For years, Detroit automakers would argue that the Japanese yen was artificially devalued, and that the value of the currency was a big competitive advantage to the likes of Toyota and Honda. To erase this gap, The Detroit Three pressured suppliers to lower costs in any way possible, which caused ill-will within their supply bases. In fact, Japanese automakers routinely scored higher in supplier relation studies, while General Motors, Ford and Chrysler hovered at the bottom of the list.

One massive global recession and a fast-rising yen later, it appears that the shoe is on the other foot. Automotive News reports that Toyota has made it clear to its 219 largest domestic suppliers that costs must be cut or business will be lost to countries with cheaper labor.

Toyota reportedly loses $343 million in profit for every one yen the currency rises against the dollar. Given that the Japanese currency has risen by 13 versus the dollar over the past year, Toyota could be looking at a staggering $4.5 billion in losses. For perspective, that's more than half of Toyota's total research and development spending for any given year. Ouch.

And Toyota isn't alone in looking for ways to combat the rising yen. Honda recently announced that it was going to build more vehicles outside of Japan. Nissan CEO Carlos Ghosn recently asked the Japanese government to adjust the issue of the rising yen, or risk losing a great deal of the country's industrial base.

Given its currency conundrum, we can't blame Toyota for looking for more cost-effective ways to build vehicles. But when GM, Ford and Chrysler were in the same predicament, corners were cut and many vehicles were less competitive than they could and should have been. As a result, The Detroit Three had to add heavy incentives just to move product and their reputations suffered. Here's hoping history doesn't repeat itself.


