen and 30,000 yen per ton of steel products.

Coupled with price increases of other materials, Toyota's annual procurement costs have shot up by more than 300 billion yen.

Toyota takes the lead in price negotiations in Japan between automakers and steelmakers.

Automakers are expected to step up calls for reducing steel prices during the negotiations for the new business year.(IHT/Asahi: January 12,2009)