TOKYO (Reuters) - Toyota Motor Corp (7203.T) aims to nearly double operating profit to at least 1 trillion yen (7.4 billion pounds) in two to three years under plans to be unveiled on Wednesday, a source with direct knowledge of the situation said.
The world’s largest car maker, trying to move on from a massive global recall, will also seek to boost its operating profit margin to at least 5 percent in the same timeframe from an estimated 2.9 percent in the year ending in March, said the source.
The figures are not strict financial targets but an estimate of what Toyota can achieve as it cuts costs and strengthens operations, said the source, who declined to be identified because the information was not public yet. The figures were earlier reported by the Nikkei newspaper.
“It looks like it is finally catching up with Nissan and Honda in recovering (profitability) and I think that is being reflected in the share price,” said Makoto Kikuchi, chief executive of Myojo Asset Management Japan.
“It’s clear that Toyota’s biggest mistake was to add too much production and the question (now) is how Toyoda is going to tackle that,” he added.
The company’s president, Akio Toyoda, is due to unveil his global gameplan for the next 10 years at 4 p.m. (7 a.m. British time). Besides the financial estimates, a cut in Toyota’s board members to 11 from 27 will be among the measures likely to be outlined.
Toyota shares have risen 13 percent over the past three months, outperforming its rivals.
Since taking the job in June 2009 in the aftermath of the global financial crisis, Toyoda, grandson of the company’s founder, has often spoken of the need to go back to the basics of “making better cars and contributing to society”.
That vision became a directive as a recall of millions of cars, mainly for complaints of unintended acceleration, damaged Toyota’s once-impeccable quality image, especially in the important U.S. market. Toyota has recalled nearly 20 million vehicles worldwide since 2009.
Toyota has been struggling with profit margins, which are weaker than those for Japan’s No. 2 Nissan Motor Co Ltd (7201.T) and third-ranked Honda Motor Co Ltd (7267.T). Toyota stayed ahead of General Motors Co (GM.N) as the world’s biggest automaker by a thinner margin last year.
Although Toyota’s loss-making, export-dependent Japanese operations remain a major drag because of the strong yen currency, the shares have outperformed recently as some analysts expect profitability to improve with the adoption of efficient manufacturing technologies and further cost cuts.
Executives say that under Toyoda’s leadership, the company has veered away from market share targets that used to be a major driver for growth during its boom years in the past decade.
Toyota’s Global Vision for 2020 is expected to map out where Toyoda wants to take the company without being caught up with short-term financial goals. Toyoda outlined some of those initiatives in 2009, including developing cars suited to each market rather than selling the same vehicle around the world.
While many, including Toyoda, blamed the rapid, unchecked growth as part of the problem behind the recalls, the chief executive is caught between his drive to focus more on customers -- even if that means slowing down vehicle development -- and shareholders’ desire for profit growth and returns.
The profit and margin forecasts, as well as plans to expand in emerging markets and the hybrid segment are seen as an attempt to address such needs.
By 0530 GMT, Toyota's shares were up 0.4 percent, roughly in line with the Nikkei average .N225.
Toyota’s medium-term operating profit forecast is roughly in line with market expectations, with 15 analysts putting the profit at 1.14 trillion yen for the year to March 31, 2013, according to poll by Thomson Reuters I/B/E/S.
Toyota has forecast a group operating profit of 550 billion yen in the current business year ending this month, based on the assumed dollar rate of 86 yen.
Additional reporting by Tim Kelly in Tokyo and Ploy Ten Kate in Bangkok, Editing by Nathan Layne and Anshuman Daga