Toyota Prepares To Tell Suppliers They Need To Slash Prices

Toyota Motor Corp. plans to ask suppliers to cut prices for the first time in about a year in an effort to boost competitiveness, Nikkei reported.

The company has already started talking to suppliers and is proposing cuts ranging from 0.5 percent to slightly less than 1 percent for the six months starting October, the Japanese business paper said, without saying where it got the information.

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TheSteve - 8/20/2015 10:30:54 AM

+2 Boost

This is routine at Toyota/Lexus, and it's a good idea. They don't just seek out the lowest bid. They want to assure a high level of component quality while driving the cost down. My understanding is that Toyota/Lexus doesn't just make "lower the price" demands. They sit in with the manufacturer to help them figure out how to lower costs and keep quality up, and also make a "reasonable" profit. After all, there's no point in nickel-and-diming your suppliers into receivership. You want them healthy. In exchange, Toyota/Lexus guarantees huge sales volumes to their suppliers.

Note that suppliers usually sell to multiple companies, and not just Toyota/Lexus. So when Toyota/Lexus inspires them to become more cost-effective, that gives them the upper hand against their competitors: they can either keep prices similar and make more profit, or make the same profit and drop the price to land that new sweet contract.