Industry Report: Toyotas Simple Slim Cuts Costs of Camry 3.5L Engine by Large Margin

There are two ways to increase your income; 1) spend less or 2) make more. While no one questions whether or not Toyota Motor Company will have any problem achieving the second, the automaker is already a tightly run ship. Nevertheless, about 300 of its most creative engineers have figured out how to cut build costs of its popular 3.5-liter engine, by a significant margin.

How much is significant? Most bean-counters would be thrilled if their production departments managed to trim the cost of fabricating a single item by one or two percent, especially when dealing with such high volumes that a mere fraction of a percent could present a major difference to the bottom line. Such small increments of efficiency gains wouldnt be good enough for Toyotas Executive Vice President Kosuke Shiramizu, mind you, who announced a new goal of reducing production costs by 50 percent to foundry workers at the Bodine Aluminum Troy, Missouri engine facility back in 2003.

What Shiramizu didnt say to his Troy workers was that theyd be getting a great deal of support in meeting these goals, from 300 engineers back in Toyotas Japanese R&D facilities. A new technology was being developed for pouring molten aluminum into molds for engine components, resulting in new equipment that made up Toyotas new cost-cutting program dubbed Simple Slim. Basically, Simple Slim lets Toyota use smaller, cheaper molds to produce engine parts, and the system was easily implemented into its U.S. foundries as well as those in Japan and China. Another reason the new engine is cheaper to produce is that it uses less aluminum, an expensive metal, than the current version. The new aluminum block weighs 55 pounds less than the 3.3-liter engine, a 27 percent reduction in overall mass. Another improvement to the new 3.5 includes a redesigned cylinder head that needs fewer honeycomb-like fuel and air passageways.

The new engine design is also allowing for smaller caster machines at the foundries, again reducing costs. New efficiencies will help to reduce inventories of unfinished cylinder heads, expensive to store and, wasteful. Also, defects will be easier to spot with the new process, potentially allowing Toyotas V6 to once again rise to the highest levels of reliability - it suffered some setbacks with its previous V6.

To put this in perspective, Toyotas Jackson, Tennessee engine block factory, which has been using similar casting methods since it opened in November, has reported an extremely low 0.7 percent defect rate in its engine blocks. This compares with a 2 percent defect rate at Troy, which is similar to Toyotas Japanese foundries that use the old casting methods.

Another effort sees savings from reducing the number of clamps needed to hold the cylinder heads in place while its being machined by 80 percent. The new process reduces machining costs by a staggering 50 percent. Also, Toyotas Georgetown plant has halved the length of its V6 assembly line by moving "just in time" kit boxes of parts along the line with each engine.

Toyotas money crunchers must have done back flips when production costs for the new engine were halved to about $1,000 per 3.5-liter V6, what will soon become one of its most popular engines. The new V6, currently residing in the recently redone Avalon and completely revised top-level 2006 RAV4, replaces both 3.0- and 3.3-liter V6 engines for the all-new 2007 Camry when it goes on sale in March, the best-selling car in the U.S. The engine will also be the motivating force behind the new 2007 Highlander and should soon find its way into the Sienna minivan and replacement for the Camry Solara coupe and convertible models, plus a number of Lexus models including the new 2007 ES 350 sedan and RX 350 crossover SUV. A version of this V6, the same 306-horsepower version that is used in the new IS 350, is also expected to replace the less powerful inline-6 in the GS 300, plus the more conservatively tuned version could very well power a rumored compact Lexus crossover SUV based on the new RAV4, being designed to go up against Acuras new RDX and BMWs X3.

Putting this into context, Toyota has not only managed to halve the cost of its most popular six-cylinder engine, but the very fact this same engine is used in so many vehicles will, through economies of scale, increase Toyotas profitability overall. Compare this to rival General Motors, the worlds largest automaker and one that looks as if it will soon be passed by the Japanese giant for overall global sales, which makes so many engines V6 engines that its difficult to keep track of them all. A lesson could be learned, with the General producing a variety of antiquated overhead-valve engines with only 3-valves per cylinder, measuring 3.4-, 3.5-, 3.8- and 3.9-liters in displacement, plus a supercharged 3.8-liter version in its Pontiac Grand Prix. Only Cadillacs 3.6-liter V6 boasts four-valve per cylinder and dual overhead cam technology, an engine also found in Buicks top-line LaCrosse. To complicate things even further, it could be argued that GMs most sophisticated V6 is the 3.5-liter mill found in the top-line Saturn VUE, but the fact that its nothing less than Hondas superb Accord V6 is no doubt embarrassing to the Detroit-based automakers execs.

