YAMAHA CUTS COSTS TO BOOST PROFITS
November 2nd 2004.

Yamaha Motor has overhauled its motorcycle production systems in order to increase profits, as reported by Nikkei Net on November 1st 2004. The need to reduce costs has been brought about by intense competition and low pricing in the Asian market.

Yamaha is addressing the fact its motorcycle division accounts for only 30 per cent of consolidated earning profit, despite being responsible for half of group sales. The company is attempting to regain ground that it has lost in Asia following a currency crisis in the late Nineties. It aims to increase profits by focussing on low-end models, as these account for 60 per cent of the regional demand. Cost and pricing are particularly important considerations in this field.

Between the fiscal years 2001 and 2003, Yamaha's average sales price fell by 18 per cent. In the Asian market as a whole, prices decreased by 20 per cent.

The necessary response to these negative changes is to reduce costs by a sufficient margin to offset the losses. Concentrating on major components, such as engines, Yamaha is also making design staff more acutely aware of the importance of cost. Subsequently, the company has reduced the number of parts used in constructing swingarms and frames.

The effects of these efforts include a 29 billion yen saving over the past two years. For the fiscal year 2004, operating profit margins are expected to rise by more than five per cent (for the first time since 1998).

Yamaha enjoyed high profit margins during the late Nineties, thanks to the popularity of high-priced sports bikes, such as the YZF-R1 and YZF-R6, and it is hoped these new changes will help regain lost profitability.

Hiroshi Tanaka, Executive Officer, commented: "We will push for further cost cuts now that cost awareness has finally penetrated throughout the production floor."

Source: Kanja Baba (staff writer) Nikkei Net