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  • 57 Comments
      caddy-v
      • 3 Years Ago
      Just a mere few years ago Toyota demanded their suppliers cut costs by some 30%. Just about the time when their troubles with quality really began. Cut them any further and the only supplier that would be willing to do business with these morons will be Mattel.
      Gorgenapper
      • 3 Years Ago
      The interior of Toyota vehicles is already the pits, it'll be hilarious to see just what new depths Toyota can sink to after they get their way.
      us51356073
      • 3 Years Ago
      'Toyota urges suppliers to slash prices" cut costs = cheap quality
      Len_A
      • 3 Years Ago
      It's interesting to see the Japanese manufacturers beating up on suppliers, like the Detroit 3 used to do. What goes around, comes around, I guess.
      Matrix
      • 3 Years Ago
      Toyota is turning into the hyundai of the 90's with cheap interiors, now hyundai has the nicer interiors. I test drove a corolla the other day to trade in the old corolla and the interior of the new corolla was just rubbish! so i left. Common toyota!, get with the program!
        Len_A
        • 3 Years Ago
        @Matrix
        I rented a Detroit manufactured Ford Focus the other week, while my car was being serviced, and the overall quality was light years ahead of anything Toyota and Honda has in the same vehicle class, quite a change from just a couple of years ago when it was the other way around.
        Chase
        • 3 Years Ago
        @Matrix
        I have to hop on the band wagon. Its not that the Japanese brands have gotten worse, its that the rest of the world went into over drive and the Japanese didn't keep up. And now the Cruze outsells the Corolla.
      AngeloD
      • 3 Years Ago
      Leaning on suppliers to cut costs unreasonably will destroy what's left of Toyota's quality reputation.
        Dest
        • 3 Years Ago
        @AngeloD
        Considering Toyota is one of the top brands in the world and is still ranked at the top for reliability in both JD Power and Consumer Reports, I'd say their reputation is just fine. The only place they may have taken a reputation hit is in Southern USA or something.
          moderate fringe
          • 3 Years Ago
          @Dest
          Hokie, most loyal clowns never noticed Detroit (now Mexico/Brazil/Canada) sold junk, ever.
          Hokiegrad09
          • 3 Years Ago
          @Dest
          @Dest. Apparently you don't understand the perception lags behind reality. GM Ford and Chrysler's ranking didn't go down overnight.
      Hokiegrad09
      • 3 Years Ago
      Wow Its official! Toyota has become old GM!!!! Except they are even dumber than GM was because they saw what not to do when GM, Ford, and Chrysler did almost everything wrong for decades.
        Ralph Waldo Emerson
        • 3 Years Ago
        @Hokiegrad09
        No. They are the Walmart of automakers. Forcing price concessions on suppliers, and selling junk that no one would buy if they had more money and or taste...
          Ralph Waldo Emerson
          • 3 Years Ago
          @Ralph Waldo Emerson
          I guess "junk" was not the right term. The one I wanted would have been filtered. Toyota's are not junk. Just passionless, tasteless, lifeless appliances. There, that's better.
          moderate fringe
          • 3 Years Ago
          @Ralph Waldo Emerson
          Toyota junk sure stays on the road for a long time unlike the big three, excluding trucks and rattling crown vics. Ford contours and Dodge Neons where did you go so quick. Those were cars touted as great an not junks.....just like the junk they push now.
        moderate fringe
        • 3 Years Ago
        @Hokiegrad09
        New GM is old GM. One day people will realize this but GM will be claiming to be New-New GM so probably not.
      Hazdaz
      • 3 Years Ago
      Wow, Toyota is in fact turning into the next GM. This might end up being beneficial to the US economy if Japanese suppliers come here, but to Toyota as a company, souring your relationships with suppliers can hurt you in the long run. Just like with Detroit in the 80s and 90s, suppliers would first offer up their best new innovations to other car companies because Detroit was too stingy, well that situation might now turn around and suppliers might start putting Toyota on the "Sh!t List" and offer the best goodies to someone else. This type of short-term thinking got Detroit in the mess that they were in a couple of years ago. Toyota, ya might want to take a history lesson before you repeat others mistakes.
        • 3 Years Ago
        @Hazdaz
        [blocked]
      :)
      • 3 Years Ago
      Here we go again........ Toyota is going to use sub par venders and suppliers to try to move ahead. Isn't this what they did when they so badly wanted to be number one? Resulting in recall after recall..... no brakes....floor mats wedgies...... stuck gas pedals...... stop sell of almost every Toyota and Lexus made?????? Will they never learn!!!!!!!!!!!
      carfan
      • 3 Years Ago
      once again, it gives me great pleasure reading that this POS company is facing yet another problem. These are all signs of a degenerating company along with the rest of the "beloved" by moron americans japanese manufacturers
        carfan
        • 3 Years Ago
        @carfan
        still better than sending the dollars to asia. But thank you for your invaluable contribution to the blog and the American car manufacturing industry. You must be a caring American citizen
        moderate fringe
        • 3 Years Ago
        @carfan
        Yeah get you a subsidized American car made in Canada or Mexico with Korean or Chinese parts.
          carfan
          • 3 Years Ago
          @moderate fringe
          still better than sending the dollars to asia. But thank you for your invaluable contribution to the blog and the American car manufacturing industry. You must be a caring American citizen
          caddy-v
          • 3 Years Ago
          @moderate fringe
          Oh, pleeeze. Toyota and their native bretheren have been heavily subsidized by the Empire since their beginning.
      Kevin W
      • 3 Years Ago
      2.2 billion dollar annual R&D budget? That's a LOT of money to invest into how to make cars as uninspired as possible.
        IBx27
        • 3 Years Ago
        @Kevin W
        They said $4.5B was MORE than half of what they spend in R&D. That means nine billion dollars goes into how to make cars as lifeless as possible, to the point where they've created a black hole that sucks any romanticism out of you and can kill a sexy mood just by looking at a toyota even if it's not yours.
          IBx27
          • 3 Years Ago
          @IBx27
          I'm being voted down by someone who was biched into buying a swagger wagon by his overcontrolling wife.
        moderate fringe
        • 3 Years Ago
        @Kevin W
        Ford has 4.9 billion from a no interest government loan for R&D. But they didn't take the bailout. Yeah right just begged GM and mopar be bailed out plus a loan so the ford family would not lose their stock.
      whofan
      • 3 Years Ago
      Just what the D3 did, P off their suppliers. Toyota is modeling themselves after the policys that failed the US companys. Doesn`t history teach us anything? So much for quality!
        dukeisduke
        • 3 Years Ago
        @whofan
        Yep, this is exactly what the Big Three were doing in the '80s and '90s, and look where it got them.
        • 3 Years Ago
        @whofan
        [blocked]
          r_r
          • 3 Years Ago
          At that time, Toyota were cutting cost by being innovative on manufacturing. This time around, they are just demanding cheaper price (which inevitably will result in cheaper quality) from their suppliers.
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