The question that General Motors should be asking itself is, why make a total of six V6 engines and borrow another from Honda, adding complexity and resultant cost to the automakers bottom line, when the only truly competitive GM V6 to Toyotas 3.5, or for that matter Hondas 3.5-, Nissans 3.5-, Hyundais 3.3- and 3.8-, or Fords all-new 3.5-liter V6, is the 3.6-liter unit only available in the Cadillac CTS, SRX and STS, plus the LaCrosse? Wouldnt it be simpler, more efficient and therefore potentially cheaper to make one extremely good V6 engine, rather than five that dont really measure up to the competition?

In contrast to GM, Ford has long produced one V6 engine for most car applications, the 3.0-liter Duratec 30 with dual overhead cams and 24-valves per cylinder. It was a very competitive engine when introduced, and now that an all-new 3.5-liter is being readied for a full-line introduction, blue-oval products will have no problem lining up to their Asian and German competitors.

Likewise, Toyotas new 3.5-liter V6 not only measures up, but leads its rivals in every category its entered in. A sophisticated four-valve, DOHC, V6 with proprietary dual variable-valve timing, it makes a stunning 268-horsepower and 248 lb-ft of torque in Camry trim and 280-horsepower plus 260 lb-ft of torque when fitted to the Avalon.

While it appears that Ford is on the right track, competing with Toyota will remain an uphill battle. Not only is the Dearborn-based automaker struggling to hold on to its customers, just like GM, with the two top-selling domestic automakers combining for 44.8 percent of U.S. sales last year, a 2.3 percent decline from the year prior, but Toyota wins over an average of six new buyers to every one it loses, while Honda gains four for every one lost. Together with Japans second-largest producer Nissan, the two U.S.-leading Japanese manufacturers captured a combined 28.2 percent of the U.S. market last year, showing an increase of 2 percent.

Toyotas profitability, the strongest in the auto sector, allowed its stock to rise 54 percent last year, up to an all-time high of 6,420 yen on February 17, 2006. Streamline the production of its V6 will only increase profits, and in turn make its stock more enticing to investors, strengthening its hold on the market. Comparatively, both GM and Ford lost so much ground last year that the ratings firm Standard & Poors was forced to downgrade their stock to junk status, two of the largest companys to ever be subjected to such an embarrassment.

And just how much time will Toyota need to pass General Motors in global sales volume? With a total of 8.85 million expected sales worldwide in 2006, an increase of 2.95 million over its 5.9 million sales in 2001, it could slide past the worlds largest automaker, which achieved 9.17 million unit sales last year, soon. GM has announced that it would be cutting production significantly by 2008, and this measure, combined with eroding market share and Toyotas continued growth, could see Toyota rise into the top position before the end of the decade, and maybe sooner.

And dont expect the new engine production technologies to only benefit Toyotas 3.5-liter engine. The Bodine foundry will soon make the upcoming Tundras 5.7-liter V8 block, while other foundries will benefit from the Simple Slim improvements when they get updated. And dont think that Toyota will end its cost cutting efforts in engine manufacturing. It is reported similar initiatives are under way in the companys paint, plastics, welding and warehouse operations around the world.

Can GM and Ford catch up and eventually keep pace with Toyota? History shows that the two will probably be left behind over the short-term at least, causing greater losses until wholesale changes are made, brought on by complete reevaluations of core business strategies. Ford, at least, seems to be on the right track regarding the number of V6 car engines it currently produces, while GM has seen improvements over the last five years by nearly halving the number of man-hours needed to produce its V6 engines. Such advancements will not be enough, however, to match the production efficiency and resultant lower costs and improved reliability of Toyotas Simple Slim processes.