TOKYO -- Toyota Motor Corp. is planning to make hybrid vehicles significant contributors to profits in the fiscal year beginning April 1, 2008.

Toyota has been expanding rapidly. President Katsuaki Watanabe wants to improve efficiency so Toyota won't sacrifice profits for the sake of growth -- or growth for the sake of profits. "We would like to strengthen the top and bottom lines," he says.

Watanabe sketched out a broad outline of the carmaker's medium-term strategy on Wednesday, May 10, at the company's earnings news conference.

Toyota aims to achieve an operating-profit margin of about 9 percent. The margin in the fiscal year that just ended was 8.9 percent.

Under Watanabe's plan, the following represent the sources of Toyota's current and future profits. The first three are current sources; the latter three are beginning to come onstream.

1. Global sales. Toyota predicts global sales this fiscal year will rise 6.0 percent to 8,450,000 units. North American sales are expected to rise 9.5 percent to 2.80 million units and European sales 13.4 percent to 1.16 million.

2. Global production. Toyota added capacity worldwide to build 565,000 additional vehicles in 2005. It plans to add capacity for 420,000 more in 2006 and 560,000 in 2007.

3. Global core models. Four model families account for just over one-third of all Toyota sales. The Corolla led with 1,207,000 sales in the last fiscal year. It is due for a redesign this fiscal year. The others:

Innovative International Motor Vehicle. These pickups and SUVs are built in Thailand, South Africa, Argentina and elsewhere. Sales are expected to total 537,000 this fiscal year.

Camry. The vast majority of its sales of 536,000 this fiscal year will be in North America.

Yaris/Vitz. Originally developed for Europe, this small car is expected to sell 432,000 units this fiscal year.

4. Global luxury brand. Watanabe implied that Lexus was a minor contributor to profits last year. It is expected to play a greater profit-generating role this year and continue to increase in significance after that.

Last fiscal year was the "dawn for global Lexus," Watanabe said. Sales for the luxury brand rose 21.2 percent to 411,000.

5. Cost-cutting. Watanabe indicated that Toyota's latest cost-cutting would start to pay off during the fiscal year beginning April 1, 2007.

6. Hybrids. Watanabe reaffirmed his goal of selling 1 million hybrid vehicles a year in the early 2010s by expanding the hybrid lineup and lowering costs. Last fiscal year Toyota sold 263,000 hybrids, up from 143,000 a year earlier.

Cut electronic complexity and costs
Toyota Motor Corp. wants to slash the electronic complexity of its cars by cutting a vehicle's electronic control units from about 60 to four.

That is part of a companywide cost-cutting drive that aims to exceed Toyota's previous cost-cutting program in "speed, scale and amounts," says President Katsuaki Watanabe.

That's a tall order.

Toyota says its last cost-cutting drive, launched in 2000, raised annual savings to between 200 billion yen and 300 billion yen, or $1.70 billion and $2.55 billion. Before that effort, the annual cost-cutting payoff was between $851.3 million and $1.70 billion. That cost-saving effort found cases where common parts could be used across platforms. Toyota's current initiative aims to identify savings on entire systems, such as brakes and heating and cooling.

Watanabe cites electronic control units as an example of where Toyota expects to find savings.

Toyota cars contain as many as 60 of these computerized brains to monitor and control the car's electronics. Toyota wants to reduce those to just four units. The four units will control electronics for the powertrain, safety devices, body and multimedia.

Watanabe expects the savings from the latest effort to kick in significantly during the fiscal year beginning April 1, 2007.

"The Corolla led with 1,207,000 sales in the last fiscal year. It is due for a redesign this fiscal year."