Toyota said today it was slowing production at plants in Britain and Turkey and would downsize its contract work force to meet weakening demand in Europe.
"In response to demand conditions recently in Europe, we are adjusting our production flexibly through such steps as a change to TAKT time," a company spokeswoman said, referring to the time spent to roll out each vehicle.
Toyota will not renew contracts for some temporary workers but will retain full-time staff, she said.
The company declined to reveal targets for the production and contract staff reductions but it reported yesterday that sales were sliding in North America, Western Europe and Japan.
The move is in line with the company's announcement on July 28th that it had cut its 2008 production forecasts by 250,000 vehicles to 4.33 million outside Japan and by 200,000 units to 4.10 million units in Japan.
Toyota also cut its 2008 European sales target to 1.19 million units from 1.27 million and its global sales forecast by 350,000 units to 9.5 million vehicles.
The plants in Britain and Turkey, Toyota's biggest and third-biggest in Europe, mainly supply vehicles for the European market.
The British plant rolled out a total 278,000 units of the Avensis mid-sized sedan, the Auris compact and others last year, while the plant in Turkey made 161,000 units of such cars as the Corolla Verso.
Last month, Toyota said it would suspend production of slow-selling big trucks in the United States for three months and implement a major overhaul of its US manufacturing plans to shift to more fuel-efficient cars.
Shares in the firm jumped 4.6 per cent today as investors looked past a sharp fall in earnings at the world's biggest car maker to take reassurance from its decision to keep its outlook unchanged.
Quarterly profit dropped 28 per cent at the company, which faces its most challenging year in recent memory as high fuel prices batter the auto sector, but it said a favourable yen exchange rate would offset falling sales over the course of its financial year.
"Contrary to concerns that it would revise down full-year earnings guidance based on altered forex assumptions, Toyota has kept its original targets," Morgan Stanley analyst Noriaki Hirakata said in his report to clients.
"The cut in production targets is about as large as was feared, but reserve provisioning for the sales finance business is much lower than we expected."
Toyota booked provisions of 9 billion yen - significantly lower than Nissan's 42 billion yen and less than half what Honda set aside - saying the resale value of vehicles in its leasing business had suffered less than those of its rivals.
Toyota shares jumped 210 yen to 4,790 yen today, which one market analyst said may reflect that investors had sold shares in fear prior to the profit announcement, after eyeing the dismal results of domestic and overseas rivals, including General Motors.
"Toyota shares have already priced in a very tough situation for the automaker, so they are up today after the bad news came out," said Kenichi Hirano, operating officer at Tachibana Securities.
"But that does not mean Toyota shares have started an upward trend. It's just that the negative news is out in the open for now."
As of 0100 GMT, Toyota shares had eased back a little to be up 4.2 per cent at 4,770 yen, outperforming the Nikkei average down 0.4 per cent.
Reuters