Every year since 2005, Toyota had been constructing new plants to meet rapidly expanding demand. With the collapse of Lehman Brothers in 2008, however, vehicle sales fell dramatically. The earlier focus on increased production now meant surplus capacity and, thus, earnings deteriorated. Our reaction was to stop the bleeding by clamping down on that surplus capacity. Thanks to Toyota's quick actions, production essentially returned to normal in 2012, with effective balancing of production capacity and vehicle production. We have subsequently implemented a variety of measures affecting production to achieve increasingly lean yet powerful management.
Toyota has been holding off on the construction of new plants for a three-year period, beginning in 2013. Over this period, we have continued (and will continue) to reassess those key steps that need to be taken while focusing on improving our capabilities. For example, Toyota has successfully addressed the increase in production output over recent years by effectively maximizing usage of existing capacity and linking production of same-model vehicles across multiple plants to make thorough use of even the smallest capacity surpluses at each plant.
As a result, Toyota has reduced its capital expenditure related to initial plant construction and new model changeover by 40% compared with 2008. This reduction in investment is being used as a source of funds to support the pursuit of ever-better cars and plants.
While we expect to temporarily increase investment subsequent to this period, total capital expenditures are anticipated to remain below 2008 levels thanks to our earlier reduction endeavors.
Moreover, our capital expenditures are expected to decrease even further, owing mainly to the positive flow-on effects of TNGA at the time of the next model changeover.
In its bid to make ever-better cars, Toyota is pushing forward initiatives that are designed to enhance the competitiveness of its plants. While maintaining its emphasis on one-by-one production, a basic principle of the Toyota Production System, Toyota is promoting simple and slim production lines that are versatile and feature shorter processes while providing a bright, clean workplace. The introduction of newly developed technologies to existing high-volume production lines is also helping to boost plant competitiveness.
* One-by-one production:
A method under which production is carried out according to each customer order across every facet of the production process, from the manufacture of components to assembly.
Toyota is combining the results of efforts made to date to build ever-better plants that reflect the mindset and production engineering technologies accumulated by striving to make ever-better cars. In this manner, Toyota is endeavoring to create production sites that are competitive and built for sustainable growth.